Hikvision USA Refuses [Now In], Dahua USA Drives Forward With "Coronavirus Cameras"
Both have been federally banned, both sanctioned for human rights abuses but only one - Dahua - is taking aim at the booming "coronavirus cameras" market in the USA.
Is Dahua bold or self-destructive? Will Dahua finally overtake Hikvision in the USA?
Inside this note, we contrast the two manufacturer's approaches, why they are taking the approaches they are and the risk/opportunity for Dahua.
UPDATE: April 13th, Hikvision USA is now in the fever screening solutions business, renaming it to temperature screening, hoping to avoid FDA crackdown.
This may just be a single 'product' but it's the single fastest-growing video surveillance market segment, perhaps ever. Just in the US, this market could be a billion dollars this year. Virtually every company we have spoken to in this space reports massive spikes in sales, backorders and far unmet demand. A thousand systems per month per company is not extreme.
This means a $100+ million year run-rate is quite feasible, at ~$10,000 per system (and that's a low estimate), a company that sells 1,000 systems a month does $10 million revenue a month, or $100+ million a year. At 10,000 systems per month, that's a $1 billion run rate.
What's so different here is that virtually no one has these systems and a vast array of organizations are seriously considering buying them. You have a greenfield market with literally emergency demand.
Now, the market for coronavirus cameras could suddenly crash. FLIR, who has been through SARS and other epidemics recently remarked about such sales right now:
it's certainly contributing to instruments' strong sales. We're also cautious when we look at the bookings that we're getting around it to be mindful about how much that really converts to revenue. In the past we would get a tremendous amount of bookings. But as the concerns of the virus elapsed those bookings would be canceled and not turn into revenue. [emphasis added]
For now, though, there is no crash in coronavirus cameras to be seen but other products are down.
Sales Slumping For Cameras
IP camera sales, like most everything in the global economy, are down right now, so companies like Dahua and Hikvision that depend so much on those sales need an alternative revenue generator. Enter coronavirus cameras.
FDA Central Issue in Dahua vs Hikvision USA
Hikvision USA is not offering these cameras and actively stopping companies that try to sell them in the US. Our understanding is FDA concerns are driving Hikvision's refusal to offer these cameras.
No doubt, Hikvision is losing significant sales in the USA by doing this while Hikvision is aggressively selling the same products across the rest of the world.
Dahua meanwhile has dismissed the FDA saying that it is not a medical device and while they market it as a response to coronavirus that it is not intended to diagnose any disease, as this excerpt from an ADI webinar shows:
Dahua Support From ADI And Anixter
With Hikvision out, the biggest distributors in the USA have rallied around Dahua, e.g.:
We asked ADI what their position was about selling Dahua without having FDA approval but ADI refused to respond.
The reality for distributors is similar to manufacturers, in a time of falling sales, coronavirus cameras represent the best chance for immediate revenue growth.
As we covered in FDA Gives Guidance on 'Coronavirus' Thermal Fever Detection Systems, such systems are potentially illegal.
However, the FDA gave IPVM cryptic guidance on what might come next:
We are aware of potential challenges for those wishing to obtain temperature screenings. The FDA is committed to maximum regulatory flexibility in its response to this pandemic, while assuring products are appropriate for use. The FDA has a variety of tools to help meet the medical device needs of the American people during a public health emergency, including the ability to authorize emergency use of an unapproved medical device or product marketed for medical purposes that is eligible for such use, in certain circumstances. We are evaluating the best approach to help to ensure the availability of critical and appropriate medical devices. [emphasis added]
Will the FDA emphasize the 'flexibility' element or will the come down on it not being 'appropriate for use'? We do not know.
Gamble For Dahua USA
If the FDA simply ignores this or just gives Dahua the proverbial 'slap on the wrist', Dahua is likely going to gain significantly. Instead of facing further losses, Dahua USA might generate, ironically, its highest revenue ever and significant profits.
On the other hand, if the FDA comes down hard, the systems sold could be removed, Dahua could be forced to stop selling these systems, and they could face even more issues.
Likewise, Hikvision USA could see its revenue further decline and losses mount, perhaps to levels where the business' viability is further challenged.
This all comes as the US government continues to proceed towards 'blacklisting' of companies using Dahua and Hikvision products this August.
Hikvision Smart or Too Conservative?
Virtually everyone in the industry, including us, views Hikvision as being better run and more sophisticated than Dahua. Take the integrator who recently compared the two companies to the Arnold Schwarzenegger / Danny DeVito movie Twins.
But just because Hikvision is generally smarter than Dahua does not mean they will be correct here. If Hikvision is right, it will avoid more legal issues in the US while its main rival gets hammered. But if Hikvision is wrong, Dahua USA will gain a major edge over Hikvision USA.
What will happen remains to be seen.
Vote / Poll
UPDATE: Hikvision Is In
Hikvision USA has now decided to do enter the market while renaming the offering from its original 'fever screening thermal solutions', shown below:
To 'Temperature Screening Thermal Solutions':
Hikvision is clearly screening for fevers but, for legal purposes in the US, by rebranding it to just 'temperature', they hope to avoid FDA regulation or crackdown.