As the commercial race to dominate cislunar space accelerates, South Korea is emerging as a late but determined entrant, betting on a government-led industrial cluster strategy to position itself in the rapidly evolving “new space economy,” the Carnegie Endowment for International Peace (CEIP) has reported.

According to the report, analysts say the country’s approach offers valuable lessons in how mid-sized economies can marshal domestic coordination strengths to compete in sectors where traditional industrial catch-up strategies no longer suffice.

The “new space economy” — encompassing commercial activities in orbit around the Earth and Moon — is transforming space into what policymakers in Seoul view as a new arena of economic and technological competition. “The dynamics of the new space race are unlike any other industrial transition,” said a recent analysis from the Asia Program in Washington, which studies security and technological risks across the Asia-Pacific. “Late entrants must achieve global competitiveness from inception, without the luxury of step-by-step capability building.”

At the heart of Seoul’s effort is a nascent three-hub model designed to distribute responsibilities across key regions. The city of Sacheon anchors satellite manufacturing, Daejeon hosts research and talent development, and Goheung serves as the base for launch operations. Together, the hubs are intended to replicate South Korea’s time-tested model of close government–industry coordination that underpinned the rise of its automotive, shipbuilding, and semiconductor sectors.

Yet early implementation has exposed serious challenges. Geographic dispersion among the hubs has strained the intense daily coordination that once defined Korea’s industrial policymaking. “The physical separation undermines the collaborative density that made our traditional clusters so effective,” one industry insider in Daejeon observed. In addition, administrative friction between Daejeon and Sacheon over aerospace governance and the centralisation of the national space agency has further complicated the rollout.

The Asia Program report identifies three barriers that make space industrialisation fundamentally different from Korea’s earlier growth models. First, firms must compete globally from day one, with limited opportunity to develop behind protected domestic markets. Second, success demands simultaneous mastery across multiple cutting-edge technologies, including propulsion, AI-driven systems, and advanced materials. Third, the powerful ecosystem effects of space manufacturing — where early entrants shape global supply chains — place latecomers at an enduring disadvantage.

Despite these structural hurdles, Korea’s approach reflects a clear recognition that industrial policy must evolve to meet the realities of twenty-first-century technology competition. The government’s coordination model, refined through decades of state-led development, remains one of the few institutional assets capable of mobilising resources rapidly across sectors. “Korea’s coordination capability is its comparative advantage,” said the report. “The question is whether that strength can be adapted to industries that are inherently global and fast-moving.”

Complicating matters further CEIP reports is the convergence between defence and space technologies. As with the original Cold War-era space race, strategic imperatives continue to shape the commercial landscape. Korea’s efforts must therefore satisfy both economic competitiveness and alliance integration requirements, particularly with the United States. Analysts note that the dual-use nature of space technologies — from satellite reconnaissance to launch capabilities — blurs the line between industrial policy and national security strategy.

According to the CEIP report, the early stages of Korea’s cluster initiative will provide important evidence on whether countries with established coordination mechanisms can sustain their advantages in globally integrated industries. While still in its infancy, South Korea’s bid to carve out a position in the new space economy underscores the growing complexity of industrial policy in an age of technological convergence. The success — or failure — of its cluster strategy could determine whether the country remains a fast follower or becomes a credible participant in shaping the next frontier of global industry.