The Zhitong Finance App learned that CITIC Securities released a research report saying that China's aerospace industry has entered the “fast track” of development. The construction of emerging constellations such as satellite internet and the trend of high capacity and low cost of capacity are leading the beginning of a new era of commercial space, and China StarNet+G60 will enter a period of accelerated networking. The bank believes that in terms of satellite manufacturing, with the completion of satellite mass production lines, satellite manufacturing efficiency will be significantly improved, costs will be effectively reduced, and in the future it will produce grid-connected satellites with stronger performance and more functions. In terms of rocket launches, as private rocket companies advance in technology, rocket capacity and launch cost bottlenecks may break through, and participation in commercial space launch sites will increase. In terms of ground equipment, terminals are expected to be low-cost and multi-functional. In terms of operational services, it is expected that the application field will continue to expand in the future, and the number of users will switch from slow growth to rapid growth.

The views of CITIC Securities are as follows:

Outlook 1: Commercial rocket technology continues to advance, and the bottlenecks in rocket capacity and launch costs may usher in a breakthrough.

There is still a gap between China's space capacity and launch costs at this stage compared to the US. According to the official websites of various private rocket companies, several private rocket companies plan to conduct the first flight test of a recyclable medium launch vehicle targeting the Falcon series in 2024-2025. Among them, Tianbing Technology's Tianlong 3 and Xinghae-powered Zhishen Star 1 are scheduled to fly for the first time in 2024. Blue Arrow Aerospace's Suzake-3, Zhongke Aerospace's Force Arrow 2, and Oriental Space's Gravitational Force 2 are scheduled to fly for the first time in 2025. The bank believes that 2024-2025 will be a key point in China's commercial rocket technology breakthroughs. If private space companies successfully participate in China's Starnet rocket tests, they are expected to participate successfully in China's Starnet rocket tests. +G60 In constellation launch services, the bottlenecks in rocket capacity and launch costs may usher in a breakthrough.

Prospect 2: The completion of a satellite factory will promote mass satellite production, effectively improve the efficiency of satellite manufacturing, and reduce production costs.

In recent years, China's all-star manufacturers such as Gus Aerospace, Galaxy Aerospace, and Micro-Nano Starsky have been setting up batch satellite production lines. Gus Aerospace's G60 satellite digital factory is the first digital “lighthouse factory” for intelligent satellite manufacturing in the Yangtze River Delta. According to Gus Aerospace's general manager Cao Jin at the commissioning of the G60 satellite digital factory and the launch ceremony of the G60 satellite Internet's first commercial satellite, under the satellite Internet batch production situation, the G60 satellite digital factory can produce 1 satellite in about 1.5 days, with an estimated annual output of 300 units. As batch production lines for various satellites are completed and production capacity is climbing, the bank believes that in the next few years, China's satellite manufacturing efficiency will increase significantly, and single-star manufacturing costs will drop further.

Outlook 3: Low-orbit satellite constellations accelerate networking, and China StarNet+G60 ushered in significant progress.

In 2023, China will conduct a total of four satellite internet test satellite launches. According to the official WeChat account of Songjiang in Shanghai, Gus Aerospace is expected to produce through a digital production line at its satellite factory in 2024, and Yuanxin Satellite will complete the launch and network operation of at least 108 satellites. By the end of 2022, the “G60 Starlink” program had successfully launched 5 test satellites. Referring to the development history of SpaceX, China believes that 2024 is the first year of large-scale launch and networking of the Chinese low-orbit satellite constellation, and the satellite constellation represented by China Star Net+G60 will usher in important progress.

Outlook 4: Rapid iteration of satellite technology.

Judging from the development history of Starlink, its satellites have generally experienced two generations of development, including iterative versions such as Tintin A/B (test star), V0.9, V1.0, V1.5, V2.0Mini, and V2.0. Compared with the V1.5 satellite, the V2.0Mini has a more powerful phased array antenna and uses E-band backhaul, which has 4 times the communication capacity of the previous generation; at the same time, the V2.0Mini uses argon Hall electric propulsion, which reaches 2.4 times the thrust of the previous generation and 1.5 times the specific impulse of the previous generation. According to the direct satellite connection plan announced by Starlink, the bank expects that the full V2.0 satellite may carry a huge antenna in the future to achieve direct connection to ordinary mobile phones on the ground. Referring to the Starlink satellite iteration process, the bank believes that after the satellite constellation is verified in orbit, it will usher in gradual iteration, and that the next generation of low-orbit communication satellites with stronger performance and more functions will participate in the networking process.

