China's Satellite Internet Race Breaks Wide Open

Plus, GeeSpace in Oman 🇴🇲, China's Starlink-esque terminal debuts 📡, and Hainan's Launch Site makes progress 🚀

Dear Readers,

Happy Sunday, Happy 🇨🇦 day weekend to my Canadian friends, and a happy halfway point for 2024. Quite a lot going on this month, including a successful launch from Galactic Energy (their 3rd since late May), a big funding round from Space Pioneer, and some international announcements from GeeSpace. But before that, we dive into a rapidly evolving question in the Chinese space sector: which companies will be distributing China’s satellite internet infrastructure, e.g. if China builds its own version of Starlink, how will that constellation get sold to end users?

Gentlemen, Start Your Engines: The Wide Open Race that is Chinese Satellite Internet

We have written a lot about China’s plans to field their own non-geostationary (NGSO) communications constellation, i.e. a “Chinese version of Starlink”. In particular, we have focused on the upstream side of the equation, because this is where the action has been: more companies are coming up with concrete plans to build NGSO comms satellites, companies with more credibility are talking about launching their own plans.

But until recently, the downstream part of the industry has been relatively quiet. What do I mean by “downstream” in this context? In short, if China builds it (a Chinese version of Starlink), what type of demand will come? For awhile we’ve speculated that any state-built constellation will work with other state-owned enterprises (SOEs) to commercialize this constellation, but with relatively limited tangible results thus far. For example, we would expect China Mobile, Telecom, and Unicom to be working closely with China Satellite Networks Limited (SatNet) to develop applications for SatNet’s planned Guowang constellation. Other synergies could include China’s state-owned oil & gas companies, military equipment manufacturers, and other SOEs with a regional/global footprint and lots of assets to connect to the internet.

For ~2.5-3 years since the April 2021 establishment of China SatNet, we have seen few tangible examples of other SOEs (or major private companies, e.g. Huawei and ZTE) getting involved in satellite internet in any meaningful way. Until the past ~6 weeks, during which time it’s become increasingly clear that everyone is getting into satellite internet, with several usual and a couple of unusual suspects diving in.

So What’s Been Happening?

Shots were first fired at the end of May, when the Chinese internet uncovered a company established in April, China Space Time Information Group (中国时空信息集团有限公司). Its registered capital of ¥4B was paid by 3 shareholders: China SatNet (55% stake), NORINCO (25%) and China Mobile (20%). As the name implies, China Mobile is a Chinese mobile network operator (MNO) with a cool 991 million subscribers at EOY 2023, or ~1/8 of the world’s population. And for the uninitiated, NORINCO is one of the world’s largest arms manufacturers, with 2023 revenues of >US$80B.

While the three shareholders haven’t made any comments about the new subsidiary, various Chinese analysts were happy to give their two cents. Guo Tao, a Senior AI Researcher, noted that the company will strengthen China’s capabilities in military equipment and technology. In the same article, Wang Peng, an Associate Researcher at the Beijing Academy of Social Sciences, “space-time information is a key area of national security and economic development, and the establishment of the group is an important step in China’s building out a “Space-Time Industry”.

Reading between the lines, and especially taken in combination with the lack of progress from SatNet thus far, the key message here amounts to something like: a Chinese NGSO comms constellation is strategically important enough, in both a military and civil context, to where we are willing to shotgun marry these three huge SOEs in hopes that they can actually do something.

If history is any guide, we should have limited expectations for China Space Time Information Group. Other attempts by the Chinese apparatus to combine multiple massive, bureaucratic SOEs have not worked well. For evidence, look no further than China SatNet themselves, which counts among its leadership people from CASC, the China Electronics and Technology Corporation (CETC), and CASIC, among others. We cannot say for sure whether this mishmash of big, powerful SOEs is a cause for the slow development of the project, but probably it does not help. And so, while the creation of China Space Time is big news, and these three shareholders clearly have the political and economic strength to do something big, we should take nothing for granted here. Which might not even matter, because separate to the creation of China Space Time, the past ~6 weeks have seen several other major players throw their hats into the satellite internet ring.

China Telecom Satellite: 2nd in Mobile, First in Satellite

China Telecom is the second-largest MNO in China by a rather wide margin, with some ~400M subs. But in the satellite domain, China Telecom has a distinct advantage: historically they’ve been China’s only telco to have a satellite subsidiary, the predictably named China Telecom Satellite (CTS). CTS has been selling satellite bandwidth for 15 years, initially VSAT services and more recently pushing hard on their exclusive distribution rights for Tiantong. The latter has put CTS in the spotlight, as Tiantong’s direct-to-(mobile) device (D2D) services have caught a lot of media attention in China, and by some estimates a couple million subscribers.

All the recent publicity surrounding CTS’s Tiantong business seems to have emboldened their leadership to invest more into satellite internet. Earlier this month, we saw a report from Chinese space industry source Satellite World (卫星界) which called attention to a new China Telecom subsidiary. Citing a “document issued internally by China Telecom Group”, the article states that China Telecom is establishing a new satellite-focused subsidiary in Shenzhen.

