The U.S. government’s decision to ban the use of Chinese technology in connected cars, citing security threats, has been expanding concerns among Korean automakers. Connected cars are one of the keywords of future mobility. They are a kind of smart car that exchanges information with its surroundings through a wireless network and supports navigation and autonomous driving.
According to the U.S. Department of Commerce’s Federal Register on May 7, the Korean government submitted a letter of opinions on April 30 that started by saying, “We understand the U.S. government’s intention to cope with security risks.” But it requested a more precise definition of connected cars in the future because the definition and scope of the connected cars are too broad and may cover all kinds of vehicles.
In February, U.S. President Joe Biden ordered the Department of Commerce to investigate the security risks of connected cars using technology from foreign entities of concern, including China. Biden named six countries — China, Russia, North Korea, Iran, Cuba, and Venezuela –- as foreign entities of concern. But only China has the capacity to export cars to the United States. The U.S. Department of Commerce subsequently announced in the Federal Register in March that it was considering banning transactions with companies that develop, manufacture, or supply information and communication technologies and services (ICTS) for connected vehicles if they have ties to foreign entities of concern. This will prohibit the sale of connected cars loaded with Chinese technology in the United States.
The U.S. move to rein in China is similar to a graphite scandal in electric vehicles. When the U.S. government released the detailed rules of the Inflation Reduction Act (IRA) in December 2023, it included most Chinese companies in its list of the foreign entities of concern, raising concerns that electric vehicles with batteries made from Chinese graphite would not be eligible for U.S. subsidies. On April 4, the U.S. Treasury Department announced that it will take issue with sourcing graphite from foreign entities of concern until the end of 2026. This was good news for Korean and other global electric vehicle and battery companies that consistently told the U.S. government that it was difficult to produce cathode materials, a core material for batteries, without Chinese graphite.
The Korean government and Korean industry have been resistant to U.S. regulations of connected vehicle technology. The U.S. Department of Commerce’s definition of a connected car as “a vehicle that integrates hardware and software to communicate with other networks or devices through wireless connections such as local area, cellular, or satellite communications” falls short of fully explaining the scope of information and communication technologies and services.
Apart from the Korean government, Hyundai Motor Group and the Korea Automobile & Mobility Association (KAMA) also expressed their views that the Commerce Department’s regulation targets were too broad. Hyundai and the KAMA recommended to the U.S. Commerce Department on April 29 that the scope of ICTSs should be limited to hardware that enables remote access and control from the outside and software that operates the hardware. This means that the scope of the Commerce Department’s regulations should be limited. “Components such as wires, LED displays, brackets, and bolts have nothing to do with security risks,” said a Hyundai Motor official. “Hardware that does not allow remote access should be excluded from the definition.”
Experts also pointed out that there is too much uncertainty in the U.S. government’s regulation. “The communication modules for connected cars produced by Korean companies are not highly dependent on China, but the scope of the regulation is important,” said Lee Ho-keun, a professor at Daedeok University’s Department of Future Automobiles. “With China producing 80 percent of the world’s auto parts, if the U.S. strongly excludes Chinese components, it will inevitably lead to higher vehicle prices and a contraction in the overall auto market.”
Meanwhile, according to sources in the automotive industry and the Korean Intellectual Property Office, a total of 55,034 patents on connected vehicles have been published globally over the past decade from 2011 to 2020. Of these, China topped the list with 19,103, accounting for 34.7 percent of the total. The United States followed China with 12,831 patents or 23.3 percent. Japan took third place with 20.8 percent, followed by Korea (8.6 percent) and Germany (4.6 percent).