China New Space in 2020 catching up.

An Energetic Market: Updates on the Chinese Private Launcher Industry

The latter half of the 2010s saw a plethora of mostly privately-funded, commercially-oriented launch companies emerge from China. The speed of development and number of companies can be exemplified by the fact that they fall rather neatly into two “generations”, namely the first generation of 4-5 companies mostly founded in 2014-2015, and the second generation of up to 10 companies founded mostly since 2018. One of the most advanced companies of the “second generation” is Galactic Energy, founded in only 2018, and profiled here on WestEastSpace in 2019. We recently spoke with Galactic Energy to get an update on the company’s progress, as well as Chinese launch technology in general. Having conducted some additional desk research on Chinese launch vehicles, we at WestEastSpace have combined the main takeaways from our discussion with Galactic Energy with an analysis on the broader market for an update on the broader Chinese private launcher industry.

Despite macroeconomic uncertainty, funding continues to flow

2019 was generally considered a “less good” year for space startup funding in China, however this was partly due to the extent to which 2018 was, simply put, a banner year. Our research indicates that total funds raised by private Chinese space companies was RMB 3.2B (~$500M) in 2018, compared to RMB 2.4B in 2019. However, the biggest drop-off here by far was in funding to satellite manufacturers, with launch service providers seeing roughly consistent levels of funding overall from 2017-2019.

This has certainly been the case for Galactic Energy, with the company having completed two funding rounds in 2019—a RMB 100M angel round in April, and a RMB 150M Pre-A round in December. Both rounds incorporated a variety of mostly private Chinese VCs, with approximately RMB 20M per investor on average throughout each round. The diversity of Galactic Energy’s investors—12 different companies have invested in the company’s three rounds—is indicative of the broadening appeal of space in the Chinese VC community. The relatively early stage of the company, and the relative focus of the business model (to be discussed in more detail below), may have also been a factor, with the rise of space among broader VCs in China having primarily occurred in 2018/2019, at which time most “first generation” Chinese launchers had sold significant equity and raised significant funds already.

With that being said, Galactic Energy is far from the only launch company in China to have raised funding over the past several months. Landspace, arguably the most advanced wholly-private launch company in China, completed a massive RMB 500M ($75M) C-round in November 2019, with the round being led by Country Garden Venture Capital, the VC arm of the massive Country Garden real estate conglomerate (market capitalization: HK$200B/US$25B) in a very public way. Other recent funding rounds have included a “nearly RMB 100M” funding round by Space Transportation in December 2019, a “tens of millions of RMB” funding round by Space Trek in September 2019, a “tens of millions of RMB” funding round by Aerospace Propulsion in September 2019, and a “tens of millions of RMB” funding round by Tianbing Aerospace in September 2019. More than one of these companies have been founded by early employees of the first generation of launchers—for example, Space Transportation was founded in August 2018 by a former OneSpace employee.

With Money has Come Progress

While it may be too early to say an investment into a private Chinese launch company is money well-spent, we have certainly seen these companies progress as the funding has continued to flow. The most visible achievement over the past year or so has been the successful orbital launch of the Hyperbola-1 rocket by launcher company iSpace, also known as Interstellar Glory Space Technology, in June 2019. Others such as Landspace and Onespace have attempted and failed orbital launches, while still more have completed engine firing tests or other technological milestones.

Several companies are working to develop liquid-fueled rocket engines, sometimes as part of a program to develop a complete rocket and sometimes as a standalone technology. Aerospace Propulsion, for example, is focusing only on developing rocket engines, the Canglong-1, powered by liquid oxygen methane and offering up to 60 tons of thrust, and the Canglong-2, offering around 10 tons of thrust. Galactic Energy, meanwhile, developing a liquid oxygen and kerosene-powered rocket, the Pallas-1, in addition to its solid-fueled Ceres-1, with the Ceres-1 expected to launch for the first time in 1^st Half 2020. Landspace has perhaps the most-advanced liquid-powered engine of any private Chinese launch company, the TQ-11, a 10-ton liquid oxygen methane engine that will power the company’s Zhuque-2 rocket, expected to launch in 2021.

Separate to the plethora of largely privately-funded launch companies in China, but still new and nimble enough to be considered “commercial”, Expace has seen the most rapid technological progress of any launch startup in China. With significant backing from state-owned enterprise CASIC, Expace has quickly established its Kuaizhou rocket as a fast, reliable rocket capable of lifting several hundred kg to LEO or SSO. The company has recently shown off some of its technological chops, for example having launched twice in one day (different rockets) in December last year. The company has also been impressively savvy on social media, in particular for a company with SOE roots. The above-mentioned double-launch resulted in, among other things, a pretty big social media hit with a “dragon-shaped cloud” that appeared from the tail of one of the launches, a photo of which went viral. More recently, Expace scored a massive viral hit with an April Fool’s stunt. The company live-streamed an auction for one of its rockets that was eventually purchased by Charming Globe, an EO constellation company based in Jilin, which agreed to make a RMB 500,000 deposit for an RMB 40 million rocket. However, the deposit was probably the less significant win for the company, given that as of

10pm China time on April 2 (~24hrs after the video was posted), it had received 500 million hits as a topic on Weibo, “China’s Twitter”. Featuring a famous actress, the auction set the Chinese internet afire for the night, and was arguably the country’s most successful April Fool’s stunt of this year.

Coming Soon: Deals, and Launches?

With all the money and progress that we have seen from the herd of Chinese private launch companies, only one has had any repeat success at launching customer’s satellites into orbit thus far (Expace, with the Kuaizhou-1A rocket having launched 5 times in 2019). This should change soon, and to the extent that the coronavirus pandemic does not dry up funding for New Space companies around the world, we may thereafter start to see more Chinese launch companies ink deals with not only domestic Chinese customers, but non-Chinese ones as well. To now, we have seen Landspace ink agreements with Open Cosmos of UK and D-Orbit of the Italy. Separately, Galactic Energy had previously advertised 79kg of payload remaining on the company’s upcoming Ceres-1 launch on its website, while Expace has been known to sell advertising space to large automotive manufacturers on their rockets.

Moving forward, it is highly unlikely, if not impossible, that all 10+ Chinese private launch companies survive. If anything, the majority will fail, and a few strong companies will emerge from a rubble of spent boosters, tanks of methane, and venture capitalist tears. However, with so many companies, the likelihood that some indeed do survive is fairly high. While the coronavirus epidemic and broader economic implications may slow their progress, we have likely only seen the beginning of the Chinese private launcher industry.

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