World’s largest surveillance equipment maker Hikvision to be banned from sales to US federal agencies

The world’s largest manufacturer of surveillance equipment, Hikvision, is on its way to being banned from selling its video surveillance and communications equipment to US federal agencies. On August 1st, the US Senate passed the conference report for the 2019 National Defense Authorization Act which includes new provisions on Hikvision, ZTE, and Huawei. The bill is yet to be confirmed by US President Donald Trump.

Hikvision found itself under scrutiny last year when it was discovered that the US Army was using the company’s cameras at a base called Fort Leonard Wood. The army removed the cameras in January but noted that they were removed because “negative perceptions,” not because of any real fear of security risks.

Hikvision has lost $11 billion of market value since the start of China-US trade tensions in March, according to Bloomberg. To fight the slowdown, the company has announced investment in AI technology.

On August 3rd, Hikvision responded to the new bill with a statement saying that it is unlikely to affect its business.

In the US market, the company has never conducted direct business transactions with the federal government agencies described in the bill. The relevant contents of the bill will not have a substantial impact on the company’s business.

However, Hikvision did warn its investors that since some of the provisions of the bill are not clear they may produce broader effects, expanding from the federal government to the non-government sector.

Hikvision’s controlling share of 42% is owned by a Chinese state-owned company. The company’s surveillance cameras can be found across the US with most of its sales conducted through 3rd-party vendors. The General Services Administration (GSA) removed Hikvision’s products from a list of companies automatically approved to sell to federal agencies in November 2017. The company has tried to appease US authorities by opening a transparency center in California in March and offering US agencies to review the source code for their products.

Despite the trade tensions, Hikvision doesn’t seem to be lacking clients, namely governments that want to keep an eye out on their citizens. A report found that China is expected to have 626 million security cameras by 2020, up from 176 million in 2016. Hikvision’s next competitor China-based Dahua is less than a fifth its size.

The US’s new $716 billion defense bill will also put more control over US government contracts with China’s ZTE and Huawei because of national security concerns but the restrictions are weaker than in earlier versions of the bill, Reuters reported.