China’s Hikvision Tries a Makeover out of Spy Tech. It Will Cost

China’s Hikvision Tries a Makeover out of Spy Tech. It Will Cost


Smile, you’re near Hikvision’s headquarters.

Photographer: Visual China Group/Getty

With their hands tied by the U.S. war on Beijing’s big tech ambitions, China’s surveillance giants are trying to recreate themselves as something less threatening. Can they? Investors seem to think so, but it will be harder than it seems. 

The stock prices of Hangzhou Hikvision Digital Technology Co. and Zhejiang Dahua Technology Co., which dominate the market for surveillance cameras, are up around 25% over the past six months. Investors haven’t been fazed by the Trump administration’s attempts to shut them out of procurement by U.S. government agencies. Nor by the fact that a significant number of components have been effectively cut off by U.S. restrictions on suppliers. 

In June, the Pentagon put out a list of 20 companies that it says are owned, controlled by, or affiliated with the Chinese military, government or defense industry. On it are the likes of Hikvision and Huawei Technologies Co. A month earlier, the Commerce Department added two dozen Chinese companies to its entity list that restricts export, re-export, or in-country transfer of items subject to the firms. Last year, Washington put eight Chinese businesses, including Hikvision and Dahua, on a blacklist that accused them of being implicated in human rights violations against Muslim minorities in Xinjiang. Hikvision has denied inappropriate actions.  

The risk looms of the net widening further, whether Donald Trump remains U.S. president or not. The companies are trying to steer clear. Hikvision’s management said recently, “We are no longer just about security and we will continue to evolve and define ourselves.” That was a first, Sanford C. Bernstein & Co. analysts noted. But Hikvision’s 24% global market share has become a trap. The company is stockpiling parts at almost almost three times standard inventory levels because of restrictions on Shenzhen-based HiSilicon Technologies Co., which supplies almost 70% of the chip sets used in surveillance cameras made by Dahua and Hikvision, according to CLSA Ltd. analysts. 

There are, in theory, alternatives for the parts curbed due to the U.S.–China tech spat.  Small, unlisted companies like China’s Unisoc (Shanghai) Technologies Co. and Sigmastar Technology Corp. could step in, but that will take time. Hikvision said last year that it has a plan to fully replace American parts in its products.

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