Subscriber Discussion

Hikvision Play The Long Game

UI
Undisclosed Integrator #1
Sep 21, 2018

The issue is that the real story is Trump's imposition of tariffs in an attempt to "make the  US great again" and discredit/punish/bully trading partners. China is bearing the brunt of this and Hik are part of that equation. With Trump off the scene, a new administration would seek to repair the colossal international damage caused. The issue for Hik is how to sail around this - do they seek a short-term solution or do they play the long game? 

For my money, I'd say Hik will play the long game and wait until Trump is no longer. They have deep pockets and a strong worldwide market. They will ride the storm with damage limitation and accept that the US is a short-term problem. A new administration will be seeking to rebuilt relationships and create new jobs and wealth, without raising the climate of fear and hate as Trump has done. Hik will then engage and build manufacturing and R&D facilities in targeted areas in the US in return for the relaxing of sanctions, bills etc. at the same time as partnering/acquiring a domestically respected (US) IT partner.

Time will tell....but in the same way as the UK acquisition of Pyronix in the UK surprised a lot of people, their vision was clear. I see something happening similar in the US - once Trump is taken out of the reckoning.

NOTICE: This comment was moved from an existing discussion: Hikvision USA Starts Layoffs

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JH
John Honovich
Sep 21, 2018
IPVM

I made the comment its own post because I think it is a good point and worth discussing.

I do think that is a reasonable approach, especially since obviously Trump has significant strong detractors within the US.

A few questions / concerns:

  • Will the US really shift policies post Trump? Of the many things that Trump fights with Democrats on, one thing that has broad support is China. A new administration (R or D) might shift but it's not guaranteed.
  • What does Hikvision do in the meantime? If they really cut back staff in the US over the next few years, that would further reduce their momentum and make it harder to come back later. If they do not, they could burn tens of millions more waiting for a more favorable political environment.
  • Can the PRC/China hold in the meantime? They have their own risks and Hikvision is heavily dependent / exposed to downturns in the Chinese economy. If the trade war or general economic conditions turn, Hikvision could be faced with its own existential fight dealing with their core China business. To be clear, not saying this will certainly happen but it is a risk they face.
UM
Undisclosed Manufacturer #2
Sep 21, 2018

The Hikvision ban came from Congress, not Trump. Those things are not the same thing at all. Nor is it clear that Hikvision will be able to recover the blow to their reputation even after Trump leaves office. I bet I'm not the only competitor saying "do you really want to use a product that has such bad cyber security issues it was banned from being used in any federal job yes that's right but it's cheaper for a reason yeah that's what I thought here sign on the dotted line and we'll get started right away." 

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UI
Undisclosed Integrator #1
Sep 21, 2018

All far comments. We are all intelligent enough to understand there is a significant geopoilitical angle on this that goes far and beyond the "cybersecurity" theme.

I wouldn't expect a seismic shift with any change of adminstration. It takes time to undo the damage and rebuild trading relationships. But Hik can start doing the background work on this, such as scoping out manufacturing facilities and finding a suitable partner. 

I had understood there was significant US input into the IVMS5200 (perhaps California SV?), which if true could become an expanded R&D facility. Costs could be mitigated by the cutting of sales posts until the tide turns back in their favour.

There are many risks for everyone in this. The rediculous situation we're in is that Trump is in the Middle of a balancing act with Russia, China, NK and his own survival. 

China will work through-out, although with a diminishing level of growth. Bear in mind though, with tariffs flying left right and centre because of Trumps incompetance - new trading allegiances wil be formed where you least expect it - and the Chinese have been much more successful at identyfying these opportunities than their competitors.

UM
Undisclosed Manufacturer #2
Sep 21, 2018

The tariffs are just the straw that broke the camel's back. Even if you removed it, you still have a whole hell of a lot of straw loaded on top of your poor camel. 

This is not a Trump thing. Hikvision likely would have had problems no matter who got elected in 2016. 

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UI
Undisclosed Integrator #1
Sep 21, 2018

Spoken as Trump supporter no doubt. I can't accept that its "coincidental" I'm afraid.

