China’s New Space: a deep dive into the world’s fastest growing commercial space industry

Introduction

China’s history with space is essentially that of large state corporations, even to this day. Until very recently, almost all of China’s space industry could be linked to just two state conglomerates: CASC (China Aerospace Science and Technology Corporation), and CASIC (China Aerospace Science and Industry Corporation).

The year 2014, however, marked a radical change of mindset. At a State Council executive meeting, Premier Li Keqiang officially encouraged private capital to invest into the space industry. This moment would mark the beginning of China’s private space sector, and many more governmental official texts have followed, guiding private capital into the industry [1]. As private capital moved in, the number of Chinese start-ups swiftly grew, giving birth to a thriving albeit still early stage New Space ecosystem. In 2018, after just 4 years, it has risen to become the 4th largest market for private space investment, with the fastest market growth among all international markets [2].

Just how many start-ups are there?

In November this year, The Wall Street Journal (quoting Chinese space expert Lan Tianyi) claimed that there were 80+ space start-ups in China since the industry was opened to private capital [3]. An independent writer, Chen Lan, estimates the number to be above 100 start-ups [4]. Xinhuanet News website (quoting a report by a Beijing-based investment institution, Future Aerospace) sees a lower number of start-ups, at around 60 [5]. Variations in the estimates are probably due to the different definitions given to “space start-up”; but whatever the real figures may be, even 60 start-ups since 2014 would mean 1.3 space start-ups being founded every month during the last 4 years.

The reasons behind the great surge of China’s New Space

One reason explaining the sharp upturn is a better understanding by Chinese investors of the huge potential of New Space applications, both in China and international markets, as has been demonstrated in many recent studies (see for example the explosive growth for commercial satellites & launches in [6][7][8]).
An important factor that triggered this realization was the spectacular development of New Space in the US.  The stunning performance of SpaceX (among others) put an end to the skepticism of many in China on the ability of the private sector to engage in high-risk and capital-intensive activities such as the development of rocket launchers and satellite constellations.

Among the other reasons, there is also the strong complementarity between the traditional and new space players, in the sense that the former are often more focused on heavier payloads and launchers, making room for New Space applications: lighter launchers, microsats, nanosats, and new satellite uses. China is no exception: CASC and CASIC are historically focused on medium and heavy launchers/satellite platforms, even if there are hints that each player is edging towards lighter systems (Long March 11 & Jielong-1 for CASC, Kuaizhou for CASIC). CASC’s other focus is China’s ambitious human spaceflight & exploration programs (Tiangong, Chang’e, …), as well as space science.
The absence of competition from these two space giants has left unchartered territory for Chinese space start-ups to thrive.

Ultimately, it is also worth mentioning that several hot topics in the Tech sector such as VR and crypto entered a frostier cycle after a strong hype, thus encouraging Chinese venture capital to find new areas of investment.

A first mapping of New Space in China

Below is a map I have drawn, based on the monitoring of Chinese and international media. I have yet to uncover the 60+ start-ups mentioned by [3][4][5] as my current count is around 40 start-ups, although this may be due to my more restrictive criteria (companies founded before 2014 are not counted, activities have to be mainly focused on space, space consulting companies are not counted, large companies which have diversified their activities into space are not counted). Still, it’s more than enough to extract useful information.
Below is a general mapping of the 25 more visible Chinese new space players:

Fig. 1 – mapping of the 25 more visible Chinese space start-ups*
(*companies founded before 2014 or that have diversified their activities into the space sector are not included)

The diversity of these start-ups are remarkable:

  • Launchers: suborbital and orbital (LEO & SSO), solid and liquid propulsion, disposable and reusable launchers
  • Satellite payload: light & mid-size satellites
  • New constellations: IoT, IFC, Earth imagery, …
  • New satellite-based services

Beijing, capital of the traditional space players… and of China’s New Space

Noticeably, the aforementioned start-ups are predominately found in the area of Beijing, the historical stronghold of Chinese aerospace which already hosts the headquarters of many state corporations, strong aerospace universities (Tsinghua, Beihang) as well as a great part of China’s VC companies.

Fig. 2 – Block chart of the headquarters of China’s space start-ups*
(*companies founded before 2014 or that have diversified their activities into the space sector are not included)

The number of start-ups created are increasing by the year

Let’s now have a look at the year of foundation of each of these space start-ups (with the aforementioned restrictive criteria). We notice a strong increase between 2014 and 2015 (approximately x2), and a second surge between 2016 and 2017 (x 2). The data regarding 2018 can be regarded as incomplete, as many newly founded start-ups probably haven’t reached a stage of development sufficient to be mentioned in the media by December 2018.

Fig. 3 – Number of space start-ups* founded in China, per year
(*companies that have diversified their activities into the space sector are not included)

 

These start-ups can basically be split into two groups. Those created in 2014-2015, such as Landspace, One Space or Linkspace, are today either engaged in suborbital and orbital launch tests, or in advanced phases of testing of their rocket engines. These players have matured and often raised hundreds of millions of RMB. The second generation of start-ups, dating from 2016 and 2017, is essentially still in initial phases of testing, design, and products often are at the stage of a Powerpoint presentation.