The company, known as “Tiantong Satellite Technology Limited” (天通卫星科技有限公司) is described as “consolidating and expanding China Telecom’s first-mover advantage in the field of satellite information and communications”. Notably, the company will also receive all the assets of China Telecom Satellite and the China Telecom Satellite Application Technology Research Institute, “free of charge” (相关资产负债无偿划转至天通卫星公司). In short, we have Beijing-based SOE China Telecom consolidating their satellite activities in a new subsidiary in Shenzhen, a hi-tech hub far from Beijing and near a bunch of really innovative companies, like leading EV builder BYD, telecoms equipment giants Huawei and ZTE, and drone maker DJI.

And China Telecom wasted no time getting to know their new neighbors. About a week after the new subsidiary was announced, China Telecom and BYD announced plans for satellite-to-vehicle services. BYD’s Yangwang U8 off road player edition is already outfitted with satcom capabilities via Tiantong, but broader collaboration between China Telecom and BYD could massively expand that market.

As I’ve discussed before, Chinese commercial space companies have been more active than their western counterparts at targeting so-called “B2B2C” (business-to-business-to-consumer, e.g. SatNet sells China Telecom bulk bandwidth, China Telecom re-sells it to consumers). The move by China Telecom to establish a satellite subsidiary in Shenzhen, the consumer electronics center of the world, is probably no coincidence, and we should expect to see a lot of collaboration going on there.

The Network Builders Rush In

Separate to China’s massive MNOs, the satellite internet space has recently seen more activity from the companies that build the towers: Huawei and ZTE. We covered Huawei’s ambitions in an article earlier this year, but ZTE is a new one, so let’s dig in.

On 7 June, China Mobile announced winning bidders for procurement of their “test satellite trial production project”. The first winning bidder was very much a usual suspect: Galaxy Space via their Xi’an subsidiary. As one of China’s leading commercial satellite manufacturers, it should come as no surprise that Galaxy Space is winning business that requires building of satellites.

The second winner, Huawei, does not come as too much of a surprise, given the company’s long-term satellite ambitions. But the third, ZTE, is a more interesting development, with the massive network builder having had very limited public space plans to now. The fact that both companies were selected to build test satellites for China Mobile would seem to be an indication that China Mobile wants to integrate ground telecommunications and space-based telecommunications. When you’re buying hundreds of thousands of 5G base stations per year from two companies, and if those two companies could build satellites too, why not buy from them, especially if you’re planning to integrate those 5G base stations with satellite.

And on the application/downstream side of things, these tower builders are getting busy too. On 27 June it was announced that China Mobile, ZTE, and semiconductor maker Unisoc had completed the world’s first mobile connection using a GEO satellite based on the IoT-NTN IMS voice protocol.

What Does this All Mean?

Quite a lot. As recently as 2019, no one in China was thinking about satellite internet. As recently as early 2021, there was no Chinese company designated as the builder of the nation’s satellite internet infrastructure. As recently as Q3 2023, there was only one company with a mandate to build out this infrastructure: China SatNet.

And yet, in the past ~9 months, we have seen the field break wide open. First, this happened on the upstream part, as projects such as G60 picked up momentum, led by commercial companies with state backing, rather than wholesale SOEs. Most recently though, this has started to take place downstream, with more and more big and small companies realizing that there’s going to be a ton of Chinese-launched bandwidth up there, and that there will need to be an equally impressive number of creative ground terminals and use cases to leverage that bandwidth. It’s hard to understate the enormity of this change in just a few years, going from a single SOE working on satellite internet to having everyone and their cousin doing so.

Moving forward, this trend is likely to continue. The last thing that Chinese leadership wants is a multi-billion dollar SatNet/Guowang constellation to be deployed, and to have absolutely no one on the ground aware that this is happening. This would lead to a largely empty constellation. In order for the project to have any chance of success, ecosystems need to develop, especially given that, unlike Starlink, SatNet does not have the luxury of a CEO who is a walking sound bite/media storm, and is not likely to go downstream via a vertically integrated distribution network.

And develop they very well may. Until recently, there was too much uncertainty surrounding government attitudes towards satellite internet: telecoms is a tightly controlled industry in China, and few huge SOEs with massive existing markets already wanted to stick their neck out by saying they were going big on satellite internet (or in the case of the telcos, there was no incentive to risk cannibalizing/disrupting their own oligopoly). But the past ~6 months have seen a push towards deregulation, likely driven in part by relative inaction by SatNet. While it took a little while, this deregulation seems to have been the green light for a plethora of MNOs, network builders, and other players to enter China’s satellite internet race. Time will tell, but the race has been blown wide open, and there’s clearly room for more than just SatNet in building out China’s answer to Starlink.

