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POD Research Institute today released its research report, Constant and Sustained Innovation As the imperative for Hong Kong’s Low Earth Orbit Economy, with the aim of providing clear industrial development guidance for government policymakers, financial institutions, legal professionals, the technology sector, and investors. The key points are as follows:

The core structure of today’s space economy has undergone a critical transformation. Industrial value is no longer concentrated in upstream rocket launches and satellite manufacturing. Instead, it has clearly shifted toward downstream services and applications, opening up massive business opportunities on a trillion-dollar scale.

The global space economy reached US$613 billion in 2024, and is projected to expand to US$712 billion by 2026. It is expected to maintain an average annual growth rate of around 7.8%, surpassing US$1.4 trillion by 2035. Of this, downstream services account for more than 90% of total output, while the upstream segments of manufacturing and launch represent only 5% to 10%. As costs continue to fall, their share is expected to shrink further.

SpaceX’s Starlink programme has already deployed around 10,000 low Earth orbit satellites, with plans to build approximately one million in the future. By 2035, multiple mega-constellations and space-based AI data centres are expected to be in operation. As of December 2025, China had applied to the International Telecommunication Union for approximately 203,000 LEO satellite orbital slots, and is expected to achieve reusable rocket launch missions in 2026. At present, commercial launch costs stand at roughly US$65,000 per kilogram, but with reusable technologies, these are expected to fall dramatically to US$2,000 to US$2,500 per kilogram over the next decade, a drop of more than 95%. Launch services will gradually become a standardized foundational input, and industrial development will no longer be constrained by hardware costs. In the future, 90% of profits will come from downstream operations.

The United Kingdom does not manufacture its own space rockets, yet through support from universities’research institutions and government backing for start-ups, it has built a space industry worth about US$23.4 billion, supporting 48,800 jobs in 2021/22. Luxembourg, with a population of only 650,000, has, under the leadership of major aerospace company SES, generated annual revenue of more than US$2.3 billion in 2023, making it the European economy with the highest space-industry share of GDP. Singapore has pursued an “applications-first, light-hardware” strategy in developing space technology, while Germany has generated billions of US dollars in revenue through system integration, precision optics, and space start-ups. Their development experience offers valuable lessons for Hong Kong.

The report shows that the Chinese mainland’s LEO economy has a distinctive structural profile. The mainland is highly concentrated in upstream manufacturing, with 85.4% of total revenue generated from domestic transactions. By contrast, downstream revenue accounts for only 41.8%, far below the global average of over 90%.

Table 1. Chinese Mainland LEO Satellite Industry in 2025: Regional Revenue Structure

Table 1 shows a mainland industrial structure dominated by manufacturing, standing in sharp contrast to the global pattern in which downstream revenue is dominant. This contrast is precisely where Hong Kong’s strategic position lies. At present, only 14.6% of the mainland’s LEO revenue comes from overseas markets. Even Shenzhen, the most internationalized city, at 30.9%, still derives this primarily from upstream exports rather than high-value data analytics services. Hong Kong’s institutional advantages are well positioned to help mainland LEO enterprises go global, while allowing Hong Kong to benefit commercially in the process.

The report proposes that Hong Kong can derive commercial value from LEO resources through three business models, distinguished by profit potential, market maturity, and Hong Kong’s institutional role.

The first is satellite communications leasing, with gross margins of around 35% to 40%, applicable to aviation, maritime, logistics, and emergency communications.

The second is satellite data analytics services. Analytics businesses can achieve gross margins as high as 70% to 85%, while Internet of Things applications range from 50% to 65%. These can be applied in insurance, trade finance, ESG compliance, bulk commodity tracking, and monitoring. Such business models convert data into solutions, provide legal interpretation and assurance, establish audit trails, and integrate cross-border compliance requirements into reporting.

The third is consumer satellite services, where profitability is more variable and requires longer-term deployment. Application areas include direct-to-device connectivity and consumer IoT. Hong Kong can first serve as a demonstration point, testing ground, and regulatory reference environment before gradually expanding to other regions.

Among the three, Model Two holds the greatest innovation value and is the most profitable segment in the industry. Such high-value innovation is difficult to achieve through internal corporate planning alone and often depends on cross-sector integration and synergy. For example, satellite detection of smuggling oil tankers and related data can be transformed into predictive reports for crude oil futures trading and sold to commodity speculators. Hong Kong must therefore encourage collaborative innovation across different sectors and build an open industrial ecosystem that welcomes talent and professionals from both within and outside the mainland if it is to nurture such breakthrough applications.

The report translates its overall strategic framework into seven concrete and time-sequenced recommendations, to be advanced progressively according to business maturity and institutional conditions, and implemented in three stages:

Mr Ronny Tong Ka-wah, Director of POD Research Institute, emphasized that the sustained innovation highlighted in the report means that the HKSAR Government must assume early-stage risks during the industry’s start-up phase, continuously identify cross-sector collaborative projects with high profit potential, and use non-repayable funding to attract leading experts and industry players from home and abroad. Reasonable trial and error should be allowed during the research, development and innovation process, in order to capture the high returns that future success may bring.

Mr Martin Cheung Tat Ming, Principal Researcher of the Institute, noted that Hong Kong is currently at the initial stage of development in the LEO satellite industry. While it does not need to develop satellite launch technology itself, it must strengthen exchanges and collaboration with mainland experts and research institutions. By drawing on the successful experiences of other countries and cities, fully leveraging the unique advantages of “One Country, Two Systems,” and focusing on high value-added segments such as satellite operations, talent training, capital raising, cross-border mergers and acquisitions, legal and regulatory compliance, dispute resolution, and data services, Hong Kong can build an internationally competitive LEO satellite industrial ecosystem and secure a key position in the global LEO economy.

The full bilingual report is available at the following website:
https://podresearch.hk/uploads/file/202603/657b8ce81f8e89ec364672859c6df59b.pd