The folly of the tariffs is not just my opinion....Trade Works. Tariffs Don't.

It's accepted by everyone that Hiks cyber weaknesses were worse in the past (pre-Trump) and yet Congress wasn't interested. 

Has cybersecurity just been invented? Errr...no. So even though everyone was aware of it - nothing was done. As soon as trade tariffs are thought of, congressional bills appear - the US has found a new enemy and made a new friend in Putin. And this has nothing to do with Trump?

 

JH
John Honovich
Sep 21, 2018
IPVM

The folly of the tariffs is not just my opinion....Trade Works. Tariffs Don't.

Could you let Xi Jinping know that? The PRC is a master at protectionism and mercantilism. What works best is when one country blocks out others but the other countries let that county still trade into them. China.

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Avatar
John Bazyk
Sep 21, 2018
Command Corporation • IPVMU Certified

I think Hikvisions issues have more to do with the ban than with tariffs. The reality is, even with a 10-25% increase in Hikvision products their pricing is still going to be less than most manufacturers. The ban is what will kill them. Now that it's banned will it ever be unbanned? Ask the gun industry how easy it is to unban something. It doesn't just happen even with deep pockets. I don't think Hikvision can play the long game here. Consumers and businesses simply aren't that passionate about surveillance cameras. Even with the massive support for things like guns and marijuana it takes decades to realize a change in policy for or against. I could be way off here. If I was hikvision I would seriously pullback in the US market and focus on other markets around the world, keep a presence here for sure. But not have it be the focus any longer. The world is a big place.

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Avatar
Campbell Chang
Sep 24, 2018

Consumers and businesses simply aren't that passionate about surveillance cameras

This is the thing right?  I've said it many times before, but outside of sensitive and government sites, who is going to care?  There's still thousands of jobs out there which aren't those aforementioned sites who will require cameras.  And a significant chunk of them will probably have the attitude of "China can stare at my driveway/carpark/office cubicle etc if they want to, there's nothing interesting there"

I have no idea about how much of this market Hikvision actually had, here in AU it's pretty minimal and I can't imagine that Hik or Dahua had a huge share of that market prior to the ban.

Huawei and ZTE are banned from a lot of major comms projects.  That doesn't stop people buying their phones and networking gear.  I just can't see this ban being SUPER detrimental to them.

 

 

 

JH
John Honovich
Sep 24, 2018
IPVM

I've said it many times before, but outside of sensitive and government sites, who is going to care? 

Campbell, we are seeing a third tier in the middle. These are users like hospitals or schools or other sizeable but not strictly governmental organizations. They often have government regulations and government funding. Many of these (not sure if it will be a third or a half, etc) are rejecting Hikua because of security concerns and general anxiety about the future of Hikua.

That creates a problem for mid-size integrators. If even 1 out of every 5 customers flat refuses a brand, it disincentives an integrator from carrying or at least not promoting it unless they are sure the customer cares far more about price.

So, yes, I agree that residential and SMB will overwhelmingly be safe but the mid-tier, which is quite substantial, in itself, is indirectly but significantly impacted.

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UI
Undisclosed Integrator #1
Sep 21, 2018

I respect your view and comment but don't entirely agree with it. The ban is a blunt instrument that is being used in conjunction with the tariffs - but they amount to the same - making sales of Chinese goods (incl. HIK) as difficult as possible in the US.

Banning can be circumvented easily, through acquisition. They can remain Hik elsewhere and simply acquire a US partner, use some local R&D, post-manufacturer assembling and tech support. 

 

UM
Undisclosed Manufacturer #2
Sep 21, 2018

Tariffs are a blunt instrument, but the banning of a manufacturer identified by name is a sniper's bullet through the heart. 

Yes, tariffs are designed to make it as difficult as possible for Chinese companies to do business. They are probably there to put pressure on the Chinese government to make them more amenable in negotiations, and are thus subject to change if Trump or a future President wants to reward the Chinese government for giving some kind of concession. 

