Robots are taking over factory floors, autonomous vehicles are navigating the streets of Las Vegas, and even robotic dogs are stepping in as companions. This physical artificial intelligence revolution hinges on high-tech, low-cost lidar sensors, the crucial components that enable these technologies to perceive their surroundings. At the forefront of this burgeoning industry is Hesai Technology, a Shanghai-based lidar manufacturer that found itself on the U.S. Department of Defense’s blacklist in 2024 as a national security threat, designated a “Chinese military company.”
While this designation prevents Hesai from securing Pentagon contracts, it doesn’t outlaw the use of its products in non-military applications. This distinction has allowed Hesai’s technology to continue its expansion into U.S. commercial sectors, a development that has raised significant concerns among government officials and security experts. They warn that integrating Chinese lidar into critical U.S. infrastructure could create vulnerabilities to cyber threats, potentially providing Beijing with a backdoor to sensitive data.
Hesai’s co-founder and CEO, David Li, strongly refutes these allegations, calling the narrative of his company posing a threat “fiction.” In his first extensive interview addressing the blacklist, Li defended Hesai against claims that its technology jeopardizes national security or facilitates data collection by the Chinese government. “In the DOD case, I don’t feel there is sufficient evidence, and it’s not logical,” Li stated, expressing his company’s frustration.
Despite the federal scrutiny, Hesai’s market penetration is widening. An expanded partnership with Nvidia will see Hesai sensors offered as an option for automakers integrating with Nvidia’s autonomous vehicle platforms. This collaboration is a testament to Nvidia CEO Jensen Huang’s vision of an all-autonomous future for transportation, with robotics, including self-driving cars, being a key growth area for the chip giant. Nvidia’s latest fiscal year filing highlighted a 39% surge in automotive revenue, underscoring the accelerating adoption of its autonomous driving solutions.
Hesai is a significant player in the global autonomous technology ecosystem, with its sensors integrated into systems from Amazon’s Zoox, autonomous trucking firms like Waabi and Kodiak, autonomous vehicle technology company Nuro, and agricultural automation firm Agtonomy. Beyond the automotive sector, Hesai’s lidar is employed at New York’s JFK Airport for traffic monitoring and even in autonomous lawn mowers.
However, the widespread adoption of these sensors is not without its detractors. Craig Singleton, a senior director at the Foundation for Defense of Democracies, a think tank critical of the Chinese government, has extensively researched the potential security risks associated with foreign-made sensors. His findings indicate that lidar sensors, as they become more integrated into U.S. systems, could “enable Beijing to access sensitive U.S. data or disrupt critical operations.”
Lidar, or “light detection and ranging,” functions by emitting laser pulses and measuring their return time to construct a detailed 3D map of the environment. Singleton argues that as Chinese lidar sensors proliferate, they will inevitably approach sensitive defense nodes and utility grids. “That data is so sensitive and it’s so precise that it could be weaponized by a hostile foreign power if they ever wanted to target our infrastructure,” he warned.
These concerns are amplified by broader anxieties about Chinese government oversight and its potential access to data collected by Chinese companies. Hesai itself acknowledges in its SEC filings the “risk of Chinese government intervention or control” and that the Chinese government “may influence or intervene in our operations at any time.” Singleton believes this could legally compel Hesai to share data collected by its lidar sensors with the Chinese government, stating, “Whether they want to transmit that information or not isn’t a question, it’s mandated by law.”
Li counters that Hesai’s sensors lack the memory to store data, and that the responsibility for data security rests with their partners, over whom Hesai has no control. He also dismisses the possibility of Chinese government access to data through the company. Nevertheless, Singleton contends that the rapid deployment of autonomous systems is outpacing the scrutiny of potential security risks, characterizing it as “a tale as old as time with Chinese tech.”
This situation echoes past instances where U.S. companies embraced low-cost Chinese technology, only to face costly “rip and replace” mandates later due to national security concerns. The telecommunications giant Huawei, blacklisted in 2021, serves as a prime example. Despite its designation as a national security threat by the FCC, its products remained in use until a significant FCC ruling forced their removal. Similarly, drone maker DJI and router manufacturer TP-Link, both blacklisted by the Pentagon, faced FCC bans on selling new products in the U.S. due to national security risks. While Hesai’s commercial sales remain permissible, the historical pattern raises a red flag.
