Space manufacturing has a number of potentially promising products, and one which has proven itself (protein crystals). However, high costs, bureaucracy, unpredictable schedules, and other factors keep this market from being larger than it is. Very few commercial firms are interested in spending their own money.
Note that I (along with the CSTS, section 22.214.171.124, page 41, and perhaps other sources) use the term space manufacturing to include many activities which might also be described as research and development. The criterion is not whether an activity returns materials to earth for sale; the criterion is whether the activity produces results which can justify spending money on it.
The best developed space manufacturing application is protein crystals. Better crystals can sometimes be grown in space which allows one to determine their structure, for medical/biological research and drug development. The paper "Protein Crystal Growth Results from the United States Microgravity Laboratory - 1 mission" by Delucas et al discusses many of the technical details of protein crystallization apparatus. Also see Science, Vol.268, 28 April,1995, pp.497-498 and Nature, Vol. 360, 26-Nov. 1992. According to a speech by Rep. Weldon of Florida in The Congressional Record, 104th Congress, page H4440, drugs developed using space crystals are now in FDA trials. A more detailed summary of the results from crystals is in the testimony of Lawrence J. DeLucas to the U.S. Congress, House Committee on Science, Subcommittee on Space and Aeronautics hearing of 9 Apr 1997. In particular there are some proteins and drugs listed. The question I am really trying to answer is "what are the results from protein crystalization (current and future), and what volume of future experiments is thereby justified?" This could be answered by comparison to funding levels for other biological and medical research. But I haven't seen an attempt to do this.
"Despite the lack of impact of microgravity research on structural biology up to now, there is reason to believe that the potential exists for crystallization in the microgravity environment to contribute to future advances in structure determination", Future Biotechnology Research on the International Space Station, National Academy Press, 2000, page 2. This work has various specifics on what could be done to fulfill the promise of protein crystalization.
The Potomac Institute report, page C-8, discusses protein crystals as a drug delivery vehicle. I didn't see anything about this in a quick look at the UAB Center for Macromolecular Crystallography home page, so unless told otherwise I'm going to assume this application for protein crystals is less interesting than using crystals to determine protein structure.
There is one other existing (but small) market--latex spheres for microscope calibration. The quantity required is literally microscopic. These are sold through NIST (SRMs 1960 and 1961, see page 126 of the 1995-1996 SRM Catalog at the NIST SRM page) and were produced on two early 1980s shuttle flights; I don't know whether there are any plans to produce additional supplies of these materials in space.
Bacteria growth is faster in space with potential pharmaceutical applications; see Bristol Myers Squibb Research Shows Promising Results, SPACEandTECH Digest, 8 Jan 2001. Another article on the same research: Commercial Antibiotic Production Experiment to Begin on Space Station, SPACEandTECH Digest, 23 Apr 2001. As usual, this is for research, rather than producing drugs in space for sale.
The Wake Shield Facility is deployed from the shuttle and provides high quality vacuum which claims to have potential applications such as thin-film epitaxy of semiconductors. But see the statement of Dr. T. J. Rodgers, President and CEO, Cypress Semiconductor, before The Senate Committee on Governmental Affairs (Subcommittee on Oversight of Government Management, Restructuring and the District of Columbia), June 3, 1997, which gives a figure of $1000 for the best wafers, compared with the $10,000 estimate for what wafers produced in space might eventually be capable of.
There has been some research (STS-57 and other shuttle flights) on contact lenses made in space. See "Space Research Advances Contact Lens Technology", Space Technology Innovation, January/February 1994.
Zeolites are widely used in the chemical industry. Zeolites have been made in space which are superior to ones made on earth, but it is not at all clear that this superiority has any significance to commercial zeolite users (Potomac Institute, page C-13). The German/Japanese EXPRESS had an experiment. Also STS-73. Also the CASIMIR experiment (using a French furnace on the Russian Resurs-F 9 vehicle in 1990; source: Europe and Asia in Space 1993-1994, p. 231). One good paper is "The Growth of Zeolites A, X and Mordenite in Space" by A. Sacco et al., concerning experiments on STS-40. It is primarily technical but also contains an introduction to the economics of zeolites.
