China Securities Co., Ltd.: Investment Opportunities in the Commercial Aerospace Industry Chain

Since 2020, the global rocket launch frequency has reached a new high for three consecutive years, and global aerospace activities have significantly increased, showing unprecedented dynamism. In the field of communication satellites, China's construction of low-orbit satellites lags behind high-orbit high-throughput satellites. The TianTong-1 satellite is China's mature GEO satellite constellation, which has been widely used in various industries. In 2024, China's two large satellite constellations (GW and G60) were officially networked, marking the beginning of a new era of normalized satellite deployment by 2025. By the end of 2024, SpaceX's Starlink satellites had launched over 7,000, with the GW and Yuanshin G60 networks deploying 10 and 54 satellites respectively. The construction and operation of giant low-orbit satellite constellations have long cycles, high technical integration, and high risk engineering characteristics. China's state-owned and private enterprises are jointly planning, and the satellite development and rocket launch mode are gradually transitioning. Key technologies and production capacity bottlenecks are expected to be overcome, and commercial aerospace forces are expected to accelerate the deployment of low-orbit Internet layout. The development of giant low-orbit satellite constellations has long been related to high risk, high complexity, high integration, and high engineering and technology complexity. China's state-owned and private enterprises are making joint efforts to develop the satellite and launch mode, gradually transforming key technologies and production capacity, breaking the bottlenecks, and accelerating the low-orbit Internet layout. SpaceX's investment of $17 billion in acquiring Echostar's 50MHz golden spectrum resources marks the strategic positioning of the global mobile satellite direct connection competition. This move allows SpaceX to break away from its dependence on ground operators' spectrum and achieve direct satellite connection to ordinary mobile phones through chip embedding technology, upgrading its service capabilities from text to voice and streaming data. By using a hybrid model of "self-operation in remote areas + cooperation in cities," SpaceX is constructing global satellite communication capabilities. China has also introduced policies to support the development of mobile satellite direct connections, accelerating the network formation of satellite constellations and the commercialization of private rocket launch. The entire commercial aerospace industry is facing development opportunities, but the scarcity of spectrum, technological maturity, and sustainability of the business model are still important variables to be watched. The global competition for mobile satellite direct connections is intensifying, focusing on investment opportunities in commercial aerospace. SpaceX's $17 billion acquisition of Echostar's 50MHz spectrum resources marks the strategic positioning of the global competition for mobile satellite direct connections. The core objective is to break away from the dependence on ground operators' spectrum and build independent global satellite direct communication capabilities. Through this acquisition, SpaceX upgrades its "mobile direct satellite" (Direct-to-Cell) service capabilities from text transmission to future voice calling and streaming data businesses and plans to increase system capacity 100 times through the next-generation constellation. This move highlights the core value of scarce mid-frequency spectrum resources in the integrated competition of aerospace, and also marks the key turning point of satellite Internet industry from technological validation to large-scale commercial operation. With its strong capital, leading launch capabilities, and mature Starlink ecosystem, SpaceX is accelerating the global commercialization of satellite Internet. Spectrum acquisitions bring independent operation and service capability leap. SpaceX acquires Echostar's AWS-4 (40MHz) and H-block (10MHz) spectrum for $17 billion, marking a shift from "cooperation dependence" to independent operation. Previously, Starlink relied on the operator's spectrum (such as T-Mobile's PCS band), with income sharing and geographic restrictions. Now, with exclusive spectrum, SpaceX can flexibly deploy global services, increase the capacity of direct satellites by 20 times, and increase the total system capacity by 100 times. The new spectrum supports the 5G satellite system, which can provide services comparable to ground LTE in the future, covering 50% of land and ocean blind spots that traditional networks cannot reach. On the technological side, chip embedding and hardware compatibility upgrades are being made. SpaceX is collaborating with chip manufacturers to embed RF chips that support satellite bands directly into smartphones. This solves the core bottleneck of Starlink's direct services - hardware compatibility. Ordinary phones can access the satellite network without external antennas, enabling messaging, calling, and basic data