You're correct. There is no circumstance under which he's compelled to open up his source code. If the hardware system he's selling has some kind of crypto (l

You're correct. There is no circumstance under which he's compelled to open up his source code. If the hardware system he's selling has some kind of crypto (like login passwords that you don't know!) that disallows modifications to the base system, GPLv3 can require you to give up enough control to let the user install their modified grep too. (That's still not giving away your source code, but it is more than just giving out the source code to grep.)