SpaceShoring: When Offshoring Just Isn’t Far Enough

This Week's Focus: The Viability of Space Manufacturing

Today we’re examining the concept of SpaceShoring—the migration of production and data centers into space. Despite the enthusiasm driving this idea, the economic reality presents significant challenges. While certain specialized sectors may carve out profitable niches, broader adoption faces hurdles such as high capital expenditures, costly logistics, and the gradual scalability of orbital operations. Can this space-based industry transition from experimental technology to commercially viable enterprises or will it remain confined to high-concept projects supported by research and government funding? Let’s explore whether the optimism fueling these ventures is sufficient to overturn the fundamental challenges at hand.

During my recent trip to India, one of the most interesting firms we met was Pixxel.

I know very little about hyperspectral imaging, but I was impressed by the founder’s ambition—quite possibly the most remarkable of all we met on the trip—and the low cost of launching a satellite, which enables small startups to operate in space.

This also alerted me to the fact that there are more and more startups moving production and data centers into space, thus establishing the term:

Not offshoring…

Not nearshoring…

Not friendshoring, but… Spaceshoring.

What I realized is that the concept of leveraging space for manufacturing is no longer a theoretical exercise; it is rapidly evolving into a tangible reality.

Driven by the unique advantages of microgravity, near-vacuum conditions, and abundant solar energy, several pioneering startups are exploring the commercial potential of orbital industry. However, these ventures are not without significant technical, financial, and logistical challenges.

In today’s article we’ll examine the underlying logic behind manufacturing in space, evaluate the associated costs and obstacles, and explore whether these concepts are not only viable but also scalable. We’ll also try to discover whether the optimism that fuels many of these ventures is enough to overcome the fundamental challenges that could limit their widespread adoption.

Let’s ‘launch’ into the details.

Benefits of Manufacturing in Space

One of the most significant advantages of manufacturing in space is the ability to produce materials with unique properties that are difficult or impossible to achieve on Earth. According to the paper “Research Campaign: The Sciences of Space Manufacturing” (Hanson et al.), the microgravity environment enables superior crystallization, which minimizes defects in semiconductor production and improves protein crystallization for pharmaceutical applications. Additionally, the absence of gravitational forces allows for containerless processing, which facilitates the development of novel alloys, glasses, and polymers with enhanced material properties.

Furthermore, research highlighted in the paper “Biomanufacturing in Low Earth Orbit for Regenerative Medicine” suggests that microgravity conditions provide an ideal environment for bioprinting and tissue engineering. This is because the absence of gravity allows for better cellular organization and more uniform tissue structures, which are crucial for regenerative medicine applications. These findings indicate that space-based manufacturing can offer unprecedented advantages in both material sciences and biomedical applications.

Another key benefit of space manufacturing is the ability to produce components on demand using additive manufacturing (AM). As discussed in “Challenges and Opportunities for Next-Generation Manufacturing in Space” (Nieman et al.), additive manufacturing techniques, such as powder bed fusion (PBF), allow for the efficient use of raw materials by minimizing waste. This process is particularly advantageous in space, where resupply missions are costly and logistically complex.

Additionally, the high cost of launching materials from Earth, estimated at $3,000–$10,000 per kilogram, makes on-site production an economically viable alternative. By manufacturing tools, spare parts, and even entire structures directly in space, mission costs can be significantly reduced. Nieman et al. emphasize that this capability is particularly relevant for long-duration missions and extraterrestrial colonization efforts, where self-sufficiency is essential.

The ability to construct large structures in orbit represents another major advantage of space manufacturing. According to Hanson et al., space-based production allows for the assembly of structures that are too large or fragile to withstand the forces associated with launch from Earth. This capability is particularly relevant for the construction of next-generation space telescopes, solar power stations, and modular space habitats.

Furthermore, Hanson et al. discuss the potential for in-situ resource utilization (ISRU), which involves extracting and processing materials from extraterrestrial sources such as the Moon, asteroids, and Mars. By leveraging these local resources, space manufacturing could reduce dependency on Earth-based supply chains, further enhancing the scalability and sustainability of off-world industrial operations.

