You know what the Chinese government does really well? Spy.

Last year, a human rights group reported that the Chinese government had set up 100 secret “police stations”—seven of them in the U.S.—to spy on Chinese nationals. At the recently concluded G20 summit in New Delhi, the Chinese delegation refused to put some strangely shaped luggage through the hotel scanner. A hotel employee later reported that he saw “suspicious equipment” in one of the open suitcases. And just a few weeks ago, The Wall Street Journal reported that Chinese nationals, posing as tourists, have made some 100 attempts to gain access to U.S. military bases in recent years—including into a missile range in New Mexico. Chinese scuba divers have also been spotted swimming near a rocket launch site in Florida. Military investigators call them “gate-crashers.”

There is a second kind of spying that relies on technology instead of people. Earlier this year, a Chinese surveillance balloon was sighted traveling across the United States. Huawei, the giant Chinese telecommunications company that has close ties to the military, has long been suspected of creating a “backdoor” in its routers and other equipment, allowing it to scoop up information from U.S. users that can be sent back to China. In 2020, the U.S. Justice Department charged Huawei with conspiracy to steal trade secrets. (Huawei has denied that its equipment has been used to spy on the West.) And of course there’s TikTok, which is owned by a Chinese company, and which many U.S. officials are convinced is used to collect data on Americans.

Now comes the latest threat—a technology, soon to be ubiquitous, called LIDAR. 

LIDAR stands for Light Detection and Ranging, and it’s essentially a system of complex sensors that can, for instance, serve as the “eyes” for a self-driving vehicle. Indeed, even cars that are only semiautonomous have a LIDAR system to guide them. That is the primary way LIDAR is used today, but it is hardly its only application. It’s also a mapping technology, an aid to the growing number of “smart cities,” a tool for robotics, farming, meteorology, you name it. 

As recently as 2018, most LIDAR systems sold in the U.S. were made by American companies. Today? The leading manufacturer is a company called Hesai. And though it has a Silicon Valley office, it is not a Silicon Valley company. It is a Chinese company that is now listed on the U.S. stock exchange.

How dominant is Hesai? The company says that 12 of the top 15 autonomous driving companies are Hesai customers, including Zoox, which is owned by Amazon, and Nuro, which has self-driving cars on the road in Houston, Los Angeles, and San Francisco. In 2022, Hesai sold nearly one out of every two LIDAR systems globally. For the first six months of 2023, Hesai saw a 630 percent increase in the number of units sold, far outpacing all of its American rivals put together. (Neither Google’s Waymo nor Tesla use Hesai’s LIDAR. Waymo makes its own LIDAR sensors, while Elon Musk believes that LIDAR is inferior to the system of cameras Tesla uses to see the road.)

Now, this market is set to get much, much bigger. According to the Yole Group, an international market research and strategy company, total LIDAR revenues are expected to reach nearly $5 billion by 2028, compared to $332 million in 2022. Hesai is well-positioned to capture the lion’s share of that.

This should make Americans very nervous. Why? Because the Chinese government likely sees in Hesai another means to capture information from the West that can be funneled back to China. In a statement earlier this month, Hesai insisted that its LIDAR “does not and cannot independently wirelessly transmit any operational or biometric data or data of any other kind.” But China is a country with a law that requires organizations and citizens to “support, assist, and cooperate with the state intelligence work.” At a minimum, vigilance is required.

Yet vigilance is precisely what appears to be missing, as America increasingly uses Hesai’s LIDAR. This includes the Department of Defense. 

Late last year, the Defense Department awarded a $50 million contract to Kodiak Robotics, a company whose technology powers self-driving trucks—and that uses Hesai’s LIDAR system. These trucks have been deployed on military bases, which means that they have been creating detailed geospatial maps of the bases. Because these LIDAR sensors are networked, they are likely connected to sensitive security and communications systems.

What are the chances the Chinese government would like to have that information? High.

Meanwhile, high-end drones are already using LIDAR as a mapping aid. The Congressional Research Service recently described the potential threat this all poses, stating that “China could use this information to conduct military or industrial espionage or gain operational advantages in a military conflict. [Chinese] firms also could introduce malware via a software update and degrade the performance of systems using the technology.”

And it’s not just a military problem. Imagine if LIDAR becomes an integral part of the power grid, or manufacturing plants, or various kinds of American infrastructure—something that is quite likely within the next decade or so. 

So why are companies willing to buy Hesai’s sensors? The answer is the same one that has allowed Chinese companies to take over solar panels, 5G, and drones. The product is good—but more importantly, less expensive than American-made LIDAR. It’s good partly because Hesai has stolen other companies’ intellectual property, just as many other Chinese companies have done over the decades. Hesai has called this allegation “baseless,” but in 2021, it settled a patent infringement suit filed by American competitor Velodyne for $20 million, plus royalty payments that will continue until 2030. 

It’s cheap because Hesai is selling its LIDAR systems below its own cost—something it can afford to do because, like many cutting-edge Chinese technology companies, it has the strong backing of China’s Communist Party. Congress recently expressed fears that Chinese LIDAR companies have flooded the U.S. market with “heavily subsidized” products, and that many of these companies are receiving research support and considerable government funding.

There are voices in the U.S. government who are warning about LIDAR’s potential threat, but they are few and far between. North Carolina Senator Ted Budd, a Republican, sent a letter earlier this summer to Dr. Laura D. Taylor-Kale, the Assistant Secretary of Defense for Industrial Base Policy, raising the national security risks that would come with relying on Chinese LIDAR. (The Pentagon did not respond to several emails from The Free Press.)

And Congress is adding a provision to next year’s defense budget expressing concern about “the proliferation of Chinese technology in the United States that gathers critical information on U.S. geography, vehicle traffic, human patterns, and behaviors,” specifically naming LIDAR. It points out that LIDAR is used to surveil America’s critical infrastructure, including terminals and airports, and that the sensors facilitate the gathering of “enormous amounts of information.” 

These developments are positive. And yet after years of highlighting the dangers of becoming dependent on China’s technology, why are we watching the same patterns unfold? It is simply not enough to express concern. The government needs to act to protect America’s commercial and national security interests.

America today is beholden to Chinese companies for antibiotics, lithium batteries, 5G equipment, and more. Allowing a Chinese company to take control of the LIDAR market would be economically foolish—and likely very dangerous.

Nadia Schadlow is a Senior Fellow at the Hudson Institute and was a Deputy National Security Advisor for Strategy in 2017 and 2018. Read Geoffrey Cain’s Free Press piece about How China Got Our Nation’s Kids Hooked on ‘Digital Fentanyl.’

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