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Key Takeaways

Western governments are increasingly aware of the Chinese Communist Party’s (CCP) control over critical technologies, especially cellular IoT modules (CIMs).
China currently dominates approximately 69% of the global CIM market, raising significant concerns about reliance on these devices for essential services and infrastructure.
Without intervention, the dependency on Chinese CIMs could lead to vulnerabilities in national security and critical infrastructure through potential data theft and sabotage.

The Rise of CIM Dependency

Governments in liberal democracies have begun to recognize the risks associated with the Chinese Communist Party’s (CCP) control over rare earth minerals, essential for military, electronics, and clean energy applications. However, an equally pressing issue remains largely unaddressed: dependence on cellular IoT modules (CIMs). These modules, comparable in size to a thick credit card, contain processors and antennas that connect devices to the internet, crucial for the functionality of modern products ranging from vehicles to agricultural machinery.

By 2029, projections indicate that CIM connections will exceed 6.4 billion. In automotive technology, for example, CIMs enable critical features like obstacle detection and real-time data transmission. Yet, approximately 69% of global CIM shipments originate from China, which aims to monopolize this industry. This reliance poses a threat greater than that posed by rare earths, as the CCP could leverage its position to exert pressure on Western nations regarding policies or security concerns.

Moreover, CIMs require regular firmware updates, heightening U.S. government fears over vulnerabilities in systems like connected vehicles or payment terminals. Without proper oversight, malicious updates could introduce malware that the CCP could activate in times of geopolitical tension, potentially crippling essential infrastructure, such as power grids and financial systems. Reports indicate past data breaches, including sensitive information transmitted from a government vehicle connected to the UK Prime Minister.

Although growing awareness of this ‘rare earths 2.0’ threat is evident—demonstrated by the U.S. designation of Quectel, a major CIM producer, as a military firm—the response has been slow. Chinese companies are attempting to circumvent restrictions by establishing U.S. or European joint ventures, maintaining control over their technologies and firmware updates. The predicament mirrors past experiences with platforms like TikTok, where foreign access to foundational technology remains ungranted.

Fortunately, non-Chinese CIM manufacturers can scale production to reduce dependency on Chinese sources. However, for this shift to happen, governments must proactively exclude Chinese CIMs from their systems, allowing trusted firms to thrive without the threat of being undercut by heavily subsidized competitors. If steps are not taken, the consequences of relying on Chinese CIMs may mirror the dangers posed by rare earths, serving as a cautionary lesson in the ongoing struggle for technological sovereignty.

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