The Impressive Curriculum of the Start-up Founders

Within China’s New Space start-ups, many founders are actually former engineers/leaders from state-owned companies, and top-notch university alumni, with solid experience in aerospace engineering or finance. Some of the emblematic examples include:

  • SHU Chang (舒畅), CEO and founder of OneSpace: born in 1985, graduated in aerospace engineering and finance, at Beihang University and   Peking University respectively. Before founding OneSpace, SHU Chang worked at the CASC space investment fund (航天科技集团航天产业基金) and as a VP in strategic investment at Legend Capital (联想控股投资) [9]
  • MA Chao (马超), President of OneSpace: Beihang University MsC & PhD [9]
  • ZHANG Chang Wu (张昌武), CEO and cofounder of LandSpace: born in 1985, Tsinghua MBA, worked for HSBC and Santander in finance for the automobile industry. [9]
  • WU Shu Fan (吴树范), co-founder and board member of LandSpace: born in 1964, NUAA PhD (Nanjing University of Aeronautics and Astronautics), previous worked 15 years at ESA, today also chairman of MinoSpace (founded in 2017)  [9]
  • WANG Jian Meng (王建蒙), chairman of LandSpace: born in 1954, Electronics and Mechanical engineering graduate from Tsinghua University, previously worked at Xichang launch center, the Beijing Launch and Control Center, then served as Executive Vice President of APSATCOM [9]
  • PENG Xiao Bo (彭小波), founder and chairman of iSpace: born in 1970, previously head of CASC’s First Academy R&D department [9]

This is in contrast with other leading space nations, where start-ups are often headed by young, less experienced founders.

The top VC and Tech firms have joined the race, as Money pours into the Commercial Space Ecosystem

Niu Wen, the angel investor of LandSpace and OneSpace, estimated in November 2018 that 6-7 billion RMB (900 million to 1 billion USD) have been injected into China’s commercial space ecosystem [4]. New-York based investment company Space Angels also brings further insights in a 2018 report [2]: China has attracted approximately half a billion USD of private investment, representing 3% of total investments into commercial space worldwide since 2009. This is figure is significant when put together with the fact that China’s space sector was open to private capital only since 2014. The importance of China will most likely gain momentum: Chinese space companies raised $69 million of investment in the third quarter, more than any other country during the same period. The first 3 quarters of 2018 have already seen 217 million USD pour into  China’s space companies, nearly matching the $230 million invested in all of  2017. [2]


Fig. 4 – Location of all worldwide space investments, from 2009 to 2018 [7]

Sums raised individually have also increased significantly, as the start-ups scale up.  LandSpace for example raised a whooping 200 million RMB in series B in Dec. 2017,  iSpace announced it had received 600 million RMB over the past year due notably to a series A, and One Space drew 300 million RMB in a series B in Aug. 2018.

Among the investors are many big names within the VC and tech companies, such as Matrix Partners, IDG Capital, China Merchants Venture Capital, Legend Capital, Baidu, Didi Chuxing, and Fosun Group, to name a few.


Fig. 5 –  Some VC funds and Tech companies that have invested in China’s New Space

Considering the abundance of capital, the availability of talented human resources, and the growing market demand, the New Space craze in China is likely to be only at its very beginning.

However despite the strong potential demand from China’s market, the domestic market will presumably not be enough to sustain the entire lot of new Chinese companies, especially in view of the large number of start-ups that have been founded over the past 4 years. Survival will depend on Chinese start-ups ability to compete internationally and win contracts abroad (some already have, such as Spacety with Danish  and Israeli companies GOMspace & SpacePharma). They will be facing an already well-established international commercial space ecosystem, ranging from the USA to Europe to New Zealand. Survival will depend on the capacity of each player to provide an efficient, cost-effective solution; of strong fund-raising capabilities, and of choosing the most sustainable configuration (orbit/payload/technology/…) in line with the market’s demand.

References

[1] Proceedings of the 28th Conference of Spacecraft TT&C Technology in China, Chapter 2. Preliminary Discussion on the TTC and Management of Commercial Space in China, A. Xu, G. Zhang, July 2017
[2] Space Angels Investment Quarterly Report Q3 2018
[3] In China’s New Space Odyssey, 80 Startups Race to Get Into Orbit, Wall Street Journal,
[4] A historic day for Chinese NewSpace, The Space Review, November 19, 2018
[5] Chinese commercial space startup develops AI satellites,Xinhua News, November 25 2018
[6] State of the Satellite Industry 2018, SIA (Satellite Industry Association)
[7] The Annual Compendium of Commercial Space Transportation 2018, FAA (Federal Aviation Administration)
[8] Nano/Micro satellite Market Forecast 8th Edition, 2018, SpaceWorks
[9] 国内商业航天大盘点, 未来空天, August 27 2018

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