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Select Committee Urges Scrutiny of Chinese Tech Firm Quectel

Select Committee Urges Scrutiny of Chinese Tech Firm Quectel

The Lede: The House Select Committee on the CCP published a letter on Thursday that asks the Biden administration to restrict U.S. investment in the Shanghai-based tech company Quectel Wireless Solutions. The lawmakers cited risks from its contributions to China’s defense industries along with the presence of its products in smart devices inside the U.S. as the company gains market share in the smart device and Internet of Things (IoT) industries.  

What We Know:

  • The letter was released on Thursday and signed by Republican Representative and committee chairman Mike Gallagher and Democratic Representative and ranking member of the party in the committee Raja Krishnamoorthi and addressed to Treasury Secretary Janet Yellen and Defence Secretary Lloyd Austin.
  • The Select Committee’s members cited links of Quectel’s technology to Beidou, a navigation satellite system that is used by the Chinese military, as well as telecom giant Huawei Technologies, which has been banned by the U.S. since 2022. 
  • The company’s president Norbert Murer pushed back on the ‘false accusations’ and said that there was ‘no basis to add Quectel to any U.S. government restricted list’ as its products are ‘designed only for civil use cases.’ 

The Background: The Internet of Things (IoT) refers to the infrastructure of physical objects like vehicles, entertainment systems, payment devices, and appliances that communicate with computing systems using sensors and other wireless technologies over the internet. In 2021, the Biden administration listed 59 companies as ineligible for American investment under executive order due to alleged links to the Chinese military. This letter from the Select Committee follows a request in September 2023 from Federal Communications Commission (FCC) Chairwoman Jessica Rosenworcel to the Pentagon to consider declaring Quectel as a risk to national security with claims that the company’s modules could track and sabotage internet-connected devices.

Likely Outcomes:

  • The Biden administration is likely to investigate Quectel following this recommendation by the Select Committee and may decide to add it to the blacklisted Chinese companies given the security concerns. The Select Committee will likely continue to look into other sectors that may have dual-use civil and military applications. This will probably contribute to the ongoing friction between U.S. and Chinese trade, finance, and economic ties against the backdrop of the competition between superpowers. 
  • If Quectel's products are subsequently curbed from use in the U.S., there would have to be an alternative supplier for the IoT technologies that Quectel currently provides. This would likely raise prices for the such products if alternatives are available and could necessitate shoring up capacities where they are lacking as the supply chains shift. Severing ties here would contribute to the divergence of the technological ecosystems of China and the West. Aside from the military, this may well be felt by the American public as it affects consumer electronics and other civilian-use products that include internet-connective functions and features, which have become widely applied to a broad range of household items in recent years.  

Quotables:

"Connectivity modules are used in a wide variety of devices throughout the U.S., from consumer ‘smart devices’, to electric cars, to U.S. telecom networks regulated by the FCC. Serving as the link between the device and the internet, these modules have the capacity both to brick the device and to access the data flowing from the device to the web server that runs each device. As a result, if the CCP can control the module, it may be able to effectively exfiltrate data or shut down the IoT device. This raises particularly grave concerns in the context of critical infrastructure and any type of sensitive data." – Mike Gallagher and Raja Krishnamoorthi, leaders of the Select Committee on the Chinese Communist Party

Good Reads:

US Leaders Seek to Blacklist China’s Quectel on Military Ties (Bloomberg)

Letter to Treasury and Defense Secretaries on 'Chinese Military Company' Quectel (Select Committee)

Gallagher, Krishnamoorthi Write to FCC on Potential Risk of Chinese Internet Connectivity Modules Sabotaging Americans' Devices (Select Committee)

US lawmakers ask Joe Biden administration to bar investments in Chinese tech firm Quectel (SCMP)