Academic research further highlights potential vulnerabilities. Miroslav Pajic, a professor at Duke University studying lidar sensor vulnerabilities, notes that “it’s easy to physically spoof lidar.” He explains that malware can be inserted during manufacturing or via firmware updates, remaining dormant until triggered. Pajic demonstrated a simulated attack where a lidar sensor generated a phantom person, or conversely, could be manipulated to omit real objects, potentially leading to a failure to detect pedestrians or obstacles.
While Li suggests such lab scenarios can be engineered, the risk of malfunction is not purely theoretical. Michael Robbins, CEO of the Association for Uncrewed Vehicle Systems International, cited an incident in 2024 where a Hesai firmware update, due to an oversight regarding leap years, caused all Hesai lidar sensors to cease functioning on February 29th. “In that case it was by error, but that could also be done intentionally,” Robbins warned, envisioning a scenario where “every lidar in use in the United States could be turned off, or it could be used against us in a nefarious way.”
Li attributed the leap year incident to a coding bug, not malware, and stressed that Hesai makes its firmware open source for public scrutiny. The company also stated the issue was resolved within 24 hours. He further pointed out that autonomous systems rely on multiple sensor types, including cameras and radar, which can compensate for lidar failures. Hesai’s sensors have also reportedly met the rigorous standards set by independent third-party testing and validation firms.
Hesai, publicly traded on both the Nasdaq and the Hong Kong Stock Exchange, commands a substantial one-third share of the global automotive lidar market, a sector projected to reach $300 billion to $400 billion by 2035. Despite its growing U.S. presence, Hesai’s partners have offered limited comment on their relationships. Nvidia provided a general statement about its open, vendor-agnostic architecture, while Kodiak stated that Hesai has no access to its data. Waabi declined to comment on specific hardware but emphasized its rigorous data security protocols. Agtonomy, Nuro, and Zoox did not respond to requests for comment.
Hesai’s aggressive market expansion is significantly driven by its competitive pricing. The company claims to have reduced lidar unit costs from over $10,000 to less than $200, a stark contrast to U.S. competitors. Analysts note that Chinese firms like Hesai are dominating the market due to cost, scale, and government support, while Western players face higher costs and slower adoption. Hesai attributes its mass production capability to innovation and manufacturing expertise.
Critics, however, attribute Hesai’s low prices to substantial, unfair state subsidies. Singleton asserts that these subsidies allow Chinese lidar companies to scale production and control the market. Li denies receiving government support, arguing that such assumptions are made without evidence. Hesai’s SEC filings do reveal receipt of Chinese government subsidies, preferential tax rates, borrowing rates, and R&D cost deductions. The company maintains these incentives are standard industry practice globally to stimulate innovation and are broadly available. Importantly, Hesai states that no government organization holds an equity stake in the company.
The core of Hesai’s legal dispute with the Pentagon lies in its alleged contribution to China’s military-civil fusion strategy. The Pentagon asserts Hesai is an integral part of this ecosystem, citing Hesai’s Shanghai headquarters location in a district associated with such initiatives, and supplier relationships with China Electronics Technology Group Corporation (CETC), a state-owned defense conglomerate. Hesai counters that the military-civil fusion zone is not clearly defined and that its purchased components have no military application. The company maintains its sensors are solely for commercial use and that its agreements prohibit military applications, though acknowledges physical control over deployed sensors is impossible. Hesai lost its lawsuit against the Defense Department and is currently appealing.
Further scrutiny has come from international policy groups. A white paper from the Prague Security Studies Institute highlighted Hesai lidar appearing on a military vehicle in a 2023 Chinese military television program related to unmanned systems. Li confirmed the presence of Hesai technology but stated the company did not supply the sensor for the competition, suggesting it may have been acquired through the aftermarket.
On Capitol Hill, lawmakers are voicing alarm. U.S. Rep. John Moolenaar, chairman of the House Select Committee on the Chinese Communist Party, highlighted concerns about cybersecurity and national security risks posed by Chinese lidar. The committee has proposed legislation to phase out Chinese-made lidar and has introduced separate legislation to ban Chinese vehicles from U.S. roads. Moolenaar remains skeptical of assurances regarding data transmission, citing known “back doors” in Chinese technology. He also noted that current laws do not prohibit blacklisted Chinese companies from U.S. stock exchanges or prevent American investment, suggesting a lag between technological advancement and legislative oversight.
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