Dahua $550 Million West China Gov Project

By: John Honovich, Published on Mar 08, 2017

How does Dahua continue to invest in global expansion despite its many mistakes? 

Where can they get the money and strength to overcome the exposure of their backdoor?

Dahua is doing huge business inside of China with the Chinese government.

Dahua has recently announced a government partnership with a total projected value of $550 million USD. Inside this note, we examine the partnership and its potential for Dahua.

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Comments (11)

I didn't go to business school, not did I sleep in a Holiday Inn last night.

 

If China is invested into Hik, why would they use any cameras other than Hik?

 

 

If China is invested into Hik, why would they use any cameras other than Hik?

Because provinces have latitude to make their own decisions. And corruption / bribes in China are widespread. And Dahua is big in its own right (~$2 billion USD annual revenue) meaning they have political power of their own inside China.

I do not understand how this can continue.  This project, beyond being ridiculous in scale is just the tip of the iceberg as there are many large non-security projects beyond this.  All of it appears to be paid for with debt.  At some point they will emerge from this age of cheap labor into an age where there is a middle class demanding more wage, fair working conditions, reduced pollution (or negative health effects), etc.   There are already explosive housing prices in the city, which sounds a lot like the US in 2007.

I believe that not only are Hikvision and Dahua focusing outside of China for growth but they are focusing outside China for survival when the bubble bursts. Right now they are buying hearts and minds of both the consumers, integrators, and OEMs with low cost product.

#1, debt is a critical factor in China keeping its growth rates up. And debt is growing significantly faster than growth which is unsustainable.

they are focusing outside China for survival when the bubble bursts

People who know the China market well have said that too. I don't think they would describe it exactly as 'survival' as much as 'diversification.' But the broader point is agreed that too much exposure to China debt / inefficient infrastructure spending is risky for them. 

Right now they are buying hearts and minds of both the consumers, integrators, and OEMs with low cost product.

I agree they are trying to buy hearts, minds and marketshare. I don't think they are being very successful at getting the 'hearts' of Western integrators and certainly not OEMs, who they are burning bridges with, even beyond the backdoor.

The main risk I see for the Chinese expansion is that their focus on winning buyers on low cost is dangerous since low cost buyers tend not to have brand / product loyalty, so it tends to be a bad investment.

Hey John,

Do you have any information if Dahua won a RFP or how Dahua was chosen?

or were them cherry-picked?

Do you have any information if Dahua won a RFP or how Dahua was chosen?

I don't but these things are typically negotiated in China. It's not like I want X,Y and Z, who has the lowest price?

It's also described as a partnership and usually such partnerships are not a single specific defined technical project but an overarching agreement.

Somewhere John Connor is staring off into the distance thinking "This is the day the Skynet Botnet started."

This is the day the Skynet Botnet started.

You are aware that in China they literally call their city surveillance systems Skynet? So technically it started a number of years ago.

Completely forgot about that.  There must not be a word for irony in China.

I can't help but seeing that as Chinese propaganda...look how good we are western world and how big our projects are etc. Also a nice way to distract the attention from the Chinese Government and Hik link...

I can't help but seeing that as Chinese propaganda

To the best I can tell this announcement was only directed internally to China, since I found it on a Chinese language portion of Dahua's Investors information disclosures. 

If they wanted to tout it internationally, they would have done it in English, got it distributed to press outlets, etc.

My gut feel is that Dahua and Hikvision prefer not to market these deals to the West. The reason being that they worry about the negative perception of "Oh look at these companies getting money from the Chinese government." For example, way back when Hikvision had negligible overseas branded sales in 2010 they announced an $800 million China city deal. Given how small they were then and lacked an international brand, it made sense. Since then, Hikvision has won many other cities but they never announce them (in English, to the West, etc.).

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