US widens its campaign against Chinese tech companies with eye on surveillance firms
- China’s hi-tech champions are being denied access to US components because of national security concerns
- US fears Chinese surveillance firms’ products can be used to aid espionage, according to media reports
Hikvision Digital Technology’s presence loomed large at a security exposition last month in Hangzhou, taking up the entire upper floor of the convention centre. On the ground floor, Dahua Technology, its smaller rival, shared space with other security technology companies. Luminescent displays of road traffic flows, emergency response statistics and crime reports greeted the hundreds of trade visitors.
The US is now considering cutting off the flow of vital American technology to five Chinese surveillance companies, widening a dragnet beyond Huawei Technologies to include world leaders in video surveillance as it seeks to challenge China’s treatment of minority Uygurs in the country’s west, according to a Bloomberg report on Tuesday.
The US is deliberating whether to add Dahua, Hikvision, Megvii and two other surveillance companies to a blacklist that bars them from US components or software, Bloomberg reported, citing people familiar with the matter. The two others under consideration are Meiya Pico and Iflytek, according to one of the people.
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If the US does place the companies on a trade blacklist, they would join Huawei, the world’s largest telecoms equipment supplier, and other Chinese hi-tech champions that are having their access to US components shut off because they are deemed to pose a threat to US interests.
“The US government is repeatedly using national security as grounds to justify supply chain restrictions, an unreasonable move for Western countries that are supposed to be the stoutest believers in free trade and the market economy,” said Liu Guohong, research director at think tank China Development Institute in Shenzhen. “The US intention can’t be any clearer, and that is to contain China’s rise in advanced technology.”
The US is also said to be concerned that data collected by Chinese-made drones can get into the hands of the Chinese government. Shenzhen-based DJI, the world’s biggest consumer-drone maker, has said it does not transfer data.
In the case of the surveillance companies, the US is concerned that their products can be used to aid espionage, according to media reports. Hikvision has sold products to more than 150 countries and territories globally. The US government banned the procurement of Hikvision and Dahua products by federal agencies last year, citing national security risk.
Hikvision executives told the South China Morning Post privately that they have anticipated the trade restriction given the escalating competition between the US and China.
The only real uncertainty was in the timing and intensity of the backlash, according to these people, who asked not to be named to speak more freely.
“No (Chinese) tech companies are coming out of this (trade war) unscathed, not if you are already No 1 in your industry,” said one Hikvision executive. “The US intention is crystal clear, and that is to contain Chinese hi-tech industries and ensure its own absolute leading position.”
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What started out as a trade dispute, in which Washington unilaterally imposed tariffs and sparked retaliatory levies from Beijing, has escalated to broader campaigns designed to cripple China’s technology champions by cutting off their access to American hi-tech suppliers. The wide reach of US policy means that even non-US companies whose products use American technology may also be prevented from supplying to the Chinese companies.
That US strategy, however, would also hurt the country’s own hi-tech industry because American suppliers are counting on selling their goods in China, where they also collaborate with local firms to pursue further innovation, according to Liu from the China Development Institute.
Sources familiar with US policy thinking said that the Trump administration is determined to pursue a tech war even if the two countries came to a truce on the trade dispute.
Public security is a multibillion-dollar business in China and one of the biggest buyers is the government. The expansion of the domestic video surveillance industry has coincided with the country’s drive for smart cities, or the use of real-time analytics to improve traffic flows, emergency response times and other municipal services.
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Many companies, including internet giants Baidu, Tencent Holdings and Alibaba Group Holding, the parent company of the Post, provide smart city technologies to various markets to help user digitise municipal functions and improve efficiency.
The global video surveillance equipment market grew 10.2 per cent to US$18.5 billion last year, thanks to increased demand for security cameras, according to research firm IHS Markit. It said China’s professional video surveillance equipment market increased 14.7 per cent in 2017, accounting for 44 per cent of the industry’s worldwide revenue that year.
Ma Li, vice-product director in Zhejiang province for Uniview, the No 3 surveillance camera maker, said that while any US ban would be a significant blow, the industry has the practice of having backup suppliers to diversify the risk and not rely on any one channel. Leading players have also started developing their own semiconductors to meet their requirements, Ma said in an interview last month.
“There’ll always be more than one supplier,” Ma said. “We’re like that; others, too.”
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“The rhetoric from China appears to be that of a nation preparing for a long fight,” said Paul Haswell, a partner who advises technology companies at international law firm Pinsent Masons. “Unless matters are resolved quickly, then we could be heading for a trade war of attrition between China and the US.”