services (such as social media, navigation, and IoT connections). Currently, Starlink has deployed over 600 direct satellites, covering five continents, serving over 6 million users, and playing a critical role in disaster response (such as sending 1.5 million alerts via satellite during US hurricanes). Looking forward to the next-generation communication, focusing on integrating satellite and ground communication. SpaceX clearly states that it will adopt a hybrid model: self-operated satellite services in remote areas, and cooperation with ground operators in urban areas. For example, Boost Mobile users under EchoStar can directly access the Starlink network, while SpaceX can profit by providing "capacity wholesale" to operators. This approach avoids direct competition with traditional telecom giants (such as AT&T, Verizon), and enhances overall network value through complementary coverage. As AT&T's CEO said: "Satellite networks cannot replace ground infrastructure, but can efficiently cover blind spots." Recalling China, in August of this year, the Ministry of Industry and Information Technology issued the "Guiding Opinions on Optimizing Business Access and Promoting the Development of Satellite Communication Industry," which explicitly supports the large-scale application of new models and formats such as "mobile direct satellite," with the goal of developing more than 10 million satellite communication users by 2030. This policy, through a series of measures such as orderly opening of markets, encouraging private enterprises to participate, optimizing frequency and code resource management (innovating the "no card change, no number change" model), provides a clear top-level design and policy guarantee for the industry's development. Since the end of July, the GW constellation launch frequency of China has increased significantly. The launch interval of groups 01-05 stars shortened from one to two months to 3-5 days between the launch intervals of groups 05-10 stars, indicating that China's satellite Internet may have entered a high-density networking period. Private liquid-fuel rockets are expected to gradually become an important force in building China's low-orbit satellite Internet, accelerating the promotion of mobile direct satellites, and the construction of satellite Internet is expected to accelerate. With the massive investment of SpaceX in the US and the strong push of China's commercial aerospace and policy, it confirms the development potential and market certainty of the mobile direct satellite track. The entire commercial aerospace industry chain, from satellite manufacturing, rocket launches to operational services and application ecology, is accelerating commercialization. The scarcity of core spectrum resources, the maturity of technical solutions, and the ultimate sustainable business model are still the core variables that need to be continuously monitored. Risk Warning: 1. Defense budget growth is lower than expected; in recent years, defense budgets have maintained relatively stable growth, with favorable military industry policies. However, there is a possibility of a reduction in defense budget expenditure due to changes in national policies and national strategic changes. 2. Weapons and equipment delivery are slower than expected; in the post-epidemic period, coupled with regional tensions, the global economic trade chain has been greatly impacted, with sectors such as shipbuilding facing risks of delayed construction and delivery. 3. Progress in related reforms is slower than expected; the country's judgment on future situations and guiding ideology determines the development prospects of the industry. National macroeconomic policies and industrial development policies have a major impact on the strategic direction, industry choices, and investment and mergers directions of military enterprises. Looking ahead to 2025, China's GW constellation launch frequency has increased significantly, with intervals between launches shrinking to 3-5 days, indicating a rapid networking period for satellite Internet. Additionally, the bidding for the Qianfan constellation has been launched, as well as the normalization of launch operations at Hainan Commercial Launch Site, and the maiden flight of large liquid-fueled private rockets is set to commence. With these developments, China's satellite Internet is expected to enter a new phase of high-density networking. Events China's low-orbit satellite Internet constellation completed three launch missions in around 8 days On July 27th at 18:03, July 30th at 15:49, and August 4th at 18:21, China successfully launched the 05, 06, and 07 groups of satellites, using the Changzheng 6, Changzheng 8A, and Changzheng 12 rockets respectively. The satellites were successfully placed in their designated orbits, and the launch missions were a resounding success. Summary China's satellite Internet launch frequency has increased significantly, and the network speed has noticeably accelerated The GW constellation's launch frequency has increased significantly, and the network speed has noticeably accelerated. China's GW constellation, consisting of 12,992 