The Great Firewall From Low Earth Orbit (part 1 of 2)

By Blaine Curcio

June 17, 2019

The space industry’s biggest fundraising story over the past 5 years has been the enormous increase in the number of constellations aiming to offer broadband services from Low Earth Orbit (LEO). These companies—of which there are about a dozen—have raised over US$5 billion in total, with most of this going to two of them: OneWeb and StarLink, funded primarily by SoftBank and SpaceX/Elon Musk, respectively. The constellations aim to offer broadband internet anywhere in the world, at any time, using a (yet-to-be-invented) low-cost ground terminal that you could put on top of your house.

While most of the funding has gone to western constellation companies, China has been eyeing these developments with some interest, and a handful of Chinese companies have emerged aiming to offer a similar constellation business model. Taken in combination with western constellations launching into similar orbital planes, using similar spectrum, and targeting similar markets (the world), the emergence of Chinese constellations will raise a number of interesting questions, enough to cover at least two articles. Before diving into the “what happens when?” discussion, however, it helps to first paint a picture of who are these Chinese LEO constellations?

The National Team

At space conferences in China, the phrase GuoJiaDui is heard multiple times every single day. This phrase literally translates to “national team”, and is the phrase used by the Chinese private space industry to refer to the state-owned incumbents. The phrase can at times be endearing or inspirational (i.e., “we private sector can work together to help our Guojiadui industry succeed”), and sometimes a little bit awkward (“of course, we would never compete with the guojiadui”). In basically any space-related industry, the national team will be leading the charge, and LEO constellations are no exception.

China Aerospace Science and Technology Corporation (CASC), the largest state-owned space contractor, announced its LEO constellation plans in 2016 with the Hongyan project. The Hongyan constellation aims to have ~320 satellites in orbit by the mid-2020s to provide broadband services. The first Hongyan satellite was launched in late 2018, and CASC has announced funding for the project of 20 billion yuan, or around US$2.9 billion. The project is believed to have received support from the Chongqing Liangjiang New Area government, and is likely to be a component of the Belt and Road Spatial Information Corridor—China’s plan to connect BRI countries via telecoms infrastructure—if it were to launch. By virtue of being run by CASC, the Hongyan project is probably the most likely to be fully realized.

China Aerospace Science & Industry Corporation (CASIC), the next-largest state-owned space contractor, and a major defense contractor, has announced plans for multiple constellations, namely Xingyun and Hongyun, both of which are part of the company’s “Five Clouds, One Vehicle” series of projects, the five of which have a combined budget of 100 billion yuan, or around US$14.5 billion. While it is not clear if this budget is committed or aspirational, it should be noted that the company does have revenues of US$35 billion and has significant R&D resources. The Xingyun project is headquartered in Wuhan, along with several other CASIC-related companies, and it is likely that the project would be the recipient of some local government assistance (i.e. potentially free land for the development of the manufacturing and R&D facilities, deferred tax payments, etc.). Both constellations have variously been reported as being narrowband or broadband, however most recently, it appears that Xingyun is focused purely on narrowband, and Hongyun on a combination of narrowband and broadband. Xingyun is expected to have around 80 satellites in its constellation by the mid 2020s, having launched its first satellite in 2017, while Hongyun is expected to have around 156 satellites by around 2023, with its first satellite launched in late 2018.

The three constellations being planned by the SOEs in China are implicitly the best-supported politically, and may be the best-funded. However, there are a number of private LEO companies that have managed to raise significant funding and put together some of the necessary pieces of the LEO constellation puzzle.

Private Competitors

The seemingly best-funded private LEO company in China is Galaxy Space. The company was founded relatively recently, in 2018, though has since raised a rumored US$100 million, in a funding round that was publicly confirmed to value the company at RMB 3 billion, or around US$450 million. The company has raised money from Shunwei Capital, the VC of the Xiaomi CEO Lei Jun, one of the wealthiest people in China. Galaxy Space plans to launch a LEO constellation to serve IoT and potentially 5G applications.

Another private LEO company—LaserFleet—is attempting to develop a more niche business model of providing laser-based communications services to airplanes. The company’s CEO is a former executive at an in-flight connectivity service provider (Beijing Shareco), and the VP of technology comes from a state-owned aerospace background. LaserFleet has raised less funds than the above LEO constellations, only having raised an estimated several million US dollars. With that said, the company has already secured at least one cooperation agreement with the Civil Aviation Management Institute of China (CAMIC).

In addition to the above 5, there are several other Chinese companies aiming to launch LEO communications constellations. Obviously, not all of them will succeed. However, if even only one or two of these constellations come to fruition, there will be a number of implications for the western companies trying to do the same. These implciations will be discussed in the second part of this article.

About The Author

Blaine Curcio

Blaine Curcio

Founder at Orbital Gateway Consulting

Blaine Curcio has spent most of his career working in the satellite communications and commercial space industry, with experience at satellite operator SES, and with a multiple industry consulting and research firms. Blaine has spent his entire career in Asia, and is a recognized expert on several topics related to China. This has included giving lectures on the Belt and Road Initiative, China’s macroeconomy, and the Chinese space industry. He regularly attends conferences throughout Asia as a speaker and moderator, and is a contributor to SpaceWatch.Global, Talk Satellite, and the Satellite Executive Briefing, among other industry publications.

 

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