President Donald J. Trump recently signed an Executive Order restricting US firms from using telecom equipment manufactured by foreign businesses deemed national security threats, and the Department of Commerce, based upon a Justice Department indictment against the firm, banned American firms from selling and licensing components to Huawei.
this debate is more complex than the role of a single company or technology and published this research note The story behind the Huawei story and this note: The debate about network security is more complex than Huawei. Look at Lenovo laptops and servers and the many other devices connected to the internet.
Just as the role of cybersecurity in mobile networks is important, so it is in satellite networks. Chinese players have come to dominate many areas of mobile networks, including network equipment, devices, and services, and the Chinese satellite industry has developed a similarly broad set of enterprises. President Xi Jinping is driving the process for the Chinese to have a leading position in the global satellite industry, and the emergence of a national satellite champion for satellite, the “Huawei of Satellite” so to speak, is likely.
While many Western policymakers may downplay the importance of satellites, thinking they offer solutions just for rural areas, not cities. They fail to recognise the millions who use satellite broadband on planes which fly to cities, as well as the millions subscribing to 25 Mbps/3Mbps services, if not 100 Mbps down as many satellites now offer. Few recognise how satellite technologies have evolved, how they will cooperate and compete with terrestrial networks, and how they play a greater role in broadband, 4G/5G, and the Internet of Things.
The satellite industry is engaged in a technological and economic transformation to discover how to deliver faster and better broader for less money. Globally the sector represents $400 billion and will likely grow to $1 trillion. Going forward, China will play a greater role in this policy challenge and will create an arms race with Europe. Unlike in Europe, with its fractured political culture in which networks take adversarial positions against each other, the Chinese satellite industry is united with the full support of the President and the Chinese Communist Party.
While the US has lagged on closing its digital divide for 19 million who do not subscribe to broadband, China will likely quickly connect its 110 million rural residents via satellite, and once that model is proven, China will roll out the model globally to the other 4 billion people not online today. The question is whether and how the US and European players will drive this market.
In getting the first half of the world online, cybersecurity was a secondary issue. As users, data, and enterprise have ballooned, so have cyber threats. Going forward, security will be a primary concern. This changes the economics and business case for network investment, likely reshuffling the deck for many firms.
A few years ago, Xi extended the type and number of companies that could conduct space launches in China. This policy change is fueling the formation of Chinese firms with ambitions to challenge Elon Musk’s SpaceX, Jeff Bezos’ Blue Origin, and Richard Branson’s Virgin Galactic.
China has excelled when it comes to copying (if not improving) Western technologies, companies, and business models. Just look at the Chinese versions of Amazon, Facebook, WhatsApp, YouTube, and Google.
In 2015, China launched ”Made in China 2025”, promoting strategic technological sectors, including telecommunications. This policy has helped the grow Huawei and will likely fuel the satellite industry as well. The West has very little knowledge of the Chinese space industry, how it is structured, and how it works. At the top are four leading players, the state-owned enterprises CASC, CAST, CALT, and CASIC.
There are also smaller firms with mixed ownership such as iSpace, OneSpace, and Landspace. Put simply, China has copied (and perhaps improved) a model from the US: allowing entrepreneurs to capitalise on big science developments made by the government. When it recognizes a model that works, the Chinese deploys it on steroids.
China’s effect on global innovation is bolstered by its $279 billion annual budget for research and development. While the US level is almost twice this amount, the Chinese came from nowhere fast. In a mere decade, China’s space program has succeeded to launch the Chang’e-4 spacecraft and land a state-of-the-art rover on the far side of the moon, a feat facilitated by a communication relay satellite in lunar orbit, itself a first.
These are an extremely difficult technical accomplishment which surpasses US space capabilities. “We Chinese people have done something that the Americans have not dared try,” noted Chinese scientists to the New York Times. This shows something about the entrepreneurial attitude in the Chinese space industry.
The Chinese government declares that it “wants to expand human knowledge and technical boundaries in the space”. In the 1960s, American and Soviet space agencies fiercely competed. Today China’s deep pockets, focus, and methodical approach are aligned to conquer and lead the modern space industry, leaving the American space program in the dust. In 2018 the Chinese space industry had 39 rocket launches; the US, 33; Europe, 11. China will use its scale and government support to lead the global satellite market just as Huawei did with network equipment and Lenovo with personal computers.
Because of the Huawei debacle, mobile wireless users are demanding increasing transparency about the equipment manufacturers in networks. There is not the same user sophistication about makers of satellite technologies, but the use of Chinese inputs poses similar risks of hacking, theft, espionage, sabotage, and surveillance.
China’s tech threat is not confined to 5G mobile networks. It pervades the entire supply chain of the information and communication technologies economy the hardware and software made by firms with the direct or indirect support of the Chinese government and military. Policymakers need to open their eyes to the challenges facing the satellite industry in the West and many Chinese enterprises that have Huawei as a role model.
Cybersecurity is increasingly important and demands greater attention. It costs real money to build resilience into products and services, and it is important to have a frank discussion about the costs and tradeoffs for cybersecurity with other political goals. The key question is whether the West is ready to be dependent on Chinese satellites.