Īs the IoT becomes ever more present throughout society, it amplifies the security risks inherent in connection through the internet, massively expanding the potential for data theft, the compromising of digital systems, and disruption in the physical world.

These transnational IoT ecosystems will account for a growing share of global economic activity, as the internet is increasingly extended to new applications and objects in the physical world. The world will be increasingly populated with internet-connected “cyber-physical” ecosystems, including intelligent vehicles, “smart cities”, and a host of other applications. In 2020, there were an estimated 12 billion “intelligent” devices worldwide connected through the internet. The world is being transformed by the rise of the Internet of Things (IoT). In response, Australia will need to build up its own technological capacities and find innovative ways to manage, rather than avoid, the risks implied by rising digital connections with China. As powerful governments set the “terms of engagement” for participating in transnational technological ecosystems, “technology takers” will be disadvantaged. Exposure through these ecosystems to Chinese actors and therefore Chinese state power will increasingly become the price of access to the wider regional economy, even as US pressure to align against China grows. This is illustrated through case studies of the automotive sector’s transition towards electric and intelligent connected vehicles, and the expansion of “smart city” ecosystems.

And the complex features of these supply chains generate inertia against relocating them to politically trusted jurisdictions (“re-shoring” or “friend-shoring”). The cyber-physical nature of IoT ecosystems reinforces China’s advantages as a global manufacturing hub. But these efforts are unlikely to shift the established trend among East and Southeast Asian countries towards deepening integration with China. Distrust of China and its ever-more pervasive presence in the transnational IoT is driving US efforts to diversify digital technology supply chains away from China, and to limit China’s presence in global digital connections. The security challenges that go with this expansion require confronting the transnational character of these evolving technological ecosystems. The world is being transformed by expansion of the Internet of Things (IoT).

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