Aerogels are usually made on earth but there has been research into how their formation differs in microgravity; see NASA Research in Space may Redesign Household Windows, NASA headquarters release 97-34, 6 Mar 1997. An article with less hype and more accuracy on aerogel commercialization in general (not microgravity research in particular) is Kahn, Jeffery, Aerogel Research at LBL: From the Lab to the Marketplace, Summer 1993. For a summary of density, thermal conductivity, and other properties, see the aerogel page at Commercialization of Space Age Technology: A Business Opportunity Workshop, 12 Sep 1995, Long Beach, CA. A few quick back of the envelope calculations based on the numbers there make it seem like aerogels made in orbit for windows would seem to be too expensive for production use, but not by as much as I thought. There are plenty of things I don't know here, such as just what the value of microgravity is, how these windows might compare with other high tech windows, and other issues. A few good aerogel sites (not necessarily focused on commercialization of space aerogels) are from Hubert van Hecke or NASA Marshall.
Microencapsulation is a widely used technique on earth (one introduction is "The Art and Science of Microencapsulation", Technology Today, summer 1995). I'm not sure exactly how widely used (in dollars/year). Making microspheres in space has been investigated for at least two purposes: (1) for delivering cells into the body for medical treatments (Potomac Institute, page C-7), and (2) delivering drugs into the body for medical treatments (STS-70 Press Kit: Microencapsulation in Space - B (MIS-B), 1995). In both cases the microspheres made in space are superior in some ways to those made on the ground.
Space has some advantages for research on nonlinear optics (Potomac Institute, page C-9). These organic polymers are used in information and communications applications. I didn't see any indication that space might actually help in manufacturing production quantities, nor was it clear to me how great the advantages for research are.
Microgravity can be used for research into alloys, which generates insights which improve ground-based processes (Potomac Institute, page C-9). I haven't seen any numbers on the annual funding for this kind of research or anything of that sort.
There are various other potential products which I have even less information about: foamed steel I-beams (the main competitor is said to be honeycomb structures built on earth), and perfect ball bearings that only can form in microgravity. No doubt there are others I could mention; there is a whole mix of potentially promising ideas, ideas which are unlikely to be cheap enough to compete even given big launch cost reductions, and ideas where the hype got out of line with reality. In many of these cases I don't have the details.
These products were believed to have potential at one time but for whatever reason are not now considered promising.
In the early 1980's an industry team working on the space shuttle developed an electrophoresis process, for separating and purifying biological materials. The process worked, but ground-based processes advanced to the point that the space process was not required (Potomac Institute, page 24).
See "Exploring the business of space", Scientific American, August, 1996, for an article on spacehab. Basically, they admit that space manufacturing isn't much of a market now, but given the right conditions they think it could be.
Another article which summarizes the state of space manufacturing is "Business turns its back on space", Florida Today Space Online, 25 Mar 1997.
This has been moved to my Supply side page.
A more speculative area consists of products which might be sort of a cross between manufacturing and novelties. For example, if alcoholic beverages fermented in zero g would be somehow better or at least distinctive they might get a good price. This would seem to require very cheap launch and/or a source of water other than launching it (e.g. shuttle fuel cells); saying anything more specific would require a closer look at pricing, what equipment would be required, etc. One can imagine various other such products--the idea is that zero g would be used to achieve some aesthetic effect. It would not need to be something which is impossible to make on earth, because of the novelty effect, but the novelty effect would presumably be stronger if it is also something that wouldn't be simple to make on earth either.
Similarly, there is an offhand mention of apparently serious investor interest in jewelry made in space in "New Private Investors Found for Mir", SpaceViews, 3 Apr 1999.