Prospect 5: NTN technology matures at an accelerated pace, and the integration of space-terrestrial networking is worth looking forward to.

According to the 3GPP NTN technical specification standard, starting with R18, the RF technical requirements and test methods for IoT NTN have all been separated to form separate standard numbers, and further enhanced functions for NR-NTN and IoT-NTN continue to be developed. Currently, 6G technology is still in the exploration and initial stage, but the overall vision is to realize the interconnection of various communication methods based on 5G. According to the white paper “6G Overall Vision and Potential Key Technologies” published by the IMT-2030 (6G) Promotion Group, in the future 6G scenario, satellite-terrestrial integrated networking technology will be applied, and NTN will bring greater usage scenarios. The bank believes that NTN is an important direction for direct satellite connection in the future; with the demonstration and evolution of 3GPP NTN technology and the introduction of major operators and terminal manufacturers, etc., it is worth looking forward to actual commercialization.

Vision 6: The development of terminals to low cost and multi-functionality.

According to Starlink's official introduction, Starlink currently sells four versions: Standard (Standard), Standard Actuated (Standard Actuated), High Performance (High Performance), and Flat High Performance (Flat High Performance). According to Via Satellite, SpaceX President Gwynne Shotwell said at the 2021 LEO Digital Forum that Starlink's initial terminal cost was 3,000 US dollars. With large-scale production, the cost dropped to 1,300 US dollars in April 2021, and until September 2023, the terminal cost had dropped below 600 US dollars. To meet extreme environmental scenarios, Starlink has launched a high-performance version for advanced users, businesses, and a high-performance tablet version for mobile applications (currently only for marine customers). Referring to the development history of Starlink satellite terminals, the bank believes that in the future, China's terminals will develop in the direction of low cost and versatility.

Outlook 7: Increased participation of commercial space launch sites in space launches.

In addition to the four existing launch sites, China's Oriental Space Port, the Ningbo International Commercial Space Launch Center, and the Hainan Commercial Space Launch Site are all planned or under construction. Launch Station 1 at the Hainan Commercial Space Launch Site is mainly used for the Long March 8 rocket launch and was officially completed on December 29, 2023; Launch Station 2 is a liquid general-purpose launch station and construction is expected to be completed by the end of September 2024; and construction of Station 3 began on June 13, 2023. According to the “Global Times” July 26, 2023, the Hainan commercial space launch site is scheduled to launch its first rocket in the first half of 2024. With the construction and commissioning of commercial space launch sites, the bank believes that the “queuing” situation for commercial space launches will be alleviated, laying the foundation for future large-scale launch tests and commercial launches.

Outlook 8: Application fields continue to expand, and scenarios such as direct mobile phone connection and vehicle networking are richer.

Satellite Internet usage scenarios mainly include: 1) expanding terrestrial communication coverage, including remote area communication, airborne communication, maritime communication, emergency communication, etc.; 2) complementary integration with terrestrial communication, including direct mobile phone connection, vehicle networking, Internet of Things, 5GNTN and 6G. In 2023, Huawei and Honor respectively released mobile phone direct satellite connection technology, and car manufacturers such as BYD and Geely also released in-vehicle satellite communication technology. With the release of new technology, the bank believes that future satellite internet scenarios will be even richer.

Outlook 9: The number of satellite Internet users will switch from slow growth to rapid growth.

On December 22, 2023, Starlink announced on the X platform that its service has been launched in more than 70 countries/regions, and the number of users worldwide has exceeded 2.3 million, while the number of users exceeded 1 million, 1.5 million, and 2 million in December 2022, May 2023, and September 2023, respectively. Referring to the growth in the number of Starlink users, the bank believes that with the construction of China's low-orbit satellites, the number of satellite Internet users will follow a slow growth trend and switch to rapid growth.

Investment advice: develop the space industry and build a space power. China's aerospace industry has entered the “fast track” of development. The construction of emerging constellations such as satellite internet and the trend of high capacity and low cost are leading the beginning of a new era of commercial space. A new racetrack with a trillion-dollar market is about to set sail, bringing huge opportunities for development to related industrial chains. It is recommended to focus on the following segments: 1) satellite manufacturing; 2) commercial rockets; 3) ground equipment; and 4) operational services.

Risk factors: China's satellite Internet constellation construction fell short of expectations. China's satellite launch plan fell short of expectations. The construction of China's satellite ground facilities and operation services fell short of expectations. China's commercial space development has fallen short of expectations. There are faster breakthroughs in foreign satellite launch technology.