Artificial intelligence (AI) education in K–12 schools is a global initiative, yet planning and executing AI education is challenging. The major frameworks are focused on identifying content and technical knowledge (AI literacy). Most of the current definitions of AI literacy for a non-technical audience are developed from an engineering perspective and may not be appropriate for K–12 education. Teacher perspectives are essential to making sense of this initiative. Literacy is about knowing (knowledge, what skills); competency is about applying the knowledge in a beneficial way (confidence, how well). They are strongly related. This study goes beyond knowledge (AI literacy), and its two main goals are to (i) define AI literacy and competency by adding the aspects of confidence and self-reflective mindsets, and (ii) propose a more comprehensive framework for K–12 AI education. These definitions are needed for this emerging and disruptive technology (e.g., ChatGPT and Sora, generative AI). We used the definitions and the basic curriculum design approaches as the analytical framework and teacher perspectives. Participants included 30 experienced AI teachers from 15 middle schools. We employed an iterative co-design cycle to discuss and revise the framework throughout four cycles. The definition of AI competency has five abilities that take confidence into account, and the proposed framework comprises five key components: technology, impact, ethics, collaboration, and self-reflection. We also identify five effective learning experiences to foster abilities and confidences, and suggest five future research directions: prompt engineering, data literacy, algorithmic literacy, self-reflective mindset, and empirical research.