Back-to-back commercial satellite wins leave China Great Wall hungry for more

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Chinese factories have pumped out 40 satellites over the past two years, a pipeline fueled almost exclusively by domestic programs. China has been launching satellites at a similar clip, with the same demand driver.

Any other nation with that volume of manufacturing and launch activity would — and does — dominate the global market share for these services. Only the United States, Europe and Russia have equal or greater space capabilities, and the global commercial satellite manufacturing and launch markets are largely divvied up between these nations.

China’s rockets have been off limits to the majority of the world’s space players since the late 1990s. That was when the U.S. government — stinging from the conclusion that China’s missile know-how benefited from trouble-shooting help it got from American engineers following failed Long March launches of U.S. satellites — barred even the most run-of-the-mill, made-in-America widget from launching on Chinese rockets. Since even non-U.S.satellites tend to include at least some American components, tougher enforcement of U.S. export-control laws, namely the International Traffic in Arms Regulations (ITAR), have hamstrung China’s global ambitions.

But now, despite nearly two decades under ITAR’s long shadow, China has built up its domestic space capabilities to the point where its satellites are becoming competitive in the global market. Not only are fledgling spacefaring nations (China’s sole customers until last year) starting to buy its spacecraft, established operators are, too.

China had a rough start to the satellite telecommunications market. The first two DFH-4 platform satellites from the China Academy of Space Technology, Sinosat-2 and Nigcomsat-1, suffered solar array malfunctions and failed. Today, however, there are seven DFH-4-based satellites active and in orbit, sold to international customers through China Great Wall Industry Corp. (CGWIC),  China’s only space company authorized by the government to conduct business internationally.

CGWIC has cemented contracts mainly with new government operators by packaging DFH-4 satellites with Long March rocket launches, a fully made-in-China offering that steers clear ITAR issues. In the past nine months, CGWIC inked contracts with Thailand’s regional fleet operator Thaicom, and Palapa Satelit Nusantara Sejahtera, an Indonesian joint venture of Indosat Ooredoo and Pasifik Satelit Nusantara (PSN). The second deal, Palapa-N1, includes the provision of a ground control station and financial support. Additionally, PSN has a framework agreement with CGWIC for PSN-7, a high-throughput Ka-band satellite with 104 spot beams. These deals have whet CGWIC’s appetite for more business.

“With our product becoming more mature and more reliable, we are more confident in attracting these established operators coming to us,” said Fu Zhiheng, executive vice president of Beijing-based CGWIC.

Zhiheng spoke to SpaceNews at the APSAT 2017 satellite communications conference in Jakarta, Indonsesia, in May about CGWIC’s growing ambitions.

CGWIC is building up to two satellites for Indonesia. What’s your financial involvement in this project?

Our business model right now is to provide a packaged solution to the customer. It’s a tailor-made package with the satellite launch service, ground segment and insurance. In the Palapa-N1 case, we are also supporting the financing. This is not the first time for us to do financial support, but in this case it is an attempt we have tried before. For this program, we had been following this process for quite a long time, so I would say we started a little bit earlier than our competitors. The customer issued the Request for Proposal in December. It takes quite some time for everybody to prepare a complicated proposal, especially for the financing. But for us, because we started our financial model quite a long time ago, we have established very good relationships with some of the Chinese commercial banks, so it is a commercial loan. It is not an [export-credit agency] loan or something like that.

Your bundles sometimes include ground control stations. How often is this part of a sale?

For the new operators, they prefer to have a bundled solution, including the ground station to control the satellite. It is easier for the satellite suppliers to give them a really comprehensive solution. Previously, one of our customers felt they had a competitive offer regarding the fully functional ground control station, so when we signed the satellite contract we were just required to deliver a satellite control center. But they found our offer to give them a fully operational ground station was more competitive, so they came back to us. That is why I feel for those emerging operators, our solution is more competitive.

CGWIC and Pasifik Satelit Nusantara executives sign a contract for the Palapa-N1 satellite at the APSAT 2017 conference in Jakarta, Indonesia, in May. Credit: SpaceNews/Caleb Henry
CGWIC and Pasifik Satelit Nusantara executives sign a contract for the Palapa-N1 satellite at the APSAT 2017 conference in Jakarta, Indonesia, in May. Credit: SpaceNews/Caleb Henry

CGWIC now has some traction with more-established operators. Are you confident you will be able to turn more of them into customers? 

Yes. With our product becoming more mature and more reliable, we are more confident in attracting these established operators coming to us. Our first DFH-4 satellite operational in orbit is [Venezuela’s] VeneSat-1, launched in 2008. and is still in orbit. So with this kind of impeccable in-orbit record recognized by the insurance underwriters, I think that gave a strong message to the market that Chinese space products are reliable, especially regarding our satellites. Our Long March rockets already have an excellent track record, and now people are realizing that Chinese satellites are also reliable and also an affordable solution to their business plan.

How does China’s Belt and Road trade initiative affect the space sector?

There are just a small amount of opportunities for space. Not every country can afford their own satellite, but by coincidence, many of our customers are so-called One Belt, One Road countries: Pakistan, Laos and Belarus, for example. I think this kind of initiative may give Chinese companies more exposure, maybe more opportunities. CGWIC is pursuing some opportunities with this initiative, but it is hard to say if this can really become a business driver. Even if a country has intentions to launch a satellite, there are a lot of questions on them, such as whether they have the orbital slot.

How many satellites does
CGWIC produce annually?

China Great Wall is not a satellite manufacturer. For telecom, we work with China Academy of Space Technology, CAST. They actually build all of the communications satellites in China, including DFH-4 and future DFH-5 satellites. If you went to our space facility in Beijing, you would see we have great potential for producing more satellites. I think 10 telecom satellites a year is not an issue. We could even have more capability for more satellites.

Right now in our production line we have telecom satellites, navigation satellites, remote sensing satellites and manned spacecraft. Our combined production capability is very strong. In the past two years, CAST launched over 20 satellites of all kinds each year.

Belintersat-1 launching on a Chinese Long March 3B rocket in January 2016. Credit: Belintersat
Belintersat-1 launching on a Chinese Long March 3B rocket in January 2016. Credit: Belintersat

How many launches are you planning for this year?

Around 30; China has a lot of domestic launch needs. For example, the Beidou navigation constellation is still at the deployment stage to become a global system by 2020. Also, there are some Chinese domestic programs for Earth observation, weather satellites, and also human exploration and deep space exploration programs. All these areas are requiring a significant number of launches. Last year we were on par with the U.S. for 22 launches. I think this year we might be No. 1 in terms of launches. [Editor’s note: this interview was conducted before the July 2 failure of China’s Long March 5 rocket.]

You’ve mentioned “NewSpace” companies rising in China. Is that just for small satellite launch?

NewSpace is a new concept in China. Many people pay attention to NewSpace and many investors are interested in this kind of opportunity. That is why there are some startup companies that want to develop their own launchers. They want to become China’s SpaceX. I think it is quite a difficult job for them. China’s space industry is different from what you have in the U.S. This is a more state-controlled business.

There will be some private-investment and commercial companies in the coming years, but if they are to be successful, their focus should be meeting the launch requirement of the smaller satellites, not the bigger ones.

 

This article originally appeared in the June 19, 2017 issue of SpaceNews magazine.