PRC Government Entity Now Controlling Shareholder of Infinova / March Networks

By Charles Rollet, Published Jan 16, 2020, 08:57am EST (Info+)

A PRC government entity is now the controlling shareholder of US security manufacturer Infinova as well as its wholly-owned subsidiary March Networks, IPVM has confirmed.

IPVM Image

This means Infinova, a New Jersey-headquartered company, has the same ultimate controlling shareholder as Hikvision. This comes at a time of unprecedented scrutiny into PRC government video surveillance and of Chinese investments into US firms.

Infinova told IPVM that "Infinova is not controlled by the PRC government", stressing this has no effect on their US operations or subsidiaries - the banking surveillance specialist March Networks and home video surveillance firm Swann.

While Infinova's new PRC government owner says it will help sales within China, it poses a risk to March Networks' major US banking customers to depend on surveillance products with such PRC government ownership.

In this exclusive report, we examine this news and its broader impact, including:

  • Infinova Background
  • SASAC Now Controls Infinova
  • Reasoning
  • SIH Examined
  • Infinova Response
  • National Security Concerns
  • March Banking Customer Concerns
  • Potential for March Divestiture
  • CFIUS Risk
  • March Networks Response
  • The Trend of PRC Government Takeovers

Infinova **********

******** ***** ** *** ******** ***** exchange ** ****,******* * ******* (*** ***** ************ standards) $*** ******* *** ***** *** valued **** ** ~$*.* *******. *******, the *******'* ********* *** ********* ** the **** ******, ******* *** ********* of *** *** ***** ************ ******:

IPVM Image

***** ********'* ******** **** ***** *************, multiplying **** ***** $** ******* ** 2009 ** ***** $*** ******* ** 2018, **** ****** *** ******* ****** on ************ ** ******** ***** (***** ******** ** ****,***** ** ****) ****** **** ********'* *** ************ business. ******** ************* ******* ******* ********* ******* **************** ****, *** **** ****** ******* Infinova $*** ******* ** ***** **** year *.*. ****** **** ** ********'* entire *******, ********* ** ********'* **** annual******.

Profitability *********

***** **** ******** ******** *** ******** in ******* ****** *** ********, ** has *** ********* *************. ********'* ********* disclosures **** **** **** **** ** the ***** ***** ******** ** ****, Infinova **** ***** $*.** ******* ** sales *** * *** **** **-$*.** million ** **** ****.

IPVM Image

**** ****** ** ******** ** ********** China ************ ************* **** ********* *** Dahua, *** ****$*.** **********$*** ********* ******* ** **** ************ (******** to $** ******* *** ******** **** year). ******** *** ********* ** **** a ******** ** *** *** ********** surveillance ****** **** ***** ***** ***** at, ****** **** "******** ** ** American *******" ** ***** ****** ********** **** ****.

Founder ******* *** ** ****** *********** ***********

** * ******** ******** ***** ********************, ******** ****** **** * ******* called******** ********** *********** "****** *** *********** *********** ** the *******" **** ********* *** ****** rights **** **.**% ** ********'* *****.

IPVM Image

**** ******** ***** *** ****** *% of ******** *** ***** $** ******* (343 ******* ***) **** * ***** company ********** ** ******** *** *** founder ******* *** ********* ******** ***. (*** ******* ***** *********** ******** stock, ***** ** ***** ****** ** 2018.) *** ******** *** **** **** up ****** ****** **** **** ** its *****, ****** *** *** *********** shareholder.

SIH ***** ** ***** - **** ** *********

IPVM Image

***** * ***** ********** ****** ***** to ******* ********** ** ******** *** the *********** "******* *** ****". ** is******* *** ******** ********* ***** ** State-owned ****** *********** *** ************** ********** of *** ***** *******.

IPVM Image

************* ** *******,******* *** ******* *** ******** ****** that ******** *****'* ********* *****-***** ********** sector. *********'* *********** ***********, ******, ****** ***** ***** ** *****.