Advancements in computational power and automation are also integral to the success of space manufacturing. As Nieman et al. point out, the use of digital twins and artificial intelligence (AI)-driven control systems enables remote diagnostics, predictive maintenance, and self-repair mechanisms. This is particularly important given the challenges associated with human intervention in deep-space environments.

Challenges of Manufacturing in Space

Despite its numerous advantages, space manufacturing is currently hindered mostly by high costs and economic uncertainties. Hanson et al. estimate that the initial investment required to develop space-based manufacturing infrastructure could exceed $100 billion, making it a financially daunting endeavor.

Furthermore, the return on investment (ROI) for space manufacturing remains uncertain. While high-value industries such as pharmaceuticals and semiconductor manufacturing may justify the costs, widespread commercial viability has yet to be demonstrated. As a result, Hanson et al. argue that significant financial and technological advancements will be required before space manufacturing can become a self-sustaining industry.

The unique environment of space presents a range of technical and engineering challenges that must be addressed. One of the most critical issues is thermal management. As Hanson et al. explain, the absence of gravity-driven convection affects heat transfer, making it difficult to regulate temperatures during the manufacturing process. This can lead to inconsistencies in material properties and reduce the overall quality of manufactured components.

Additionally, Nieman et al. highlight several challenges associated with material behavior in space. For example, welding and metal joining must be adapted to function in microgravity, where surface tension and weak interfacial forces can significantly impact the integrity of assembled structures. Similarly, phase change behaviors are altered in space, leading to unpredictable solidification patterns during metal casting and additive manufacturing.

Another major concern is radiation exposure. As discussed in Hanson et al., prolonged exposure to ionizing radiation can degrade polymers, electronics, and biological materials, necessitating the development of radiation-hardened manufacturing processes.

The success of space manufacturing also depends on overcoming communication and computational constraints. Nieman et al. emphasize that the time delay between Earth and distant manufacturing sites creates significant challenges for remote operation and real-time decision-making. For instance, the 42-minute communication delay between Earth and Mars limits the effectiveness of Earth-based control systems, requiring greater autonomy in space-based manufacturing platforms.

Furthermore, data privacy and cybersecurity risks must be considered when using cloud-based control systems. Nieman et al. suggest that homomorphic encryption and other cryptographic techniques may be required to protect intellectual property and prevent cyberattacks on space-based manufacturing systems.

Finally, space manufacturing operations face significant logistical challenges due to the limited availability of spare parts and redundant systems. Nieman et al. note that unlike terrestrial manufacturing, where backup components are readily available, space-based operations must rely on minimal resources. This increases the risk of critical failures and necessitates robust repair and maintenance strategies.

Additionally, Hanson et al. point out that launch constraints remain a significant bottleneck. Despite advancements in reusable rocket technology, the cost and complexity of launching manufacturing equipment into space continue to pose challenges for large-scale industrial operations.

Finally, space manufacturing must navigate a complex regulatory landscape. Hanson et al. highlight that NASA certification standards for additively-manufactured safety-critical components require 100% volumetric inspection, making quality assurance highly resource-intensive. Moreover, the lack of standardized testing methods for materials in extreme space environments further complicates the certification process.

To address these challenges, Hanson et al. advocate for the development of new regulatory frameworks tailored to space manufacturing. This includes the creation of industry standards for material properties, testing procedures, and safety protocols that account for the unique conditions of space.

Comparing Total Landed Cost: A Detailed Breakdown

A major question surrounding space manufacturing is whether it can compete with Earth-based production when considering Total Landed Cost (TLC), which includes all costs from raw materials to final delivery. I’ve discussed the concept before when deciding where to source from among different countries, but can also use it to discuss the decision to manufacture and ship from space.

Launch and Setup Costs

The first major expense in space manufacturing is getting raw materials and equipment into orbit. Currently, the cost of launching cargo using SpaceX’s Falcon 9 stands at approximately $2,600 per kilogram. SpaceX’s upcoming Starship system is projected to reduce this cost to around $500–$1,000 per kilogram, which would make larger-scale operations more feasible. However, even at this lower bound, a 10-ton payload (10,000 kg) would cost $5 million to launch, making any large-scale manufacturing endeavor a capital-intensive venture.

