The industry chain of private spaceflight
The term 'commercial spaceflight' could be defined with different explanations. For this article, we use a 'market-oriented' as criteria.
Commercial spaceflight is the space practice that commercial companies use to serve market demand and have a commercial business model. This definition applies to companies such as rocket manufacturing and launch service, satellite manufacturing and operations, and remote sensing services for data analysis. The space industry total revenue in 2018 was USD 360 billion globally.
While people's attentions are attracted by Elon Musk's SpaceX, in the commercial spaceflight industry chain, the launch service is actually in the middle stream.
The upstream includes satellite manufacturing and ground-based infrastructure manufacturing, takes about 40% of the space industry's total market size. The middle stream includes launch service, takes about 2% market share. Downstream mainly includes satellite services such as earth observation via remote-sensing technologies which takes about 35% market share. Non-satellite space sector consisted of government space budget and commercial human spaceflight also contribute 23% of the total space economy, data from the 'State of the satellite industry' report published by SIA.
How could Chinese players be profitable?
Launch process
The global launch market revenue was USD 6.2 million, increased 34% compared with 2017, and the United Sates took 37% of total.
According to NASA, the full-scale rocket is mainly composed of four major systems: structural system; payload system and guidance system and the propulsion system. The structural system is the frame of a rocket includes all parts.The payload is the 'stuff a rocket is carrying' such as a satellite that will be sent into space. Guidance system includes sophisticated sensors, on-board computers, radars, and communication equipment, for controlling and providing stability.
What worth noting here is the heart of carrier rockets - the propulsion system. It includes all of the parts which make up the rocket engine produce thrust which is the force to move a rocket through the air. From the engine's perspective, the rocket can be mainly divided into two types: solid rocket and liquid rocket.
The solid-fuel rockets are mostly used for military due to the flexiblility and fast reaction features. The setup period of one launch could be compressed to 24 hours. The limitation of solid-fuel rockets is mainly about loading capacity, offering carry opportunities to micro or small satellites are possible though.
The liquid ones are mostly for civilian use, propellant need to be injected and pre-test, which extend the total set up period to about 20 days. With the advancement of technology, setup time has been shorten recently. Even though it needs longer preparation time and has shorter storage period, the superiority of liquid-fuel rocket is still obvious: higher loading capacity and efficiency; it also enable to be shut down once launched.
In terms of the commercial space industry, compared with small solid rockets, medium liquid rockets have several advantages in launch cost, time consumption, risk level and other aspects under the wave of constellation network in the future. In the development of new liquid-fuel rockets, the main design objectives include high quality and low cost. In addition, reusability, easy of maintenance, combined with non-toxicity and pollution-free are also the main targets. Considering a balance between cost and performance, liquid oxygen methane engines will be the business trend for private space industry.
Key domestic players
Private start-ups has emerged and grown rapidly since 2014, pushed by the civil-military integration policy. Here will listed several key players in the carrier rocket sector.
Apart from fast growing start-ups, state-backed companies keep their competitive advantages, here will list three examples.
China Great Wall Industry Corporation (中国长城工业公司) is the first commercial launch service provider in China. Great Wall is the subsidiary of China Aerospace Science and Technology Corporation founded in 1980. According to its website, the launch record shows that it successfully launched 40 carriers since 2018.
China Aerospace Science and Industry Corporation (航天科工火箭公司) was founded in February 2016, CASIC is the first professional carrier rocket company in China to conduct research and development and application based on a business model. Different from Great Wall, it pursues a commercial operation model, seek financing opportunities from the capital market. Accordingly, lower cost is one of the main targets they seek solutions for.
Aerospace Long March Launch Vehicle Technology (中国长征火箭公司) was founded in 1998. It develops reusable, marine launch technology to target the commercial market with a new generation of Long March rockets. On July 31, 2018,it officially released the micro solid-fuel carrier rocket Jielong No.1 (捷龙一号).
Satellite Manufacturing
Up to the year-end of 2018, there are 2100 satellites in the orbit in total. Remote sensing satellites accounted for 39%, while telecommunication satellites accounted for 22%. Total revenues went up to USD 19.5 billion, with a yearly growth rate of 26%.
Satellites of low mass and size, usually under 500 kg are small satellites. With advantages including small size, quick manufacturing, fast technology update, good performance and strong survivability. The number of small satellites will usher in growth. The cost of launching a satellite varies depending on the satellite mass, the orbital altitude, and the orbital inclination of the final satellite orbit. According to Space Freighter, launch cost is approximately USD 5000 per kg to low-earth orbit and the average mass of small satellite is about 150kg. Accordingly, low-earth orbit (LEO) small satellite has low-cost, high-performance features.
The state-backed companies have paid more attention to technological breakthroughs such as high-orbit and heavy-load, and it is difficult to completely cover the commercial market demand of low- and medium-orbit, which will leave spacious room for start-ups.
Combined with the continuously increasing market demand, such as the spread possibility of 5G, one limitation factor could be the difficulty of constructing ground-based stations above extreme regional conditions such as ocean or desert. Such condition has push the demand of low-earth orbit satellite network, which able to upgrade the global communication network.
GalaxySpace (银河航天) has secured new round of funding. Another satellite start-ups, Spacety (天仪研究院) was founded in 2016, it was one of the earliest players which provide short-term, cost-effective overall solution for micro-satellites for scientific research and commercial institutions. Now it has provided satellite manufacturing and launching services, payload R&D and on-orbit services. At present, it has also promoted data services. In terms of financing, Spacety has completed series B round of financing in 2018, raised CNY 150 million. Other players, such as Piesat (航天宏图) which was founded in January 2008, has completed its IPO in the STAR market in July this year. Commsat (九天微星) has also raised more than CNY 200 million with 5 rounds of financing since its establishment before 4 years.
Apart from the blooming downstream demand, the development of the aerospace industry is inseparable from the support of national policies. With the military-civilian integration policy, China has formulated a series of policies to carry out long-term planning for the aerospace industry and put the development of commercial spaceflight on the agenda. It's obvious that the capital market has been enthusiastic about domestic start-ups, with further cost reduction, plus returnable launch carriers, profit-making in the commercial spaceflight sector become possible.
Looking at the future market, there's no obvious best choice of solutions, as many applications and factors need to be considered. However, if taking profitability as the target, taking cost and demand into consideration, liquid oxygen methane engines are being seen as the development trend for private space start-ups. In terms of the launching satellites, building the low-earth orbit small satellite network could be one of the most important business models to generate profits.