China’a digital communications technology conglomerate Huawei grew faster in 2023 than during any of the past four years. This follows Huawei’s introduction of a new smartphone in August 2023 powered by a sophisticated processor which U.S. experts did not think could be made in China.
Another Chinese telecommunication firm, ZTE, also reported significant growth last year. We should be prepared for the same story to unfold in China’s space industry.
China will be able to make ever more sophisticated space systems, with more advanced payloads, using domestically produced components. Chinese space companies, subsidized by investments from Beijing, will find customers around the world eager to buy their affordable products and services.
Given these trends, how can the United States maintain its commercial competitive edge in space? The U.S. government will have to use all tools at its disposal. This means going toe to toe with China to set international space standards, working with U.S. companies to close foreign deals, and reassessing export controls.
To many of us in the United States, it might be surprising that the biggest-name Chinese telecom companies have had such a strong showing. After all, Huawei and ZTE have effectively been squeezed out of the United States, as well as Canada and the United Kingdom, given bipartisan security concerns and policy actions to ban their equipment.
However, they have found success elsewhere. Huawei saw significant growth in China and other parts of the Americas. Its telecommunications infrastructure business, which accounts for over half of Huawei’s revenue, also grew last year.
Lessons from telecom
Notably, Huawei is currently working with wireless carriers on advanced 5G networks in Finland, Germany, the UAE, Kuwait and Turkey. Huawei now has cloud customers in 170 countries and regions. ZTE won contracts in Mexico, Brazil, and India. Many countries are turning to China for high-tech solutions, in spite of U.S. security concerns and sanctions, so there is no reason to think they would not consider buying space capabilities and services from China, too.
China will use its growing abilities to domestically produce advanced chipsets to power next-generation broadband and remote sensing constellations. There are already several Chinese companies focusing on electro-optical and synthetic-aperture radar satellites, including a joint project with Brazil, and at least two Chinese initiatives to build broadband constellations.
If China can launch satellite broadband networks, it will aggressively seek customers around the world, as it has done with 5G equipment, mobile handsets, and cloud solutions. China might also seek to sell turnkey satellites to foreign customers, capitalizing on a growing trend for nations to want their own sovereign space capabilities. We should also watch what China does on commercial launch, particularly as several Chinese private sector launchers come online.
Huawei’s and ZTE’s successes show that China has learned how to operate global high-tech businesses independent of Western supply chains. At this point, it is not clear if more sanctions are the answer. China has learned on its own how to fish, and can feed itself for a lifetime.
We have to think of other actions that can help U.S. companies compete with China. For one, we should mimic China’s approach to the 5G competition. For many years, China has dominated international standards-setting organizations such as the International Telecommunication Union (ITU) and International Organization for Standardization.
Advocate for standards
We will have to step up our game. If there is an international standard to be set for a space system, such as on inter-satellite or customer terminal links, we should make sure the U.S. advocates for standards that reflect operational solutions already developed and deployed in space by U.S. companies, as well as like-minded international partners.
That an American was elected in 2022 to lead the ITU, replacing an official from China, suggests the world is eager for U.S. leadership on these issues.
It’s also time to take a hard look at export control rules and International Traffic in Arms Regulations (ITAR), with the review of space-related export controls announced by the White House in December 2023 being a step in the right direction.
While designed to protect national security, these rules are due for an update to take into account the state of the international space market. There is no doubt that U.S. space companies are incredibly innovative and can compete. But the U.S. government can help to make sure the regulatory environment does not create a competitive disadvantage for them.
The U.S. government should also assess whether the International Development Finance Corporation (DFC) and Export-Import (Ex-Im) Bank can play a larger role in space.
For example, there have only been two Ex-Im space deals since 2015, though more may be on the way. For countries that want to buy a U.S. space capability, but need some financial support, increased use of tools like DFC and Ex-Im Bank can help close a deal. Such efforts will help U.S. businesses, and also garner security benefits, stymieing China’s efforts to recruit commercial partners in space and build a space-based Belt and Road.
Partner with allies
Finally, U.S. efforts should be done collaboratively with international allies and partners like in Europe, Japan, and India. As the world’s most populous country, India is an especially important partner and market for U.S. space companies. If the path to unlocking opportunities in India, which is already suspicious of China, involves licensed co-production of a space system or a technology-transfer arrangement, it is worth the price.
A British Prime Minister in the 1930s, Ramsay MacDonald, remarked that, “we have all been so distracted by day-to-day troubles that we never had a chance of surveying the whole situation and hammering out a policy regarding it.” A survey of the whole situation before us today shows that we need a plan to maintain U.S. commercial space leadership.
Huawei’s and ZTE’s successes are a testament to China’s ambitions, drive, and commitment to do what it wants despite U.S. sanctions and other measures. What we can do is work to remove barriers that hinder American companies from doing what they have always done best: invent, innovate, compete, and win.
Clayton Swope is deputy director of the Aerospace Security Project and senior fellow of the International Security Program at the Center for Strategic and International Studies, Washington, D.C.
