Private investment fuels China commercial space sector growth

In its latest research titled "China Space Industry Report," Euroconsult provides in depth analysis of how commercialization is driving both growth and technology advances in the Chinese space sector, with oversubscribed IPOs and a wave of private investment. China Satcom is now the world's highest valued pure satellite operator with a market cap of US$11 billion as of May 2020, while China Satcom parent company China Aerospace Science and Technology Corporation (CASC) reported record revenues of $37 billion in 2018. With a deep-dive into the structure of the Chinese space industry, the report details the relationships between myriad space organizations and China's complex delineation between commercial and government entities. The Chinese government began to liberalize private investment into the space sector in 2014, and since then more than US$900 million in private funding has been invested. With nearly equal investment from government sources, commercial companies have raised a total of at least US$1.85 billion since 2014. Notably, Euroconsult finds that following a short-term lull in activity corresponding to the COVID-19 pandemic, the Chinese space industry is rebounding strongly, having resumed launches, re-opened manufacturing facilities, and continued to move forward with much-needed reforms. The pandemic has coincided with a drop in funding, with 2020 thus far seeing around RMB 900M of funding raised by Chinese space companies, however this is partly due to 2019 being a historically large year in terms of funding.

"Our overview and analysis of the Chinese space ecosystem provides context and understanding for one of the most opaque markets in the world," said Blaine Curcio, Euroconsult Senior Affiliate Consultant based in Hong Kong.

"The growth of the private sector since 2014 has been astonishing, and there is little to suggest a deceleration in this growth. That being said, the low starting point for the private sector, combined with the sheer size of state-owned incumbents, means that the private sector remains extremely fast-growing but relatively small."

In addition to information on Chinese investment in the space sector, the research provides detailed analysis of five market segments including Earth observation, ground systems, launch services, satellite communications, and satellite manufacturing. It sizes the markets and discusses both government and private companies in each sector, including their business activities and international plans. It also delves into vertical sub-segments such as the national TT&C network, backhaul and trunking demand, and Chinese plans for low-earth orbit (LEO) broadband constellations similar to western concepts such as Starlink.

The report includes an Excel database which organizes hundreds of data points, including funding, supply, demand, and revenue numbers for each of the five market segments. It also provides an up to date analysis of the LEO constellations being developed in China today as well as information on China's NGSO filings with the ITU for Q/V-band, X-band, and S-band spectrum rights.

Key Findings
Euroconsult's analysis shows that from 2014 to 2019 there were 319 launches of Chinese manufactured satellites. Of these, 178 were launched in 2018 and 2019, reflecting the recent expansion of China's manufacturing and launch capabilities.

In the launch sector there have been 46 rounds of private investment in Chinese launch companies since 2014, with total funding raised from both private and government sources of roughly US$1 billion. This investment is targeted at commercial launch companies that are developing more than 20 rockets, many using liquid propellants. Of the launch vehicles being developed, at least seven are expected to have a first launch in 2020 or 2021.

"It's important to understand the government policy decisions that are driving industry trends in China," said Steve Bochinger, Chief Operating Officer, Euroconsult. "When the National Development and Reform Commission added satellite internet as one of its "new infrastructures" to be developed, it triggered a flurry of private investment. While the majority of the Chinese space industry is domestic-focused, there is also an increasing emphasis on internationalization, with this expected to accelerate as China rolls out more global space infrastructure."

China has built out significant space infrastructure over the past 5-10 years, including the BeiDou satellite navigation constellation, the Gaofen Earth observation constellation, and coming LEO broadband constellations. It has a clear strategy for internationalizing this infrastructure to provide turnkey service in regions including Eurasia, Africa, and Latin America.

Market for 3,300 satellites worth $284 Billion over next decade

According to the 21st edition of its report Satellites to be Built and Launched over the Next 10 Years, Euroconsult anticipates that 330 satellites with a mass over 50 kg will be launched on average each year by 2027 for government agencies and commercial organizations worldwide. This is a threefold increase over the past decade as the satellite market experiences a paradigm shift with the rise of small satellites and large constellations. "The satellite sector is undergoing a massive transformation as more commercial and governmental entities take advantage of constellations to introduce new satellite services on Earth," said Rachel Villain, Principal Advisor at Euroconsult and editor of the report. "We anticipate that over 40 constellations of various sizes and capabilities will launch about 2,300 satellites into low or medium Earth orbits for services as diverse as communications, navigation, Earth observation, meteorology and data collection from Earth sensors." The 3,300 satellites over 50 kg to be launched over 2018-2027 should represent a market of $284 billion for the space industry in terms of building and launching, up 25% over that of the past decade. At the same time, a price decrease is visible in the satellite industry, driven by the commercial constellations of smallsats introducing new production and operation concepts including economies of scale, softwarization, and vertical integration up to data analytics.

Governments will remain the largest customer of the satellite and launch industries with 1,300+ satellites to be launched over the next 10 years for about 70 countries, for a market value of over $200 billion.

Governments dominate the space industry as established space countries replace and expand their in-orbit satellite systems, and more countries acquire their first operational satellite systems, usually for communications, Earth observation and imagery intelligence. 85% of the government market will remain concentrated in the 10 countries with an established space industry (the U.S., Russia, China, Japan, India and the top five European countries).

The other 60 countries invest in satellite systems to develop domestic space capabilities, or to acquire their first systems (usually for communications, Earth observation and imagery intelligence) in order to be more responsive to social and economic development.

In the commercial space sector, Euroconsult believes about 50 companies will launch almost 2,000 satellites, of which 1,700 units will be for 22 commercial constellations (of which one single constellation accounts for 70%).

Commercial space still means communications and broadcasting satellites in geostationary orbit; these satellites represent almost 50% of the $70 billion of commercial revenues expected over the decade.

The two other large commercial markets are for non-geostationary orbit satellite constellations for communications (25% of revenues) and Earth observation (11% of revenues). New commercial markets are emerging for in-orbit services such as life extension, and for in-orbit tourism (mostly lunar).