Another SpaceX Critique is Wrong

There are various Youtubers who make weekly videos attacking SpaceX, Tesla and Elon Musk. They are able to make a few thousand dollars a month making these attack videos. One of these people is someone who calls himself the “Common Sense Skeptic”. He claims that SpaceX Starlink will not live up to its promises.

Incorrect claims:
* Starlink will not be able to beat existing satellite internet providers Viasat and Hughesnet
* Hughesnet is regular losing 30,000 to 60,000 customers each quarter. They are down to about 1.3 million and call Starlink the biggest threat

* Skeptic makes an incorrect analysis of SpaceX rocket costs. He assumes SpaceX launch costs are what SpaceX charges customers
* Apple has a cost of $462 for its iPhone Max that it sells for $1100. Cost of goods sold is not the same as sales price. SpaceX reuses the first stage booster 15-20 times. The boosters cost about $30 million and amortizing the cost over ten launches means $3 million per launch. Add $1 million per launch to refurbish the boosters. The second stage is about $7 million and payload fairing is about $6 million. The payload fairings are recovered and reused. If the fairings are reused 6 times then the amortized cost is $1 million. This means a Falcon 9 launch costs SpaceX $14 million, if we also add in $2 million for fuel and other costs.
* If we consider the first 12000 Starlink satellites, this will be 200-300 launches. 300 launches would be $4.2 billion for the launches. 200 launches would be $2.8 billion.

* False claim that there will be a lot of long lasting space debris. This is wrong the low orbiting satellites are designed to de-orbit and burn up without lasting debris
* claim that there will be problems for astronomers. SpaceX worked with Astronomers and resolved it.

* claim that SpaceX Starlink will not make more than $6 billion. SpaceX should be profitable by the end of 2023. The Starlink revenue with residential, RV and business service is already about $6 billion. The revenue will might double this to $12 billion by the end of the year.

UPDATE: Skeptic comments For example, we never said the StarLink programme will never make more than $6billion in revenue. We demonstrated how the financial is unsustainable and will never generate the profits Musk said it would. And that holds up, since Musk still requires VC money to the lights on at star link. The video talked about the total satellite internet market being about $6 billion per year. Skeptic claims Starlink will never generate profits like Musk said it would. Parsing this out. I presume Skeptic is referring to the image of a Wall Street Journal article (not written by Elon Musk) but which claimed to be internal SpaceX projects of reaching $30 billion per year in profit.

Exchange with Skeptic
NBF: Yes, I know they raise VC and private funding. Amazon and Facebook ran on VC and publicly raised funds for many years before switching from market share capture to profitable operations. High growth vs sustained growth. It is the classic high tech company business strategy since the mid-1990s
Skeptic – Yes. Fraud has long been a staple of Silicon Valley startups.
NBF: One of your main errors is that you use the selling price of Falcon 9 launches and not the cost to SpaceX. SpaceX is selling itself Falcon 9 launches. With 10-15 reuses of their main first stage boosters this is $2-3 million per launch amortized. Second stage expended and they are now reusing the payload fairings.Second stage about $7 million, Fairing $6 million but reused. Total Falcon 9 costs to SpaceX about $12-15 million not counting separate operational overhead.
Skeptic – It’s not an error, if you understand the term “loss of opportunity.” You’re just not sophisticated enough in your understanding of the overall model to see past Musk’s lies. We are not under that same spell.
NBF -There is no lost opportunity because the 20-25 launches that they sell to governments and other businesses is all of the commercial launch market. They have more production that there is market demand for launch, This is why they are vertically integrating and generating their own [eventually] profitable business.
Skeptic – Yes there is, because these units have a finite lifespan. Which means, launches used today can’t be used later. When the vehicle reaches end of service.

