Everyone knows by now that SpaceX is building a 12,000-satellite orbital broadband internet constellation, called Starlink. Many people probably also know that SpaceX is about one-third of the way toward completing this constellation, with more than 4,600 operational Starlink satellites up in orbit already, and more going up every few days.
One thing you may not have noticed, however, is that the pace of Starlink's expansion has slowed of late. In fact, over the past several months, SpaceX has increasingly been sending up batches of 21 or 22 Starlink satellites at a time -- rather than the 50- and 60-satellite missions that were most common up through the end of last year.
This isn't necessarily a bad thing for SpaceX, though, as the Starlinks that have been going up this year have been what SpaceX calls "Gen2" Starlinks -- bigger, heavier, and capable of carrying 10 times the bandwidth of earlier Gen1 Starlinks. Because the new Starlinks are more robust than the old ones, in fact, you could say that SpaceX has accelerated the rate at which it's deploying Starlink capability around the world.
That's the good news.
Now here's the bad news that you really need to know: SpaceX has reason to rush its deployment.
Image source: Getty Images.
SpaceX blazes the trail, and competitors follow
One SpaceX competitor that we've written about a lot lately is Amazon.com (AMZN 0.81%). In 2019, Amazon announced that it will build a satellite internet constellation to rival SpaceX Starlink, dubbed Project Kuiper.
This project hasn't gotten off the ground just yet, but once it does, Amazon plans to put more than 3,200 satellites in orbit to provide a space internet alternative to Starlink. Once that happens, SpaceX will for the first time encounter real price competition for its Starlink service. This poses a threat to SpaceX's plan to ramp Starlink into a $30 billion-a-year business and generate enough profit to both subsidize development of the company's Starship spacecraft and attract interest in a promised initial public offering of Starlink.
Yet the potential for Amazon to turn into a space company could be the least of SpaceX's worries.
China rising
The bigger threat to Starlink comes from China. And when I say "threat," what I really mean is threats, plural -- because it turns out that China is building not one, but two separate megaconstellations of internet satellites of its own. And each one will be as big as Starlink itself.
In 2021, the Chinese government set up a state-owned enterprise expressly for this purpose: building a 13,000-satellite internet constellation to be known as Guowang. And last month, the Shanghai Municipal People's Government announced the start of a second project to build a constellation of 12,000 more internet satellites, to be known as G60 Starlink.
So China isn't even trying to hide the target of its competition here. It's actually right there in the name.
As SpaceNews reported earlier this month, the G60 Starlink project will begin with an initial deployment of 1,296 internet satellites. Plans for further deployment remain "opaque." But given how quickly China's space program is evolving -- China landed on the moon in 2020, for example, began building its own orbital space station in 2021, and declared the station "permanently staffed" last year -- it's clear that China can move quickly when it wants to.
How worried should SpaceX investors be?
Granted, fast as it can move, China currently seems off to a slow start in building its Starlink rivals. China's State Council Information Office reports that China will launch 60 rockets across a wide variety of missions this year. But not all -- indeed, not necessarily any -- of these will be carrying G60 Starlink internet satellites. Turns out G60 Starlink first needs to build itself a satellite manufacturing center. And initial plans for that include an annual manufacturing capacity of only 300 satellites per year. At that rate, building the G60 Starlink constellation would take 40 years.
Guowang seems a bit farther ahead. In March, SpaceNews reported that Guowang aims to launch at least one batch of satellites this year -- 30 satellites total. But meanwhile, SpaceX aims to launch 100 rockets this year, of which as many as 80% could carry Starlinks. Eight of the last 10 SpaceX launches, for example, were Starlink missions.
So SpaceX still has a big lead over China. But even so, Elon Musk shouldn't get too comfortable, and here's why. If China is serious about catching up to Starlink, it will need to imitate the rapid launch cadence set by SpaceX. To do that, China will need to build a lot more rockets, adding a lot more launch capacity to the global supply. The effect will be to drive down launch prices globally, potentially hurting revenue and squeezing the profit margin at SpaceX's launch business, at the same time as it grows the threat to SpaceX's Starlink business.
True, lower launch prices will be more of a problem for higher-cost launch providers such as United Launch Alliance and Arianespace than for SpaceX. But for SpaceX it will pose two problems -- and that's one big thing to worry about.