Official ********* *** ****

********* ************** ******** **** *** ***** **** Infinova ** * ****** ** ****, such ** ********* ********** *** ********** projects:

** * *********** *********** ** *** target ******* [********], ******** ********** ******** will *** *** ********** **connect *** ****** ******* **** ***'* *****-***** ****** ****** *** *** ******** ***** ** *** ****** ******* (********* ***** ****, ***** ****, ***** ****, ******* *********, ********, ***.) ** ****** *** ****** ******* ** ********** ******** ********; it will use the resource advantages of Shenzhen Investment Holdings and its subsidiaries to assist the target company in developing relevant business; the advantages of investment and [SIH] funds and financial resources to assist the target company to expand *** **** ****** **** *** ****** ******* ******* **** ***** ********* ************, *********** ********** *** ****** ** ********* *** ******** ********* *****. [emphasis added]

Infinova ********

******** **** ** * ******** ********, stating **** ******** ** "*** ********** by *** *** **********" *******:

*** *********** ** ******** ** *** SASAC. ** ** ***, ** ********** holding ******* ***** ******* ** ** support ***** *********** ** ******** ** investing ** ***** ***********. *** ** owned ** ******** **** ********* **********. By *** ** *******, *** ** similar ** * ********* **** ** the ***, ***** *** ******** ** a ************. *** ***** *** ******** a ********* **** ** ** ***** or ********** ** *** ******* **********.
*** ** * ********-****** ********** ******, and *** ********* **** ******** ** financial ********** ****. ** ***** ********** as * “*********** ***********,” *** ** able ** **** ** ********’* ********** into *** ******* *******. **** ** important ** **** ********* ***** ** ** ********** holding *******, **** ****** ** ***** holds ***** ****** **** *** ******** shares ** **. *** *** ***.
*** ** * *********** ****** ** the ******** ** ******** ********** ** Dr. *** (*.*. **. *** *** JHL). *** ****** *** ********** ** Infinova ******* *** ********* **** ********** the ****** ****** ********** **** **** of *** ******, ******* ** ******* conditions.
******** *** ************ ** ******** *** operating *** ********. ** ************ ****** in *** ****** ********** ** *** link *** *****, ** **** ************ is ********, **** *** ****** ****** of *** ********* ****** **** ** restored, *** **** **** ********** ******, and *** ******** ** ******** **** regain *******.
** *****, ******** ** *** ********** by *** *** **********.

******** ******** ******* ****:

  • ***’* ********** ** ******** ** ****** financial.
  • ********’* ********** ** ***** ******** ** also *********.
  • ******* *** (* ** ******* *** resident) ** *** ***** ******* ******* of ******** *** ** ** ****** of ********’* ******** ******* *****.
  • ***** ** ** *********** ** ******** of **********, ********, *** ********** ******* March ******** *** ********’* ********* ** China. ***** ******** *** ******** ** a ********, ********** ******** *********** ** any ********* **** *** *** **** continue ** ** **. *** ********* of *****’* ******** ********* ** *** affected ** **** ******.

******** **** ********* ****** **** ***** surveillance ********:

****** **** **** ** ****** *****, Infinova’s ******** ** ***** ************ ** China *** ********** ** * ********** level ** ***** ** ********’* ******* and **** **** ** ** ***** of ****** ***** ** *****. ******** in ***** ** *** * ******* marketing *** *********** ******* *********** *******.

Analogy **********

******** **** **** **** *** ** not ***** ** ***** *** ** the ***** **********, ******* ** * municipal **** ** *** ***. *******, SIH ** **** ** *** ******** SASAC, ***** *** ******** ** *** ******* ** *** website.************, ********'* ********** ***** *** **** that ****** *** ***, *** *** is * ******* ***** ** * single ********* ***** **** ******** *** levels ** **********.

**** ***** *****-***** ******** - **** local **** - **** **** ***** loyalty/obedience ** *** ********* *****, *** they **;*** *** *** *** ***** ************** ********* ******* *** ***** *** its ********* **** ****** *** *******, for *******:

  • ******* ** *** "********** ***** ************ *** ****** ******* ** ********* reform *** ***********", ******* **** "*** new ****** ** ********* ********-******"
  • ******* * "******* ******** *****" ** "** ***** *** ********* the ********* ****** ** ******* ********* Xi"
  • ******* ** "***** *******" ** *** ****** ** *** Hong **** ******** ** ******* "*** security ********* ****** ********" *** ****** employees ** "****** ** ********" ******* "external ******* ******"
  • *** *** ***************** *** **** ********** *** ******* ********* ***** ***** urging ********* ** "****** ** ********* thinking **** ******* *************** ** *** new *** ** ** *******"

Focus ** "******* *** ****" *******

** ** **** ***** **** *** does ******** **** ***** *** *** government's *****, ***** ******* *** **** to ***** ** *** ********* *** "******* *** ****" ****** ******** - * *********** ** **** ********** ** **** Kong*** ***'* **** ****** **** ** the ******* ********.