satellites, completed three high-orbit satellite launches from February to October 2024. From December 2024 to the present, launches of the low-orbit 01-07 groups have been completed, with intervals between launches of the 01-05 groups lasting at least one month, and some even exceeding 2 months, while the intervals between the 05-07 groups being approximately 3-5 days, signifying a significant increase in launch frequency. This may indicate that China's satellite Internet is entering a period of high-density networking. The construction progress of the Qianfan constellation has been relatively slow, but is expected to gradually accelerate. The Qianfan constellation has applied for the deployment of 1,296 and 13,904 satellite constellations. From August 6th, 2024 to present, five "one rocket, 18 satellites" launches have been completed. In January and March 2025, two launches have been completed. As of now, there are no follow-up launch missions. However, Yuanshin satellite issued a tender notice for 2025 launch services, with a total of 7 rocket launch services, including four "one rocket, 10 satellites" launch services and three "one rocket, 18 satellites" launch services, with a service/delivery period from the date of contract signing to March 2026. We expect the Qianfan constellation's construction to gradually speed up. Hainan Commercial Launch Site addresses launch bottleneck, large private liquid-fuel rockets set to debut Hainan Commercial Launch Site has built the first and second launch pads, with plans to add a third and fourth pad. Hainan Commercial Aerospace Launch Site is the first commercial aerospace launch site in China funded, built, and operated by Hainan International Commercial Aerospace Launch Co., Ltd. The first phase project has been completed and successfully launched four times, with the second phase project starting in January 2025, accelerating construction. The first phase project covers an area of over 2,500 acres, including technical and launch areas, starting construction on July 6, 2022, and forming full launch capability within just 980 days. The first launch pad introduced a ground thrust cone deflector system instead of traditional underground stream deflector systems, achieving a "7 days launch + 7 days recovery" high-efficiency launch model to meet the "three vertical" launch requirement of the Changzheng 8 series rocket; the second launch pad uses a "Three Plains" launch model, the first universal liquid launch pad in the country, with a standardized design to meet testing launches of over 20 types of rockets. The second phase project covers an area of over 1,100 acres, adding third and fourth launch pads, as well as supporting technical areas and ancient pine tracking stations. Once completed, it will form a "two-phase, four-pad" layout to better meet the needs of "high frequency, high capacity, low cost" launches, further enhancing the launch capabilities of Hainan Commercial Aerospace Launch Site. The recent launches of the GW constellation have been handled by Hainan Commercial Launch's first and second launch pads, with launch intervals of only about 5 days, indicating that Hainan Commercial Launch has entered normalized operations. Additionally, commercial rocket companies are building launch pads through self-construction and partnership models, indicating that the launch site bottleneck is expected to be gradually solved. In the second half of 2025, several large-capacity private liquid-fuel rockets are set to debut, and reusable experiments will gradually be conducted, with liquid rocket launch sites being rapidly built, expected to address the bottleneck of high launch costs and insufficient launch resources in China, reducing unit launch costs to around 20,000 RMB/kg. Private liquid-fuel rockets are expected to gradually become a major force in building China's low-orbit satellite Internet, accelerating the construction of satellite Internet. Blue Origin's Jeff Bezos said that with the collaboration with CICC on July 25, 2025, the Shenzhou Aerospace, and will start to be listed on the Sci-Tech Board. Investment Recommendation Since the end of July, the launch frequency of China's GW constellation has increased significantly, with intervals between launches shrinking to 3-5 days, indicating that China's satellite Internet may have entered a high-density networking period. Additionally, the bidding for the Qianfan constellation has been launched, as well as the normalization of launch operations at Hainan Commercial Launch Site, and the maiden flight of large liquid-fueled private rockets is set to commence, with liquid rocket launch sites being rapidly built, expected to address the bottleneck of high launch costs and insufficient launch resources in China, reducing unit launch costs to around 20,000 RMB/kg. Private liquid-fuel rockets are expected to gradually become a major force in building China's low-orbit satellite Internet, accelerating the construction of satellite Internet. Risk Warning: Satellite Internet construction is slower than expected; technological breakthroughs take longer than expected; competition for spectrum and space resources.