US Government Ban of Dahua, Hikvision, Huawei Takes Effect Now

The 'prohibition on use or procurement' of Dahua, Hikvision and Huawei products and 'essential components' take effect today, August 13, 2019, one year after the law was passed.

While the ban is unprecedented in the US industry, China has effectively blocked foreign video surveillance for years as a 'security risk'.

There are 3 critical impacts:

• Branding impact for Dahua and Hikvision
• Disruptive Ban of Hisilicon usage in most camera manufacturers - this will be the most contentious and difficult element of the ban
• Fear from OEMs, distributors, and integrator selling

Branding Impact

This has negatively impacted the brands of both Dahua and Hikvision, whatever one thinks of those companies, the PRC or the USA.

Though the ban only takes effect today, it has already driven down Hikvision US revenue over the past year and caused problems in other overseas markets, Hikvision has admitted:

There is a significant decline. Due to the impact of the US National Defense Authorization Act and the US Department of Commerce’s “physical list” sanctions, concerned that the US revenue has shown a negative growth since the second half of last year, and the company is expanding its mid- to high-end market because of some interference from non-market factors has not made much progress in many countries in a short period of time. [emphasis added]

While Hikvision correctly emphasizes, in its marketing, that they do not sell directly to the US government, the impact remains both for their partners that do and for others who see this as as a disqualifier. In particular, the effect is most significant with larger integrators and end-users with less concern from smaller ones.

Shocking Turnaround

This is a shocking turn of events as just 15 months ago, literally, no one in the industry expressed any concern or thought that Dahua and Hikvision would be US government banned. The ban was unexpectedly included in an amendment to a May 2018 House bill and less than 3 months later was passed into US law.

Moreover, Hikvision, in particular, worked hard to overturn the law, spending millions of dollars in the past 15 months lobbying the US government. And many Hikvision sales representatives told partners that this would be overturned. It has not.

Disruptive Ban of Hisilicon Usage In Most Manufacturers

While the Dahua and Hikvision product ban is simple to understand and track (buyers can simply look for the name/label), the ban of Huawei Hisilicon chip usage will be much more difficult for 3 reasons:

• Huawei Hisilicon is widely used by various video surveillance manufacturers, across China, and outside of China. For example, some have switched to rival China manufacturers TVT or Uniview but most TVT and Uniview products use Huawei Hisilicon chips. Even non-China manufacturers use them, such as Hanwha Techwin, who is in the midst of phasing them out.
• Virtually no manufacturer discloses what chips / System on a Chips (SoCs) they use. The only way to find out is to open up the devices, which is what we do since we have hundreds of unique camera models. Below is an example of Honeywell's Dahua OEMed line that uses Huawei Hisilicon:

• Compounding this, manufacturers often use different SoCs across various products. For example, it is possible that some Uniview products do not use Huawei Hisilicon chips. And it is certain that today while most Hanwha Techwin products do not, a minority do. This means checking specific models, which is difficult.

Challenges for OEMs, Distributors, and Integrators Selling

Overall, sellers have been reluctant to publicly address the ban. Up until today, they could reasonably justify it by saying the ban had not yet taken effect. Now, this has changed.

In particular, sellers, generally, have been wary to explicitly disclose that products have been banned. One reason commonly stated is that most products are not sold to the US government, which is true. Another unstated and likely more significant reason is that labeling a product 'Banned For the US Government' would invariably reduce total sales.

A few companies have made public positions. For example, Pelco has a prominent NDAA page and an NDAA Compliant / Non-Compliant list that explicitly calls out their Huawei-chip GFC line as being banned for US government use. And JCI / Tyco has added a disclaimer to their Dahua OEMed Essentials line:

But these are the exceptions rather than the rule. For example, while Honeywell has publicly touted its new non-banned Vivotek OEMed line, it has not added any disclaimers or warnings to its Dahua OEMed Essential series.

And the US' largest security distributor ADI supplied us with an imprecise response on their approach:

ADI is working closely with our supplier partners and customers as questions surrounding the NDAA ban continue to arise. With the help of our supplier partners, we are continuing to identify NDAA compliant product and are well-positioned to support product fulfillment.

That was better than Anixter who said they would provide a statement, but did not.

Distributors and integrators are caught in a difficult position. The manufacturers (or OEMs) are the ones that obviously know the truth (not typically their field salespeople but senior management) and if they do not fairly disclose, it forces re-sellers and buyers to try to figure it out, amongst almost always bogus excuses like 'we write our own firmware'.

Ultimately, though, this is now a legal issue and companies that do sell banned products to the US government risk contracts being canceled or even being banned from further business with the federal government.

We are monitoring US government RFPs and contracts to see what is being sold and whether it is conformant to the new law.

Global Impact

After the NDAA ban was announced, media outlets in several other countries such as Australia, New Zealand, and the UK published investigations about Hikvision cameras being used in sensitive locations. While those countries have not passed laws as a result yet, the Republic of China (Taiwan) is preparing its own government equipment blacklist that includes Hikvision.