** *** ******** ******************, ******** **** ** ***** *********** with *** ** ******* *** **** projects:

** *** ******, *** ******* [********] and *** **** ********** ************* ** the *********** ** ***** ********** *****,the *********** ** *** *********-**** ****-***** ******* *** ****, and will work closely with other portfolio companies of SIH and SASAC regarding collaboration and capital support, in order to achieve a win-win [situation] and build a future together.

March ******** ********

IPVM Image

***** ********, ***** ** ***** ***** ** Infinova, *** **** ****** ** * difficult ******** ***** ** ******** ***** surveillance *** ***** ** ********** ******* clients ("**** **** *** ***** *** credit ******" *********, ******.)

***** *** ********* ****** ** *** data **** *******, **** ******* *** be ********* ** ** ******* ******** with ***** ******** *** ** *** parent ******* ****** * *** ********** entity ** *** *********** ***********. *******, this **** ** *********** *** ***** US ***** ** **** **** ******** or ********* ** ******** **** ***** recorders.

March ******** ********

***** **** **** **** **** ***** "continue ** ******* *************". ***** ** their **** *********:

************, **** ******* ** ***** ********, we **** ******** ** ******* *************, just ** ** **** *** **** 8 ***** ***** ***** ******** ** US-based ********. *** ************ *** ******* the ******* ** **** **** *** top-line ******* *** ************* ** ****** years ***** ********** ** *** ***** of *** ****** ********** *********. ** fully ****** *** **** ***** ** independence ** *** ******.

***** ******** ******** *** ******** ** our *&* ******* ** ****** *** Italy. *** ** *** ************ ******** is **** ** ******. ***** ** no *********** ******* ***** ******** *** Infinova *********** *****.

*** ******** ** *** ******** *** manufactured ** *** ************** ** ******** by *** ****, **********-***** ******* (******: SANM) - *** ****-**** ************* *******. Together, ** **** ********* ******** *** industry’s **** ********, *******, *** ****** Linux-based ********* **********.

*** ********** ********* ****** ****** ***** solutions *** ** *** ********* **** March ******** **** ******** ** ******* on ***** ***** **** **** *** future.

Divestiture *********

** *** **** ***, **** ***** divestiture * **** ********** ****** *** March.

** ******** ** *** ********** *** March's ******* *********, ***** *** ** strong '*********' *** ***** ** ** part ** ********. *** *******, *****'* video ************ ******** ** ** *** opposite *** ** *** ****** *** Infinova's ***** ******* ********* ****** ** of ** ******* ** *******-******* ***** Networks.

******, *** **** *** ***** **** demonstrated ******* ****** *****' *********** ******** in ******** ******** *********. *****, ** still * ******* ****** ** ***** niche, ***** ****** **** *******.

Potential ******** ******** ******** / CFIUS

*** ** ********** *** * ******* committee ***********(*** ********* ** ******* ********** ** the ****** ******) ***** ******* ******* is ** ****** *********** ********* ******* investments **** ** *********, ********** ** they **** **** ******** **********/**** *** foreign ***********.

******** ******** ** **** **** ** it *** ******** ***** ** **** transaction, ******:

** ****** ******* ** ******** ***** matters.************* *** ***** *********** ********* *** we **** ****** **** ******* ** ensure **** ** *** ** ********** with ********** **** *** ***********.

**** ******* *** ** ***** ****** if **** *** *** ** **** not ******** * ******** ***.

************, ***** *********, ***** *********** ** possible.****** *********, * ******** ****** ** *** Peterson ********* *** ************* *********, **** IPVM **** "***** *** ****** ****** a *********** ** * ******* ******* takes * *********** ***** ** * US ********."