In other news this month 🛰️ 🚀 🇨🇳

OneLinQ debuted “China’s first civilian satellite internet terminal device” at a major product unveil during the week. The terminals, which look rather similar to Starlink terminals, come in two types: standard (¥29,800, $4,100)) and pro (¥49,800). According to OneLinQ, their terminals are ~20% smaller than Starlink’s, and they offer ~2x better performance compared to “antennas of the same physical size”. Interestingly, OneLinQ appears to be developing the consumer-grade internet industry in China, with company VP of Sales and Marketing Zhu Lin describing 5 visits he’s made to Tibet in the past ~2 years, each time for >1 month, where he has spoken with thousands of remote households that do not have sufficient internet service.

OneLinQ’s Satellite Dishes

CAST published updates on their long-underused factory in Tianjin, near Beijing. The factory, which for years has aimed at “200 satellites per year” manufacturing clip, has seen a very limited number of satellites (perhaps 10) actually built and launched. The recent update provides few real insights beyond the image below of a Kuka robot, the same (German) brand who’s robots also line the CASIC satellite factory in Wuhan (the images are not new, but they are still nice). In theory CAST would be building their LEO internet satellites in Tianjin, though to now there has been scant evidence of batch manufacturing of any kind there.

CAST’s Tianjin Factory

We saw quite a few pieces published about the on-orbit acceptance of Apstar-6E, a (relatively) small GEO commsat launched in early 2023, suffered some thruster issues, and finally reached orbit earlier this month. Operated by APT Satellite, Apstar-6E is based on the DFH-3E platform, and is focused on Southeast Asia. We speculate, but given the unusually public nature of the on-orbit acceptance, and the emphasis on Southeast Asia, the satellite may find an anchor customer in the region in the near-term, with the most likely suspect being longtime APT Satellite customer Telkomsat.

GeeSpace announced what seems to be impressive progress in Oman. On 17 June, the company announced the “first overseas communication commercial deployment test of the GeeSpace Future Mobility Constellation in Oman”, with the test achieving communication success rate of 99.15% and network availability of 99.97%. The tests were completed with local partner Azyan Telecom, with whom GeeSpace also recently signed a strategic cooperation agreement.

The Number 2 launch site at Hainan Commercial Space Center was completed, having taken ~20 months from ground-breaking to completion. The launch pad is the “first medium-sized liquid rocket launch site in China that adopts the “three-level” test/launch mode of horizontal assembly, testing, and transfer”. As of early June the site was to be ready for launches by end of June. Moving forward, we expect to see more activity coming from Hainan, including more launches, satellite manufacturing, and the buildout of a broader industrial base.

Galactic Energy saw yet another successful launch of its Ceres-1 rocket following 2 at the end of May. The company is now 13/14 for launches, having sent 48 satellites into orbit. The most recent launch on 6 June sent Nanosatellite-3A and -3B, co-developed by SpaceLink and Tsinghua University, as well as the TEE-01B remote sensing satellite. The launch also included the Eros-1 upper-stage/commercial test platform developed by Galactic Energy which can be used for on-orbit verification services, manufacturing, maintenance, on-orbit verification services, and other applications.

Not to be outdone, rival commercial launch company Space Pioneer announced a >¥1.5B funding round later in the month, with money coming from a variety of sub-national governments including the constantly-trending Liangxi District, and its city-level counterpart, the government of Wuxi City. Located past the western fringes of Shanghai, Wuxi is located very near the G60 industrial base, and (possibly as a result) the local government has been actively supporting space companies looking to set up shop in the city, with other examples including MinoSpace (January 2024) and AZSpace (Feb/March 2024). Space Pioneer and Galactic Energy are both examples of so-called “second-generation” Chinese commercial launch companies, e.g. ones that were founded in the late 2010s and have made very rapid progress.

The city of Jinan, capital of Shandong Province unveiled a detailed space industry development plan for 2024-2027. Among other things, the city calls for developing liquid-fueled rockets, satellite manufacturing, and various downstream services. Shandong Province is notably home to the Yantai Oriental Spaceport, a sea launch facility that saw its first LM-11 launch in 2019. With a population of ~100M people, Shandong Province has a massive and diversified economy (its GDP is nearly as big as Indonesia’s, making it the 17th-largest if it were a country), and could likely justify comparatively large space industry-related subsidies if it wanted to.

A decently-detailed piece on the Longjiang-3 satellite, built by the Harbin Institute of Technology (HIT) and its commercial spinoff HITSat. Longjiang-3 was launched ~1 year ago and was described as “China’s first new-generation flat low-earth orbit broadband communications satellite”.

And in what was a very busy month for CGSTL, the company hosted a conference in its home city of Changchun, Jilin Province along the sidelines of the Changchun International Optoelectronics Expo. Around the same time, CGSTL held a remote sensing training course in Guangxi Province, and attended a major remote sensing conference in Meishan, Sichuan Province, organized by one of CGSTL’s best customers, Meishan City.

Intane Optics attending the Changchun Optoelectronics Expo

If you’ve made it this far, thanks a lot for reading, and we will see you next month!

Blaine