Governments Warned Chinese Cellular Chips Pose Next Biggest Threat

Visitors check a 5G Smart City technology at the China Mobile booth at the GSMA Mobile World Congress 2019 in Barcelona, Spain, on Feb. 26, 2019. The annual Mobile World Congress hosts some of the world's largest communications companies, with many unveiling their latest phones and wearables gadgets like foldable screens and the introduction of the 5G wireless networks. David Ramos/Getty Images

Using data collected in microchips, the Chinese Communist Party (CCP) could monitor activities all over the world in people’s homes, as well as weapons deployment, according to a report.

The report (pdf), written by British China researcher and former diplomat Charles Parton for Washington-based consultancy OODA, calls on free and open countries to ban Chinese-manufactured Internet of Things (IoT) modules from their supply chains as soon as possible.

It comes after “at least one” hidden Chinese IoT module “capable of transmitting location data” was reportedly found during a sweep of the UK’s government and diplomatic cars.

IoT stands for the Internet of Things, which includes devices that can collect data, communicate with each other, send data to back-end systems, and act on the information collected.

Its application is increasingly ubiquitous as more homes, industries, and cities become “smart,” including mobile-controlled light bulbs, thermostats, smart security systems, medical monitoring devices, watches and other wearable devices, or equipment and control systems in smart industries and smart cities.

Having sent the report to the UK government, Parton urged countries to wake up to the threat.

“We are not yet awake to this threat. China has spotted an opportunity to dominate this market, and if it does so it can harvest an awful lot of data as well as making foreign countries dependent on them,” he told The Telegraph.

Parton has spent 22 years of his diplomatic career working in or on China, Hong Kong, and Taiwan. He has continued to advise the British government and parliament and speak around the world on China.

Economic and Security Risks

In his report, Parton said cellular IoT modules are often used in “settings that are part of critical national infrastructure,” such as energy, transportation, communications, and finance, making it dangerous to depend on companies controlled by the CCP.

“Given the immense importance of these modules to modern industry and life, this would make other countries highly vulnerable to a threat to withhold supplies. Dependency is dangerous when it is in the hands of the CCP, a potential, if not actual, hostile power,” he wrote.

Parton also said using Chinese IoT modules in critical national infrastructure and key industries could enable more espionage and theft of intellectual property, allow “detailed surveillance in smart cities,” or give bad actors an opportunity to sabotage the systems.

To find out about weapons manufacturing in the United States, the Chinese intelligence services may be able to “build up a worryingly accurate picture of how many spare parts or weapons systems have been transported and to where” by using data harvested by IoT modules embedded in the supply chains and logistics system, he said in one example of the potential risks.

In another example, Parton said the IoT modules in automated farming equipment in the United States can collect detailed information such as crop yields, giving the CCP an edge in their grain contracts negotiations or business takeovers and enabling the regime to slap “more accurately targeting sanctions on American growers for political ends.”

On an individual level, the CCP could collate data harvested from a wide range of sources, including government systems and individuals’ interactions with IoT devices, such as car computers, domestic appliances, or wearable devices, and use artificial intelligence to find out their identities, habits, contacts, and finances, making it easier to target key government workers or dissidents.

‘Trojan Horse’

Chinese dominance in IoT modules also poses a threat to other countries’ values “under the seemingly innocuous Trojan horse of ‘Smart Cities,’” which is a euphemism for the CCP’s surveillance in the northwest Xinjiang region and elsewhere.

Quectel and Fibocom, two Chinese companies that lead the global IoT market, control almost half of the world’s market share in terms of IoT module shipments, thanks to their competitive price and maintenance contracts.

But Parton said their competitive edge is “built on the back of the work given to them by the CCP in policing the minority population in Xinjiang.”

Quectel, Fibocom, and China Mobile control more than half of the global IoT market.

It’s not yet a “lost cause” because a big chunk of their share is China’s domestic market, Parton said, warning free and open countries to stop the CCP-controlled and subsidised Chinese companies from increasing their global market share.

Otherwise, countries would risk losing their own IoT industries and depending upon the CCP for cellular IoT modules, he said.

In his recommendations, Parton said countries should take steps to ban Chinese IoT modules from their supply chains as soon as possible, including a “thorough audit” of where these modules are embedded in government properties and services, and in critical national infrastructure, a ban on buying new Chinese IoT modules by the end of this year, and a deadline to replace existing products, possibly by the end of 2025.