Nextbigfuture observes that Skeptic has fundamental misunderstandings about how businesses operate. Opportunity costs are not real costs and his calculation assumes that there were real customers that SpaceX did not sell because they were launching Starlink. Skeptic really pats himself on the back for observing the finite lifespan of Falcon 9. He thinks the reuses must be conserved for maximum value, which assumes that Starlink launches are all wasted and will never return value. SpaceX has about 21 Falcon 9 boosters in operation and can build 5-10 each year. SpaceX fully recovers the cost of each booster after one commercial launch. SpaceX can continue to increase reuses by refurbishing boosters. If they were limited to 20 reuse life then the current fleet can fly 300 more times. If they keep refurbishing then 40 reuse life then the current fleet can fly 700 more times.

Nextbigfuture predicts that before 2029, Starlink will IPO and the annual revenue will be shown to surpass $100 billion per year. This will not include the launch revenue which will still be with the parent company. Starlink will be profitable but net income can be suppressed with various investments.

I think the higher revenue projections below are achievable and likely but I want to give some margin for various delays.

A fully deployed and sold first 12000 satellites in 2025 should generate over $150 billion.

* Skeptic does not distinguish between the different sizes and generations of Starlink satellites. If we just scale up the Gen 1 satellites to 42000, this would be about $11 billion in launch costs which is over 3 times less than the lowest Skeptic estimate because he mixes up cost of launch with launch sales price.

* Another 30,000 Starlink satellites would be the Gen 2 shell. The Falcon 9 launchable Gen 2-mini would be 2.5 times the weight of a Gen 1.5 and would have 4 times the network capacity. About 22 Starlink Gen 2 mini can be in each Falcon 9 launch. It would take about 1,200 Falcon 9 launches to deploy 30,000 Gen 2 mini. However, SpaceX will switch over to full Gen 2 Starlink satellites launched with Starship. Those will be ten times the weight of a Gen 1.5 satellite and have 11 times the network capacity. Gen 2 will be able to provide far more bandwidth for direct orbit to cellphone service.

SpaceX regularly reuses its Falcon 9 booster rockets. Reuse levels of eight or 10 time are now fairly routine. Indeed, some boosters have now flow 13 to 15 times. William Gerstenmaier, VP/Build & Flight Reusability at SpaceX, now says that booster refurbishing is taking place to extend the life of a typical booster to a 20-flight schedule. Elon Musk has said his aim was to see the boosters reused up to 100 times.

SpaceX has launched just over 35% of the first shell of 12000 satellites. They have over 1.5 customers and will have another million or two million by the end of this year. SpaceX should have half of the first 12000 satellites launched by the end of 2023 and all of the 12000 by the end of 2024. This will service 5 million customers in the USA and 50 million customers globally.

A fully deployed Gen 2 satellite system would be able to support 300 to 500 million global customers with high speed internet and billions of direct to unmodified cellphone communications (text, voice, and low speed internet).

Starlink Mobility (RV and other users) has 300,000 customers who pay $2500 for installation and $250 per month. This is more than the $120 per month for regular residential. The higher charges for mobility/RV users and the higher estimate of Starlink mobility customers, the increase in residential charges of $10 per month, increases my conservative estimate for Starlink 2023 revenue by about $1 billion to over $17 billion.

If SpaceX is able to increase Starlink satellite dish production to 500,000 dishes per month by mid-2023 then they could make 1 million in first half of 2023 and 3 million in the second half. Every 2 million more residential Starlink customers adds $3 billion per year in runrate to revenue. 6 million more residential customers in 2024 would add $9 billion per year in revenue. SpaceX is finishing a Starlink dish factory in Texas which should massively increase Starlink dish production.

RV ownership has grown from 7.9 million households in 2005 to over 9 million today. Over 11% of US households own a recreational vehicle. More than 50% of RVers take their pets away with them. Over 40 million Americans regularly go RVing, with over 25 million RVing a year. If 12% of RV owners choose to get a Starlink this would be a market for 1 million mobile Starlink. This would be $2.5 billion per year in mobile Starlink revenue. If 33% of RV owners choose to get a Starlink this would be a market for 3 million mobile Starlink. This would be $9 billion per year in mobile Starlink revenue.

There are also about 1 million long haul truckers in the USA. If 20% of the long haul truck drivers chose to use mobile Starlink then this would be 200,000 mobile Starlink customers. This would be $600 million per year in revenue.