They were also put in place by executive order, and can be withdrawn by executive order. Trump has the legal power to enact them and has the legal power to modify or repeal them. And so does any future President. If Sean Nelson gets elected President in 2020 (he's smarter and more charismatic than any of the likely Democratic or Republican candidates, so it could happen), he could easily repeal the tariffs.  

The Hikvision ban, in contrast, was create by an act of Congress, and cannot be repealed without an act of Congress. Those take a long time to enact, and must be reviewed and voted on. They also take political capital to pull off, and political capital is a finite resource. You would need to lobby a Representative to sponsor the proposal (preferably more than one, and preferably using a bipartisan group of Representatives), and then hope that the act (or the bill the act gets attached to) gets passed with no changes. Then you have to hope the bill passes the Senate. 

I don't think you understand just how serious, binding, and permanent the Hikvision federal ban is. 

Yes, they could follow your very expensive "acquire a US partner, use some local R&D, and move post manufacturer assembly and tech support to the US" plan. But that would take, what? Three years? And even then, there's no guarantee that it would help them recover their reputation, or that they could afford to continue charging McDonald's Dollar Menu prices for their cameras. 

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UI
Undisclosed Integrator #3
Sep 21, 2018

Personally I think the name 'HikVision' is going to die out in the US and China is just going to shift resources into a new company without all the baggage. Seems like the simplest and most cost efficient solution. 

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JH
John Honovich
Sep 21, 2018
IPVM

Banning can be circumvented easily, through acquisition. They can remain Hik elsewhere and simply acquire a US partner,

Point of fact, no because the ban includes any subsidiary or affiliate:

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UI
Undisclosed Integrator #4
Sep 24, 2018

So sorry but this is America and who are you to say who will be elected next?

UI
Undisclosed Integrator #1
Sep 24, 2018

Sorry, thats Putins decision, I forgot.

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Avatar
Dennis Raefield
Oct 02, 2018
Security Integration, inc.

Colossal international damage?  You mean like a new Canadian and Mexican agreement that balances trade?  You mean re-balancing the EU tilted trade agreements?

While Trump may not get reelected, I think what he is doing on trade (I don't support his other BS and attitude), is regaining our equality on foreign trade.

I lived and worked in Canada and saw the free flow of goods into the US from Canada, but huge protectionism when things went the other way. An $8.00 a bottle of wine from Trader Joe's In Washington State was C$18.00 just across the border in Vancouver!

The Chinese have eliminated almost every US camera manufacturer by dumping, their classic marketing strategy.  Drive everyone else out by paying ultra low wages to farm kids imported into Shenzhen, then cast them away when they ask for more money.

 

The only things that will save us:

1) Chinese citizens have a taste of capitalism and freedom (just a taste) and are demanding living wages.

2) A balanced trade agreement makes a level playing field

3) Intellectual Property protection required to have bilateral trade.

 

We can trash Herr Trump on many issues, but his tough strategy is working on trade.

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UI
Undisclosed Integrator #5
Oct 02, 2018

Couple questions:

Is hikua analog part of the ban?

Does buying hikua from an "Authorized USA" distributor make it "safe" with less potential vulnerabilities?

The reason I ask is 3 reps in my office have met with hik recently and these are the claims they make after their meetings with hik. To be clear I did not hear it myself from the hik mouths, it was from the reps in my office. One of the reps even said only "IP" is banned, not analog....

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JH
John Honovich
Oct 02, 2018
IPVM

Is hikua analog part of the ban?

The ban simply says video surveillance, it does not comment or differentiate between IP or analog. Perhaps Hikvision will lobby to get its HD analog cameras exempted, to be determined.

Does buying hikua from an "Authorized USA" distributor make it "safe" with less potential vulnerabilities?

The ban does not differentiate between where it is bought. Buying from an authorized distributor should ensure not getting a Chinese language firmware version but not even Hikvision claims that non-authorized one are any less 'safe' or vulnerable 'free'.

Hikvision regional salespeople may a lot of claims, often 'unauthorized' by Hikvision management.

 

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