IPA: /ˈsʌbsteɪt/
KK: /sʌbsteɪt/
A smaller part or division of a larger state or political entity.
The region was designated as a substate to better manage local governance.
Substate is formed from "sub-" (meaning under or below) and "state" (from Latin "status", meaning condition or position). The word refers to a condition or state that exists beneath or is subordinate to another state.
Think of something that exists 'under' ('sub-') a certain 'condition' ('status') — that's what substate means.