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The earth's surface moves faster at the equator, which is why it's such a good place to launch a rocket. The extra spin gives a small boost to the massive machines as they power into space, and allows the rockets to carry heavier payloads. That's one reason China is expanding its Wenchang launch center on Hainan Island, a land of palm trees, white beaches and nuclear submarines snuggled in tight against China's southern coast just 19 degrees north of the equator. Beijing hopes the base, which will open in 2013, will help China join the big Western players in the commercial satellite-launch business.
Not that it needs much help. Since 2002 China has sent 15 commercial satellites into orbit, including last October's launch of a communications satellite for Venezuela. Beijing says it plans to launch an additional 15 commercial satellites this year. Last month, it reportedly signed a contract with European communications company Eutelsat to launch a five-ton satellite in 2010. The deal, which industry experts expect to be officially announced at a satellite convention in Washington, D.C. later this month, will be Beijing's first with a Western satellite operator since 1998, when the U.S. sharply restricted the technologies American companies could sell or even send to China. (See pictures of the Earth from space.)
That ban initially hurt China's commercial-launch business but in the long run it could end up helping Beijing. Designed to prevent China from getting hold of U.S.-made technology that could be used in military applications, the restrictions apply to exports such as weapons and certain commercial machinery. Because most commercial satellite builders have traditionally relied on U.S. parts, the legislation also effectively barred firms in Europe and elsewhere from using China to launch their products.
That's why the Eutelsat agreement is such a big deal. If confirmed, it would not only mark a business coup for China, but signal a major blow to Washington's technology ban. Several European aerospace groups including France's Thales, Italy's Finmeccanica and pan-European consortium EADS have been working on how to build satellites and components free of U.S. content. Over the past decade, meantime, China has perfected relatively cheap launches for companies and governments from Asia, Africa and South America.
Put those two facts together and China is well placed to grab more of the global launch market. "The restrictions have placed China outside the commercial- launch sector dominated by American, European and Russian companies — meaning China has to offer services at far lower prices if it wants to become a major player," says Jeff Foust, senior analyst at U.S. aerospace and telecommunications consulting firm Futron. "China has that ambition."
It's still early days. Some 25 Western-built commercial satellites are sold world-wide each year, but only six have been built since 2002 without the American components restricted by the International Traffic in Arms Regulations (ITAR), as Washington's controls are known. "That's less than 5% of total sales over the past six years, and it does not constitute the threat to U.S. satellite companies that some are claiming," notes one industry source, who did not wish to be named.
See pictures of China's electronic-waste village.
See TIME's Pictures of the Week.
Still, the trend seems set. "In 2002, for reasons of both national security and commercial competitiveness, European governments encouraged companies to develop technologies that do not rely as heavily on American suppliers bound to U.S. government oversight," the source says. The result: operators such as Eutelsat can now buy satellites without U.S. content and legally turn to China to launch them.
And why wouldn't they? The price of launching a satellite in the U.S., Europe or Russia runs between $80 million and $100 million. China, says Bertrand Laport, an equities analyst and technology specialist for Fortis in Paris, can put your satellite into orbit for around half that. "The other big advantage China has is that launch schedules of Western groups are typically booked for one to two years in advance, while China's schedule remains relatively flexible," says Laport. "That additional capacity, relatively good technology quality and a reliable launch record will make China an option companies will probably consider more as time goes by."
The growing competition is already hurting U.S. satellite makers. It's not just the launch business — the money spent on launches accounts for less than 3% of the $123 billion satellite industry overall — but the much more lucrative manufacturing contracts. U.S. manufacturers complain that since the export restrictions were introduced 11 years ago, the global market share controlled by U.S. companies has plunged from 80% to 41%.
Critics of the export restrictions argue that U.S. firms are suffering for nothing — because the ban has grown increasingly ineffectual. They want the government to revise ITAR and make it easier for U.S. companies to compete. "If non-American groups are constructing satellites for clients ready to turn to China for cheaper launches, China will be handling the same technology despite a U.S. ban," Laport says. "They'd be better off changing the rules to apply only to truly sensitive military and defense technologies."
Not everyone agrees. Responding to reports of the Eutelsat deal late last month, Republican Congressman Dana Rohrabacher, who sits on the Science and Technology Committee, vowed that "rogue nations" will continue to be "barred from receiving our high-tech systems." Chief among those countries, he said, "is the People's Republic of China." Rohrabacher also warned that the U.S. is prepared to slap down any non-U.S. satellite companies who sidestep ITAR and do business with Beijing, even if they don't break the ban. "Eutelsat sells tens of millions of dollars worth of satellite services to the U.S. Government through [Defense Information Systems Agency] contracts," Rohrabacher said. "Clearly, this is the beginning of a game of chicken between Eutelsat and the Obama Administration."
But it's a game Washington could just as easily lose as win. As Foust notes, plenty of U.S. companies and government agencies rely on foreign commercial-satellite operators like Eutelsat for their communications systems — including 85% of those the Pentagon maintains. "There's more to lose than to gain by trying to turn a low-profile policy issue in Congress into a huge fight," Foust says. "It's wiser to opt for policy reform that will allow everyone to work more efficiently, but still protect strategic interests."
And just in case politics gets in the way, Beijing is hedging its bets on Hainan Island by building a $1 billion space-science theme park and launch-viewing area for 300,000 people right outside the new space facilities. That way, China can make a few bucks off tourists even if satellite clients stay away.
See pictures of China's electronic-waste village.
See TIME's Pictures of the Week.
- BRUCE CRUMLEY / PARIS
- Best known as a manufacturer of earthly goods, China is on the rise in the commercial space industry