Starpath builds factory capacity ahead of customer demand

Transcript

Transcribed by machine (Whisper) from the episode’s audio, so a word may be off here and there.

1. 30:41

   that you're gonna basically turn on your first major production line. And forgetting that who knows how the hell you actually even secure launch, you are building ahead of- Which we do know, by the way. Right, right. How are you thinking about basically building ahead of capacity? You said something like there's roughly five megawatts worth of demand for solar panels in space today and you're going to build this for 50 megawatts of capacity so how do you think about that yeah okay uh great question so we are sitting inside uh starpath megafactory la uh this building is uh near long beach that's 130 000 square feet you said um and in about five months this will turn into a 50 million watts per year fab for starlight air which is the name the brand name of our ultra-thin low-cost solar panel and a few other

2. 31:34

   products that we can talk about a little bit later if you add up the wattage meaning the power of every single satellite launched including starlink it sums to something like 50 megawatts here if you don't include starlink it's like five megawatts here so the question is you know you might ask okay why are we building a 50 megawatt fab that's 10 times bigger than demand like why would we Why would we do this? It seems like we spent 10 times too much CapEx. It seems like a big mistake. Why would we do this? And the answer is quite simple, which is that the demand that is being forecasted to us by our customers, who, by the way, are not all, you know, like sometimes people will be like, the demand I'm seeing for my customers, and then the customer is like a startup, okay? And we have customers that are startups too, and that's fantastic. We sell to them, absolutely.

3. 32:27

   lead. But when I'm talking about demand that's being forecasted, I'm talking about from companies who currently spend billions of dollars on data centers, okay? So the demand that is being forecasted to us by our customers is so immense that, and it grows on such a steep exponential year over year, quarter over quarter, whatever you want to call it, that it leaves us with two options you know so your demand demand is growing on a smooth exponential roughly and it's very very steep and your supply as in your capacity grows in steps so your factory comes online and then you have the same capacity for a little while and then another factory comes online and so you're building basically this like staircase shape graph it's like step shaped graph of capacity and you have you have roughly two choices you can either build the steps above the exponential so

4. 33:17

   here's the exponential and here are the steps so factory one factory two factory three etc or you can build it below and there is one governing word that comes out of every conversation with every customer and it is not quality which is important it is not weight which is important it's not cost which is important it is capacity the questions that our customers are asking us do include those first few things quality weight cost but mostly include how much capacity do you have in year X, in year X plus one, in year X plus two. And we're talking about numbers that are so immense, they're almost hard for me to comprehend where I am working on building one of the factories right now. Like the numbers are like, okay, this is a 50 megawatt factory. That's 50 million watts. Our customers are saying, how fast can you get to 75 gigawatts a year?

5. 34:15

   that is 1,500 times the scale of this factory, which is the largest building I've ever leased in my life by an order of magnitude. And so if we want to tell a compelling story to our customers that we actually will have the thing that they want, which is capacity, we need to have more capacity than our customers want today. I mean, it's like, it's as simple as that. You want to sell a big amount of stuff.

6. 34:46

   You better show a big amount of machines that can make a big amount of stuff, even if it means you're spending an extra $50 million on CapEx in a year where you could have gotten away with spending like five, right? So the operating word of the next 10 years for us, not for the whole world, but for us, infrastructure and industrials providers for data centers in space is capacity. And the capacity required by our customers is so gargantuanly immense that I cannot even understand what they mean. Which we won't. If we wanted to do it in LA, which we won't, we would have to lease every building between Long Beach and the 105. Every single one in order to fulfill the demand that our customers want to see in five years now obviously we're not going to do in la we're going to do it in texas where you know like it's easier to build the regulation is more friendly

7. 35:44

   but um so your question was why are you building 10x the capacity of what your customers want and it's because the work the thing they want is capacity even if they're not buying it next year and between building capacity ahead of the curve and building capacity behind the curve. It is the smarter business decision to build it ahead. And for those saying, which nobody was really saying, but if you said like, you know, what about the cost of capital, et cetera, et cetera,