Additionally, the infrastructure required for space-based manufacturing—such as autonomous robotic factories, power generation modules, and maintenance equipment—adds over $1 billion in initial setup costs. This is significantly higher than the cost of establishing an equivalent high-tech manufacturing facility on Earth, where a state-of-the-art semiconductor fabrication plant costs between $10–$20 billion, but benefits from established supply chains and logistics.

Production Costs

Space-based manufacturing requires highly autonomous production processes due to the limited ability for human oversight. This results in production costs that are estimated to be 5–10 times higher than Earth-based manufacturing due to factors such as:

Automation and Robotics: Fully autonomous manufacturing requires advanced AI-driven robotics, which are significantly more expensive to develop and maintain in space compared to human-monitored production on Earth.

Material Handling: Raw materials must be either transported from Earth or mined from asteroids (a yet unproven process), so sending essential raw materials like silicon, metals, and polymers to space makes the initial production phases extremely costly.

Energy Use: While solar energy is abundant in space, the infrastructure to harness and convert it efficiently is expensive to develop, making energy-intensive processes such as metal forging and semiconductor fabrication costly compared to terrestrial equivalents.

Retrieval and Delivery Costs

Even if manufacturing in space proves advantageous, bringing products back to Earth remains a costly hurdle. Current reentry capsule services cost approximately $10,000 per kilogram due to the need for heat shielding and controlled descent systems. If SpaceX’s Starship proves successful, this cost may decrease to $500 per kilogram, but it remains significantly higher than the cost of global terrestrial logistics.

For instance, transporting 1,000 kg of manufactured materials back to Earth under current conditions would cost $10 million using traditional methods, or $500,000 under an optimized Starship return system. By comparison, shipping 1,000 kg of goods via air freight from China to the U.S. costs around $6,000–$8,000, making space-based transport nearly 100x more expensive.

Product Costs

A primary example often cited for space manufacturing is fiber optics, which benefit from microgravity-enhanced purity. While space-manufactured fiber optics can command a premium price of $100,000 per kilometer, their Earth-made counterparts cost only $3,000 per kilometer to produce, making it difficult to justify the additional expense unless performance improvements dramatically outweigh the costs.

Similarly, semiconductor wafers, which can achieve higher purity in space, cost around $1,500 per wafer in traditional fabs. Space-based production, accounting for launch, manufacturing, and retrieval costs, would likely exceed $20,000 per wafer, pricing it out of competitive commercial use unless used in ultra-high-performance applications such as quantum computing or deep-space electronics.

Supply Chain and Adaptability Challenges

Manufacturing on Earth benefits from just-in-time (JIT) supply chains, allowing for flexible production adjustments, reduced inventory costs, and rapid adaptation to market changes. In contrast, space manufacturing requires long-term planning, with materials and components sent months or years in advance. This increases capital risk and makes responding to shifts in demand or technological improvements much slower than Earth-based operations.

Summary

Despite its potential, the total landed cost of space manufacturing remains significantly higher than its Earth-based equivalent for most industries. While specialized applications—such as ultra-pure pharmaceuticals, high-performance optics, and radiation-hardened electronics—may find niches in space manufacturing, widespread adoption remains hindered by high capital expenditures, expensive logistics, and the slow scalability of orbital production.

For space manufacturing to become truly competitive, launch costs must decrease to under $100 per kilogram, and retrieval costs must be reduced by at least 10x from their current levels. Until then, terrestrial factories will continue to dominate all but the most specialized applications.

Mini Case Study: Varda and the Economics of Space Manufacturing

Varda Space Industries is one of the most visible startups turning the long-envisioned idea of space manufacturing into an economic reality.

Founded in 2020, the company focuses on leveraging microgravity to produce pharmaceuticals and advanced materials that would be difficult or impossible to manufacture on Earth. The company’s business model is based on the dramatic decline in space launch costs, making it economically viable to produce high-value, low-mass products in orbit.

