China Satcom Targets IoT Market in South-East Asia

The introduction of 5G is likely to accelerate the trend of people streaming video rather than watching traditional broadcast TV. To prepare for the disruption, Direct-to-Home (DTH) satellite operators such as China Satcom are looking at other markets such as high-speed broadband services, in-flight connectivity, and more recently IoT.

Many satellite operators believe that there is a substantial opportunity to use satellites in conjunction with 5G to inter-connect offices, factories, robots, IoT sensor devices, aircraft, vehicles, and ships as part of hybrid 5G/satellite networks.

China Satcom is due to launch its second High-Throughput Satellite (HTS) later this year, and its parent company, China Aerospace Science and Technology Corporation, is believed to be planning a 300 Non-Geostationary Orbital Satellite (NGOS) system designed to operate in low-Earth orbit (LEO).

Crowded and Difficult Market

There are already several established players in the satellite IoT market, including Iridium, Globalstar and Orbcomm. All three launched in the late 1990s. These NGOS systems consist of many satellites orbiting in LEO orbits around 100-200 miles above the Earth. For example, Iridium has 66 satellites in its second-generation NEXT constellation.

Iridium recently inked a deal with Amazon (AWS) to offer a service called CloudConnect. This will be used to connect a range of different types of IoT devices (agricultural machinery, container ships, drones, etc.) to AWS’s cloud data centers.

Orbcomm has a major deal with container shipping company Maersk to connect nearly 300,000 of their reefer (i.e., refrigerated) containers.

Then there is Inmarsat, the traditional GEO mobile satellite operator, based in London. There are also a host of new NGOS players such as LeoSat, TeleSat, Jeff Bezos/Amazon’s Kuiper, Starlink from Elon Musk, OneWeb, and others.

Most of these are not very clear on what their target markets are, but IoT is probably one of the main potential markets along with low-latency broadband delivery.

Most of the new NGOSs are planning global services and therefore, must have licenses in every country. Licensing is a very complex process as the regulations are different in every market. If they want to operate a gateway, the NGOSs need other licenses, an even more complex process.

Some countries may not cooperate, particularly if they want to protect their own satellite companies. For example, Russia recently denied access to OneWeb by refusing to give it landing rights, a potentially significant market lost.

The same situation is true for China. Regulatory barriers in China are very high, and the Chinese will insist that there is a gateway located on their soil. Clearly, domestic satellite operators such as China Satcom will have a significant advantage. Although it is possible that China could partner with a foreign NGOS, the likelihood is that it will favor its own NGOS system and make it difficult for foreign-based systems to operate in China.

Market Size and Economics

A key issue here is the size of the satellite IoT market opportunity and the economics of the business case.

With at least four established players in this market, each with their new next-generation satellites, and many more planning to enter the market, there will inevitably be a glut of capacity. In fact, it is unlikely that any of the new NGOSs will become fully operational. With the possible exception of Jeff Bezos’s Kuiper constellation, most will probably run out of money.

At present, Counterpoint Research estimates that the total value of the mobile satellite market is less than US$2.75 billion. Of this, the top four players account for around US$2.4 billion or 87% of the overall market.

Inmarsat recorded revenues of US$1.465 billion in FY18. However, this includes all types of services including voice services, not just IoT. Iridium made US$523 million in 2018, Orbcomm US$276 million, and Globalstar US$130 million. But again these are total revenues and includes voice services as well (except for Orbcomm). In 2018, Counterpoint Research estimated the value of the overall global satellite IoT market at around US$750 million.

With the support of the Chinese government, China Satcom is probably in the same enviable position as Kuiper. It is in a strong position to dominate the IoT market in China and the surrounding region. However, whether it will be able to replace DTH revenues with new IoT services is doubtful, and it will probably need to target several other markets as well.