Foundation for Defense of Democracies (FDD) Outlines Need for Gov't Support of US-Made LIDAR

China’s Internet-of-Everything Gambit and Battle for LiDAR

Introduction

The Chinese government is intent on seizing control of emerging technologies to cement a dominant position in tomorrow’s economic and security environment.1 A principal focus of Beijing’s efforts is the network of physical devices known as the Internet of Things (IoT), which Chinese sources expect to become an “Internet-of-Everything” once it achieves a “global scale.”2 In the realm of hardware, Beijing faces little competition. Chinese IoT module makers already dominate the global market in areas ranging from smart appliances to autonomous cars, including a full stranglehold over the commercial drone industry.3 Government support and industrial strategy, as well as technology pilfered from abroad, have fueled this advantage.4

Light detection and ranging (LiDAR) technology is a clear example of this People’s Republic of China (PRC) strategy, which Beijing employed previously in its conquest of the drone market. China’s dominance there has made it difficult for the Pentagon to contribute to drone warfare operations in places like Ukraine without relying on Chinese inputs. LiDAR, like drone technology, is dual-use relevant and key to emergent critical infrastructure.5 Today, Chinese entities are dominating the commercialization of LiDAR and its applications in current advanced driver assistance systems and autonomous driving, a critical emerging field.

The United States, its allies, and the private sector must respond to the risk of China’s LiDAR gambit with both defensive and offensive measures. It will be necessary to protect U.S. research and development efforts while publicizing the risk of partnerships with Chinese Internet-of-Everything players. An effective response in the LiDAR field can serve as a model for related efforts since similar threats proliferate across the Internet of Everything.

UNDERSTANDING LIDAR

LiDAR is a sensor pod that measures distance with lasers and can deliver high-fidelity, three-dimensional views of surroundings whether in stationary (e.g., near critical infrastructure) or mobile deployments (e.g., robotaxis). Autonomous applications, like driverless cars and the economic and technological boons they promise, demand inputs like LiDAR. Perhaps more importantly, they demand comprehensive approaches to leveraging LiDAR alongside complementary software and hardware advances. This means that an advantage in LiDAR can translate into a commercial advantage.

LiDAR can aid in the characterization of surroundings, including distance and proximity.6 The technology can be used in a variety of use cases that range from weather sensing to infrastructure safety monitoring. The technology is already a critical input for the majority of the leading autonomous driving players.

LiDAR stands to drastically improve the standard features of currently deployed advanced driver assistance systems (ADAS). Its ability to map the distances of three-dimensional environs at high fidelity and in real time promises to enable more competent and safe autonomous driving — and at scale.

LiDAR is not a silver bullet in autonomous technology. It must be deployed in concert with a broader suite of sensors, including radar and cameras. That suite also requires additional elements that include integrated circuits; resources for storing, fusing, and processing information flows and algorithms; as well as other inputs and outputs. The race to deploy autonomous driving is a race to assemble that complex suite.

While LiDAR might not be the whole answer, car companies that lack the hardware and engineering expertise for LiDAR are likely to be at a disadvantage. Indeed, if Chinese companies capture the LiDAR market and shape its technological development, they will gain a systemic advantage in the autonomous driving competition. BYD, the Chinese electric car company,7 will have a leg up over global peers if BYD’s engineers have preferential access to supply, technical support, and research and development opportunities supported by China’s non-market (government) efforts. The Chinese Communist Party’s (CCP’s) “State-led, Enterprise-driven” economic model has delivered real-world advantages, including in the solar supply chain, where polysilicon dominance has enabled Chinese players to capture the higher-margin module and panel markets.8

LiDAR technology also plays a vital role in monitoring critical infrastructure — ranging from transit nodes like bridges and tunnels to power facilities like transformers and power lines9 — and other industrial autonomy applications. Those critical infrastructure sites include U.S. military installations, which leverage LiDAR alongside other perimeter security and imagery collection technologies to monitor everything from facility conditions to force protection and flight safety missions.10

MILITARY-CIVIL FUSION

The Internet-of-Everything promises returns that span from direct revenue flows, access to new pools of capital, and innovation that may fuel next-generation products. This is reflected in the corporate strategies of many of Beijing’s “Big Tech” companies. These companies assume that as device connectivity is expanded to a broader array of “smart” real-world objects, they will be in a prime position to control the operating systems that bring the “Internet of Everything” to life.11 This promises rewards akin to the dominant positions of Microsoft and Google in earlier information technology epochs.12

