A new analysis from the Foundation for Defense of Democracies (FDD) identifies a significant vulnerability in American critical infrastructure and consumer technology, warning that Chinese dominance in a key hardware sector presents serious national security threats. The report, first obtained by The Hill, focuses on cellular modules—compact components embedded in devices to provide internet connectivity—and finds that two Chinese manufacturers, Quectel and Fibocom, collectively command close to half of the global market.
Espionage and Sabotage Risks
The report argues this market concentration creates dual risks of espionage and potential sabotage. Because manufacturers maintain remote access to these modules to deliver firmware and software updates, they could theoretically be used to deactivate devices or harvest vast quantities of data. These modules are ubiquitous, found in smart home products like doorbells and thermostats, and are integral to operations at ports, hospitals, power grids, and transportation networks.
"If Beijing consolidated control of U.S.-based modules, it could disrupt an American military mobilization in response to a Chinese invasion of Taiwan," wrote FDD's Mark Montgomery and Jack Burnham in the report. "Or, amid a crisis, Beijing could hold Washington hostage by threatening to cause massive economic disruption." The authors note that while these risks remain hypothetical, their potential cumulative impact could be catastrophic.
Links to Chinese Military and Surveillance
The security concerns are amplified by the specific corporate profiles of the dominant firms. The Pentagon has formally designated Quectel as a "Chinese military company" operating within the United States. Previous congressional investigations have alleged the company is part of China's Military-Civil Fusion strategy and maintains links to the BeiDou satellite navigation system, which enhances People's Liberation Army capabilities.
Furthermore, China's national security laws mandate that companies assist state surveillance efforts, theoretically granting Beijing potential access to data flowing through these modules. "The first concern is that cellular modules embedded in Wi-Fi modems could have access to the information that's passing through that modem," Burnham, a senior research analyst at FDD's China Program, told The Hill. That data, once collected, could be accessed by Chinese authorities via the module's persistent connection to its manufacturer.
This issue intersects with broader tensions over technology and security, such as the ongoing challenges to U.S. naval enforcement in strategic waterways and the political backlash against Chinese automotive manufacturing in North America.
No Easy Alternatives
Addressing the threat is complicated by the modules' essential role in modern technology. "Dispensing with cellular modules is not an option," the report states. "They are essential to automation and will be critical to integrating artificial intelligence (AI) into real-world environments." The components are a necessary failsafe in router systems, maintaining 4G or 5G connectivity when primary Wi-Fi networks fail, and are seen as foundational for future industrial and AI applications.
The challenge, therefore, is not elimination but mitigation and market restructuring. "The challenge ahead for the United States is how to stop and reverse the proliferation of Chinese modules," the authors conclude.
Policy Recommendations
The FDD report proposes a three-pronged policy response for U.S. officials:
- Congress should compel the Pentagon to audit its infrastructure to locate and catalog any embedded Chinese cellular modules.
- Congress should ban the Department of Defense from procuring any cellular modules produced by Chinese firms.
- The Federal Communications Commission should add Chinese cellular module manufacturers to its "Covered List," prohibiting their authorization for sale within the United States.
"As Chinese firms aim to consolidate their hold over this critical market, the U.S. government has a limited opening to safeguard defense-critical operations and promote secure supply chains by enacting procurement bans and limiting adversaries' market access," Montgomery and Burnham wrote. This call for action reflects a growing pattern of using national security justifications for economic policy, reminiscent of arguments like those used in the past defense of major White House expenditures. The findings also contribute to the escalating focus on technological threats, following incidents such as the urgent federal response to a restricted AI model over cybersecurity concerns.
