Northern Sky Research

Cracking the Chinese SCADA/M2M Market

Feb 2nd, 2013 by Jose Del Rosario   More from this Analyst | Profile

China is expected to be the global investment leader for the energy and utility sectors as well as emerging verticals such as Green Energy and mining to support its current and future requirements. Such spending could dramatically drive growth for a host of players in Asia’s satellite SCADA/M2M market over the long term.

However, market access has been one of the key challenges facing the satellite industry in tapping one of the most lucrative markets in the world. Indeed, the U.S.-based Satellite Industry Association (SIA) has formally stated that “China is a restrictive market for satellite services.”

In market entry strategies, partnerships have been key with Thaicom being the latest to successfully employ the arrangement and gain access. In January 2013, the company announced it had reached a Framework Agreement with China Telecom Satellite (CTS) and Synertone Communication Corporation (Synertone) to proceed with the sale of IPSTAR Bandwidth. Under the Framework Agreement, Thaicom, with cooperation from CTS, its official partner in China, will sell all IPSTAR capacity available for China to Synertone, and will also be entitled to revenue sharing from bandwidth sales of Synertone.  In addition, Thaicom will also take an equity stake in Synertone to strengthen the business partnership in the Chinese market.

The announcement is worth noting as a positive and strategic step in gaining a foothold in targeting high-bandwidth SCADA/M2M applications for CCTV/surveillance and SCADA backhaul. Is the Thaicom/IPSTAR partnership model then a guaranteed formula for successful market entry? In NSR’s view, the largest restraint in penetrating China’s satellite market may be China’s initiative in developing its own space industry. China is likely to favor national systems and programs, local suppliers and service providers, while foreign vendors may be restricted access by their own governments due to technology transfer issues, particularly those that offer next-generation solutions.

Source: Imaginechina via AP Images & the Asahi Shimbun


A case in point is the Chinese Beidou satellite navigation network created to compete with America's Global Positioning System (GPS), which started offering services to Asian users outside the country in December 2012. The Associated Press indicated that China, and especially its military, have long been wary of relying on the United States' dominant GPS network, fearing that Washington might take the system offline in a conflict or an emergency.  Moreover and perhaps equally important is the fact that at stake is 400 billion yuan or $63 billion in annual sales for services to the transport, meteorology and telecommunications sectors.

For SCADA/M2M, the Beidou SCADA network will strategically offer services across Asia at much lower prices compared with the current GPS, which taps into a market that could cumulatively amount to $1.8 billion in revenues from 2013-2021 based on NSR’s latest research study SCADA/M2M via Satellite, 3rd Edition, Beidou SCADA is likely just the beginning in a host of platforms and services to be developed by China’s satellite and space industries, which can and will likely be justified by concerns that reliance on foreign providers and foreign systems may lead to a host of national security issues.

Bottom Line

Private sector-initiated partnerships have worked well where Thaicom’s recent announcement proves there are ways of gaining market access to tap into long term opportunities.  However, regulatory and political issues could prove to be far more prominent in the bigger picture of market penetration.  In purely commercial terms, serving internal needs and exporting such services to its trading partners in Asia with annual revenues in the $billions is another, perhaps equally enticing, proposition to restrict market entry to non-Chinese entities.

Although a good step forward, partnerships do help in tapping opportunities, but there is still much to do in cracking the Chinese market, which will require efforts at the highest levels of government and even more creative arrangements by private enterprise. 

Information for this article was extracted from NSR's report SCADA/M2M via Satellite, 3rd Edition.