On National Security | U.S. space industry takes one-two punch from China and the virus

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A COVID-19 recession could leave cash-strapped space startups more susceptible to so-called adversarial capital

In the May 2019 “State of the Space Industrial Base” report issued by the Defense Innovation Unit and the Air Force Research Laboratory, China was singled out as a perpetrator of intellectual property theft and predatory investments in American companies.

China’s behavior, experts said in the report, is driven by its ambitions to displace the United States as the dominant space power. They warned that China’s game plan “presents particular threats to the U.S. space industrial base.”

The same team of experts from government, industry and academia who wrote that report a year ago gathered again this month — in a Zoom workshop hosted by the nonprofit NewSpace New Mexico — to prepare the 2020 State of the Space Industrial Base report.

Two officials who participated in the workshop told SpaceNews that the same issues that were raised last year with regard to China are still major concerns. But the coronavirus has compounded the problem by slowing down dramatically the availability of venture capital for the U.S. space industry.

The economic downturn precipitated by the pandemic has opened a window of opportunity to what the Pentagon calls “adversarial capital.” Space startups that are part of the defense market make especially attractive targets because they are likely to give China access to valuable technology, at the same time making those startups ineligible to sell that technology to the Pentagon.

The final recommendations of the 2020 State of the Industrial Base workshop will be published in a few weeks. The group will propose “actions to preserve and expand the U.S. space industrial base in light of the disruption from the COVID 19 virus pandemic,” said one of the participants.

Last year’s report called for a national strategy that includes a space industrial base policy that maximizes innovation. It also recommended “reforms in government contracting and direct government investment as needed to compensate for U.S. adversaries’ anti-competitive behavior.” It also said the U.S. government should make steady investments in technological and logistical space infrastructure “needed to ensure long-term, U.S. dominance in space.”

In 2020, there is still no clearly defined space industrial policy. But the Pentagon has signaled that it might be taking the lead in driving future policies.

Deputy Defense Secretary David Norquist last month directed the stand up of a Space Advisory Committee under the Defense Innovation Board. The DIB is a panel of business leaders, scholars, entrepreneurs and technologists led by Eric Schmidt, former executive chairman of Alphabet. The chair of the space advisory committee is Mark Sirangelo, the former chief executive of Sierra Nevada Corporation’s Space Systems division.

Even though the United States has historically held a technological advantage in space, “potential adversaries are now advancing their space capabilities and actively developing ways to deny our use of space in a crisis or conflict,” Norquist wrote in a memo.

The Pentagon expects the space advisory committee to provide independent inputs on strategic, organizational and technological issues — including the value and implications of technologies being developed for space, and the role of commercial space innovation.

According to participants of the 2020 State of the Industrial Base workshop, the group’s recommendations could shape the agenda of Sirangelo’s space committee over the next several months. These officials said they are hopeful this could mark the beginning of a serious effort to develop a space industrial policy that drives future investments.

With the space industry hit hard by the pandemic and U.S. companies increasingly the target of predatory investment, experts believe the solution will require a whole-of-government collaboration and a close partnership with the private sector.


Sandra Erwin

 

Sandra Erwin covers military space for SpaceNews. She is a veteran national security journalist and former editor of National Defense magazine.

“On National Security” appears in every issue of SpaceNews magazine. This column ran in the May 11, 2020 issue.