Billionaires Elon Musk, Jeff Bezos, and Richard Branson dominate the emerging industry of commercial spaceflight. They’re competing to put satellites, tourists, or both in space in their bids to become cheaper alternatives to NASA, the European Space Agency, and other government-run space programs. But like pioneers in the smartphone and artificial intelligence industries before them, they now face competition from a deep-pocketed upstart that threatens to disrupt their launchpads: China. President Xi Jinping has loosened the government’s monopoly on space launches, and that’s fueling the formation of small domestic companies with ambitions to challenge Musk’s SpaceX, Bezos’ Blue Origin, and Branson’s Virgin Galactic.
The startups are receiving funding from China-based venture capitalists and private equity investors trying to tap into an $8 billion national space budget—second only to the U.S., according to the Space Foundation in Colorado Springs. They can also rely on the expertise of rocket scientists from China’s vigorous manned space program. “We are really a startup growing on the shoulders of the state aerospace giant,” says Zhang Changwu, chief executive officer of Beijing-based Landspace Technology Corp. “There’s no better time for a commercial rocket firm to grow in China than now.”
The number of satellites in space increased 50 percent from 2013 to 2017, to 1,738, according to the Satellite Industry Association. Chinese launchers could help manufacturers seeking an inexpensive way to get even more of them into orbit.
One lucrative payload for the Chinese could be miniature satellites, which can weigh less than 200 pounds. Launching these satellites will generate $15 billion in revenue by 2027, up from less than $100 million last year, according to the Paris consulting firm Euroconsult. That’s also a niche where big players such as Space Exploration Technologies Corp. (SpaceX), whose Falcon Heavy rocket can lift into orbit payloads of almost 64 metric tons (141,000 pounds), have been less active.
Several mainland companies have succeeded with suborbital launches and are vying to be the first in China to place satellites into orbit around the Earth. Founded in 2015, Landspace had raised 500 million yuan ($72 million) from local investors by April 2018 and employs 170 rocketeers and other engineers, almost all veterans of the national space program, Zhang says. The company plans to launch a rocket this month carrying a satellite for state-run broadcaster CCTV. Two other Chinese companies have orbital launches scheduled by 2020.
Xi opened the space market to private-sector investment in 2014 to help China’s technology sector shift focus from commodity smartphones and televisions to sophisticated semiconductors, artificial intelligence, and reusable rockets. More than 60 Chinese companies have entered the commercial space industry in the past three years, the state-run Xinhua News Agency reported in May.
Musk’s popularity—China is the second-largest market for his Tesla Inc. electric vehicles—has also inspired many startups. “SpaceX has had a huge impact,” says Lan Tianyi, founder of Ultimate Blue Nebula, a Beijing-based space consultant. “Nobody in China thought that a private company could develop a rocket. But now they see that a U.S. company can do this, and it’s very famous in China.”
China wants to be one of the world’s top three aerospace powers by 2030, Wu Yanhua, vice administrator of the China National Space Administration, said in December. Toward that goal, Xi envisions private-sector launches of satellites for customers in China and in countries participating in the “Belt and Road” initiative, his program to build ties throughout Africa, Asia, and Europe by funding infrastructure projects. “Government investment alone isn’t enough,” Wu says. And leaving commercial efforts to private companies also lets the government focus on prestigious quests such as landing Chinese “taikonauts” on the moon by the 2030s.
The leadership hasn’t picked a favorite, preferring to let the market select the national champion, as was the case with Tencent Holdings Ltd. in smartphone messaging and Alibaba Group Holding Ltd. in e-commerce.
Landspace opened a factory costing almost 500 million yuan about 90 miles west of Shanghai this year, with capacity to produce 15 rockets using liquid propellant annually. The facility eventually could make 200 engines a year, Zhang says.
Another startup, Beijing Interstellar Glory Space Technology Co., in September sent three test satellites into space aboard a solid-fuel rocket. The company, founded in 2016 and also known as i-Space, has raised 600 million yuan from investors such as Shunwei Capital, whose chairman, Lei Jun, is co-founder of smartphone maker Xiaomi Corp.
The company is developing a less expensive rocket using liquefied oxygen methane that it hopes to launch in 2020, says Huo Jia, a vice president who spent six years developing rockets for state-owned China Aerospace Science & Industry Corp. “We have to lower costs as much as possible to compete on a global scale with peers like SpaceX,” he says. “There is massive demand for satellite launches from small and private firms.”
One Space Technology Co. in Beijing, which has raised about 800 million yuan since its founding in 2015, has launched two suborbital rockets this year and plans to reach orbit by yearend. Its factory in Chongqing will be capable of making 30 to 50 rockets annually by 2020, and the 200-employee company plans to open an engine manufacturing facility in 2019.
Blaine Curcio, founder of Orbital Gateway Consulting in Hong Kong, says most Chinese rocketeers have a long way to go because their rockets aren’t reusable and can’t handle heavier payloads. Instead, the startups will—for now, at least—count on demand from companies developing smaller, lighter satellites for meteorological, telecommunications, and navigational use.
That initial concentration on emerging demand for small, low-altitude devices doesn’t concern Curcio. “I don’t think there’s anything keeping them from competing with SpaceX from a tech perspective,” he says. “We’ve seen in China that they can catch up in industries where it seems hard to catch up.”
—With assistance by Bruce Einhorn and Dong Lyu