The rise of a new connected future also offers tremendous boons for the Chinese security and strategic apparatus. China’s national strategy of military-civil fusion (MCF) is premised on the notion that civilian resources, technologies, and positioning can be leveraged to modernize the People’s Liberation Army and the CCP’s projection of power.13

LiDAR fits neatly within this mandate. Chinese press sources celebrate LiDAR as a “core technology.”14 Autonomy applications in China draw on LiDAR for drone and vehicle use. Chinese media also tout, “applications of lidar in the military field include battlefield reconnaissance, atmospheric environment detection, tracking and fire control, underwater detection, and comprehensive auxiliary applications.”15

The technology — and its deployment abroad — also enables the surveillance and even disruption of critical infrastructures. For example, LiDAR positioned to monitor the health of a bridge may also capture information about vessels transiting on or around them. LiDAR could pose a risk of remote disruption, which could present operational harm in critical infrastructures and systems. Drones relying on LiDAR, for example, could have their operational performance in swarming compromised by remote disruption. The operational risks with LiDAR may be contested, but a series of security vulnerabilities involving both internal and external threats and difficult-to-defend attack surfaces have been demonstrated.16 In this way, Chinese LiDAR deployment presents risks similar to those of Chinese juggernauts Huawei and DJI.

Finally, there is the dependence question. Amidst heightened great power competition, U.S. critical and security systems simply cannot depend on Chinese components.17

Strategic Responses

Individual Chinese LiDAR companies are part of a broader Chinese industrial policy agenda. LiDAR itself is just one technology within a broader Chinese Internet-of-Everything ambition. A strategic response is needed. The U.S. government needs to play both defense and offense to compete.

The defensive effort should begin with protecting U.S. research and development. As with commercial drones, LiDAR is a story of U.S.-origin technology being harvested by China’s tech machine and scaled with non-market support. Trade protections and intellectual property theft recourse are necessary to defend against such measures. The United States Trade Representative (USTR) should launch a Section 301 investigation of China’s non-market trade practices across the Internet-of-Everything ecosystem. Ultimately, tariffs should be considered for components (like compound semiconductors used in LiDAR) to finished LiDAR, camera, and related products. In concert, U.S. capital and technology should be prohibited from supporting the Chinese Internet-of-Everything players in Beijing’s surveillance program, including those complicit in the genocide of the Uyghur ethnic minority. Those restrictions should be executed across entire sectors, rather than dealing in entity-specific bans.

But those are just first steps: The power of the U.S. market should be leveraged to support American and allied solutions. This should include prohibiting the acquisition of Chinese-made technologies that present security risks and provide support to military- and surveillance-tied actors. Similarly, the Department of Commerce’s Entity List designations should include every Chinese LiDAR company. The U.S. government should also consider designations of Chinese military-linked actors managed by the Departments of Treasury and Defense.18 Such actions would broadcast the risks of PRC players and dependence on them in both interagency and private sector fora. Addressing Chinese industrial policy as codified in the National Defense Authorization Act’s Section 1260H, the United States can better address the wider threat.

However, an effective strategy needs more than U.S. government restrictions. The U.S. capital market needs to recognize the fiduciary risks associated with Chinese Internet-of-Everything players. These companies carry human rights and security concerns that fly in the face of Environmental, Social, and Governance investment standards. Indeed, these PRC companies’ operations are vulnerable to U.S. regulatory risk. However, they are also subject to the Chinese Communist Party’s “techlash” and restrictions on “important data” and the far reach of the PRC’s data localization and National Intelligence legal regimes.19 Those are the factors that prompted the abrupt de-listing of Chinese ride-hailing giant Didi from the New York Stock Exchange in 2022, causing U.S. investors to lose billions of dollars. The same factors could at any point impact the status of Chinese LiDAR companies traded on U.S. exchanges. Any corporate boards, underwriters, or exchanges that overlook this risk in bringing new IPOs to the market are willingly exposing themselves to shareholder litigation and competitive risks.

Working with Chinese companies could also negatively impact U.S. supply chains dependent on those companies. U.S. players — whether in autos or critical infrastructure — must address their own procurement processes to pursue trusted solutions over Chinese offerings. Otherwise, China’s vision for an Internet-of-Everything world operating according to Chinese rules will be one step closer to reality. Should that happen, U.S. security and international norms will suffer. U.S. supply chains and commercial advantage will suffer, too, and likely first.

If a strategic approach to competing — and protecting American markets and values — is pursued by regulatory actors, then the winner of the autonomous car race in the United States, for example, will be the one that establishes a trusted supply chain. The corporate boards, underwriters, and exchanges that address the risks of doing business with Beijing-tied partners will better be positioned to win.