Costs Determine Success In China’s Satellite Technology Development – Analysis

By Zhao Zhijiang

Satellites can be classified into three categories based on orbital altitude: geostationary, medium-orbit, and low-orbit. Low-orbit satellites, characterized by low transmission time, minimal path loss, small satellite terminal size, and large system capacity, have a competitive advantage in satellite communication. They are currently a focal point of research in satellite internet technology. Satellite internet is a communication system that enables global connectivity through satellites, providing broadband internet services to different users across land, sea, and air using a certain number of satellites. Satellite internet is a current market trend and a global focal point for future competition, likely to unfold among the United States, China, the European Union, and Russia.

At present, Elon Musk’s space-based high-speed internet project Starlink holds a leading position. Notably, during the Russia-Ukraine conflict, it became a crucial communication method for Ukraine. The Ukrainian military used Starlink to operate drones and unmanned boats against the Russian military. Recently, Musk also visited Israel, securing agreements for Starlink’s application in the Gaza Strip. This indicates the geopolitical significance assigned to satellite internet technology. For China, urgent attention is required to develop low-orbit satellite communication technology. However, compared to foreign counterparts, China faces the challenge of relatively high costs in satellite manufacturing, posing a significant disadvantage. The cost factor is crucial in determining China’s success in the sustainable development of satellite research. Failure to reduce costs could impede China’s ability to succeed in this field.

From the perspective of the development history of satellite technology, many once-dazzling corporate brands have failed due to issues related to cost control in research and manufacturing. Iridium, Globalstar, Teledesic, and Orbcomm are vivid examples. Taking the Iridium communication system under the U.S. Motorola company as an example, the total cost of this system, consisting of 66 satellites, amounted to USD 5 billion. The high cost made the operation of the Iridium system unsustainable, leading to its eventual bankruptcy. Later, after business restructuring and adjustments, Iridium experienced a turnaround from losses to profits and developed the Iridium NEXT in recent years, with a new research and development cost reaching as high as USD 3 billion. Many satellite communication companies in the market have been teetering on the edge of profitability due to the high costs involved.

“Low cost” is one of the reasons for the success of the Starlink plan. According to Morgan Stanley’s estimate, the manufacturing cost of a Starlink satellite is USD 1 million. Musk has publicly disclosed that, in an optimistic scenario with the reuse of the first-stage rocket and fairing, the cost of a single satellite can be reduced to USD 500,000. According to data cited by Leading Industry Research, deploying a total of 42,000 Starlink satellites requires an investment of USD 21 billion in satellite manufacturing costs and USD 10.5 billion in launch costs. For Musk, these expenses are nothing significant. It is worth mentioning that the U.S. tech giant Amazon is also catching up. Amazon recently launched a project called “Project Kuiper”, hoping to compete with Starlink with a low-cost operating model. According to relevant information, the cost of an Amazon satellite is around USD 1 million.

In contrast, the manufacturing cost of China’s satellites is much higher than that of commercial satellites in some other countries. According to a research report by Zheshang Securities, the current average cost of low-Earth orbit communication satellites in China is about RMB 30 million. Due to the complex manufacturing process, the old-school satellite production method in China involves the fixed-position production of a single satellite. However, assembling over a thousand processes at the same fixed position results in extremely low production efficiency. Because of this, Zheshang Securities estimates the labor and manufacturing costs account for approximately 50% of the satellite cost. In addition to this, to maintain the reliability of the satellite, researchers need to conduct extensive testing. The process of developing a satellite from scratch takes about eight months, leading to continuously increasing costs. Considering the high cost of manufacturing satellites, coupled with subsequent launch costs, it would be challenging for China’s satellite technology to reach a level of sustainable development.

The key to addressing the challenges of satellite manufacturing costs and prices lies in improving the production mode. Through the study and comparison of overseas satellite manufacturing, emerging technologies such as artificial intelligence and large-scale production are effective ways to reduce satellite manufacturing costs. It is understood that Musk has introduced a fully automated production line in satellite production. In contrast, the UK-based satellite company OneWeb utilizes advanced technologies such as automated production lines, collaborative robots, and intelligent tools, with a single production line capable of producing 2 satellites per day. For China, such intelligent production lines will help reduce labor and time costs, significantly improving the efficiency of satellite manufacturing. In addition, “modularity” is also an important concept. Experimental conclusions from American aerospace companies indicate that using modular satellite platform technology can reduce satellite costs by 29%. Furthermore, some opinions suggest that the division of labor in the industry chain and the involvement of more private enterprises will effectively reduce China’s satellite manufacturing costs. One can refer to the example of the U.S.: before Musk founded SpaceX, the cost of the space industry in the U.S. was relatively high, and it was only after the introduction of private enterprises that the development costs in this field were reduced.

Cost savings from altering the production mode can be channeled into enhancing China’s satellite communication technology, particularly addressing weaknesses in rocket recovery technology and chip development. Researchers note China’s deficiency in reusable rockets, a constraint on efficiently building satellite constellation systems. Unlike Elon Musk, China faces challenges in employing mature, low-cost chips for satellite technology. Allocating saved costs to develop these sectors establishes a benevolent cycle, fostering the sustainable growth of the country’s satellite communication technology.

Final analysis conclusion:

In the fervent global competition of satellite internet technology, the “satellite manufacturing” price and cost are crucial determinants of success. Lower costs enable actions akin to those taken by Elon Musk, while higher costs hinder any progress. In the future, China needs to pursue the sustainable development of satellite internet technology by reducing satellite manufacturing costs.

Zhao Zhijiang is a researcher at ANBOUND