Pharmaceuticals are Varda’s primary target, given their high price per kilogram. Small molecules such as ritonavir, used in Varda’s first mission, exhibit polymorphism, where different crystalline forms can dramatically alter solubility and bioavailability. Drugs like Keytruda, a cancer immunotherapy, can cost upwards of $150 million per kilogram, making even small batches produced in space highly profitable. The opportunity is significant as Varda can transport kilograms per mission, creating a revenue stream from pharmaceutical partnerships based on milestone payments and royalties.

A key advantage in Varda’s model is its dual-use approach. The same reentry technology required to bring pharmaceuticals back to Earth is valuable for defense applications, particularly for hypersonic testing. The U.S. Department of Defense, facing urgent needs in hypersonic capabilities, awarded Varda a $60 million STRATFI contract. Traditional hypersonic testing methods are either prohibitively expensive or insufficiently realistic. Varda’s reentry capsules provide a cost-effective solution by reaching speeds above Mach 25 while remaining affordable compared to existing alternatives.

This dual-use strategy allows Varda to generate government revenue while building out its commercial business. By leveraging defense contracts, Varda effectively subsidizes its pharmaceutical manufacturing efforts. More flights mean lower costs per mission, reinforcing a flywheel effect that makes space manufacturing increasingly viable. As launch costs continue to drop with SpaceX’s Starship, Varda’s business case strengthens further.

Varda’s success hinges on proving that space manufacturing can become routine. If it does, it could establish itself as a foundational player in a new industrial supply chain beyond Earth. Declining launch costs, high-value pharmaceutical production, and defense-backed revenue streams create a compelling economic rationale for space factories. In the long run, Varda’s vision is to make space-based production as standard as terrestrial manufacturing, expanding the economic bounds of humankind beyond the planet’s surface.

The Role of SpaceX in Reducing Costs

Looking back at the TLC estimations, it’s clear that SpaceX has played a pivotal role in reducing costs and enabling the feasibility of space-based industries. Reusable rockets, particularly the Falcon 9 and Falcon Heavy, have brought down the per-kilogram launch cost by over 90% compared to previous space programs. Starship, once fully operational, is expected to further lower these costs to under $100 per kilogram, a game-changer for the industry.

Rideshare programs have further democratized access to space by allowing multiple small payloads to share a single launch, reducing costs for individual companies. This model has already benefited startups such as Varda Space Industries.

Starship’s projected capabilities include launching massive payloads in a single trip, allowing for larger and more complex infrastructure to be deployed in orbit. This shift could make space-based data centers and manufacturing plants economically viable in ways previously unimaginable.

A rapid launch cadence has also enabled frequent and iterative deployment. Instead of waiting years for a single opportunity, companies can now test, iterate, and deploy new technologies in space at a pace closer to traditional tech development cycles. This agility is crucial for achieving the necessary breakthroughs for economic sustainability.

Bottom Line

While space-based manufacturing holds immense potential, the reality is that it’s still in its infancy and faces significant barriers to widespread commercial adoption. The cost of launching materials into space, though reduced by SpaceX, remains a significant constraint. Even with anticipated price reductions, profitability for large-scale manufacturing in space is difficult to achieve without significant breakthroughs in automation and infrastructure development.

Regulatory and operational risks also pose substantial hurdles as space is an inherently hostile environment and long-term sustainability requires robust solutions for servicing, repairing, and upgrading orbital facilities. Current technological capabilities are not yet at the stage where autonomous repair and maintenance systems can reliably sustain industrial-scale production or data processing in space. This creates an additional risk factor for investors and companies seeking to deploy long-term solutions.

The economic case for space-based fiber optics, pharmaceuticals, and semiconductors is promising but not yet cost-competitive with Earth-based alternatives, and without substantial demand that justifies the significantly higher costs, scaling space-based production will remain a niche endeavor rather than a transformative shift.

Ultimately, space-based industry has the potential to redefine how we manufacture high-value goods and process data, but it remains unclear whether these applications will be cost-effective at scale. The next decade will be critical in determining whether these initiatives can transition from experimental technology to viable commercial ventures—or if they will remain high-concept projects limited to research and government-funded exploration.

The real question is: When will we start offering MBA courses on ‘Space Operations and Galactic Market Entry Strategies’?