** ********, ***** ** ****** ** take ** ******** ** *** ******** is ********** **** * ******* ********** (which ** **** ***** *** **** trigger * ********* ****** ** *****), if *** ********** *** ** ******** provides ***** ***** ****** ********, *** if *** ** ******** ** * supplier ** *** ** ********** (********** in *******) ** ** ** ******** infrastructure.

The ***** ** *** ********** *********

******** ** *** ****** ******* ** the **** *** ****** ** ** taken **** ** * *** ********** entity. ***********'* ******* *** ********, ******* ******** state-controlled. ***** *** ***** *** **** a ******* ******* ** *** *** government ******** ** ** **** *** firms **** ********* ************ *** ** China's ************ ********** ************* **********.

**********

**** **** ***** ** ******** *** Infinova ** *** ******** ***** *** company ****** ********* *** ********** ********, as ** *** ******.

*******, ** ******** ***** *** ***** Networks *** ** ********** ** ********** client ******** **** *** ********** *******.

*** **** **** ******** * ********* legal ***** ** ***** ******* ** step **.

**** *******, **** ****** ******** ***** what ***** '*******' ***** ********* *** taken **** ****.

Comments (22)

Very informative and interesting article. I have always been curious how the recent NDAA bans would address PRC Owned entities purchasing US based security companies.

I wonder if CFIUS would consider the multitude of financial institutions in the USA that March services, although private, as a concern for critical infrastructure? Curious to see if they respond to your inquiries.

Agree: 3
Disagree
Informative
Unhelpful
Funny

Charles, excellent reporting!

There's been a debate over the last year about what the difference in government control is between 'private' PRC China companies and PRC government created companies like Hikvision.

This and the Netposa takeover are really interesting examples of 'private' companies that became government-controlled.

Who's next? And if you are an enterprise buyer of PRC products, how much do you need to factor this takeover risk?

Agree: 3
Disagree
Informative
Unhelpful
Funny

Very interesting read indeed. Be interesting to see how this develops further and if or what the potential fall out is for March.

Agree: 4
Disagree
Informative
Unhelpful
Funny

Ban em and rip em all out!

Agree: 1
Disagree
Informative
Unhelpful: 6
Funny: 5

Piles of Nelly’s and March recorders side by side? ;)

Agree: 1
Disagree
Informative: 1
Unhelpful
Funny: 6

A PRC government entity is now the controlling shareholder of US security manufacturer Infinova as well as its wholly-owned subsidiary March Networks, IPVM has confirmed.

Infinova told IPVM that "Infinova is not controlled by the PRC government"

I have never heard of a "controlling shareholder" not having any control over a company they control. But then again I do keep failing my indoctrination sessions so take what I think with a grain of salt.

Agree: 1
Disagree
Informative
Unhelpful
Funny: 1

heard of a "controlling shareholder" not having any control over a company they control.

My understanding of their point is that they (SIH / SASC / PRC government) do not care to 'control' matters like who are March customers or what March's customers are doing or how to get access inside of March customer's networks or access March customer's banking records.

Will they (SIH / SASC / PRC government) eventually care to 'control' such matters is something that many in the West have reasonable concerns over.

I think the best long-term solution is for Infinova to divest March Networks. March's statement declares "we will continue to operate independently" and "There is no interaction between March Networks and Infinova development teams.". As such, what benefit is to keep March as part of Infinova?

Agree: 3
Disagree
Informative
Unhelpful
Funny

I guess they are claiming a literal metaphorical "Chinese Wall"?

Chinese Wall Definition

Agree
Disagree
Informative
Unhelpful
Funny: 1

As such, what benefit is to keep March as part of Infinova?

I wonder if Infinova could get enough for March Networks to make them worth selling off. Who would buy them?

Agree
Disagree
Informative
Unhelpful
Funny

I wonder if Infinova could get enough for March Networks to make them worth selling off.

Perhaps a more important question becomes - what is the value or future of March inside of PRC gov controlling shareholder Infinova? I'd argue they have more risk keeping March inside Infinova than selling them off.

On the plus side for March, they have basically the same management team from before the acquisition:

So Infinova / March can reasonably argue that they are getting a real full company not shambles or a former organization.

Who would buy them?

There's a lot of cash out there. Someone bought Arecont. Somewhat bought Pelco. March is in better shape than those companies when they were sold.

I don't know what March wants or will do but if Strom et al. say "Hey, we are ready to take this private and lead a truly independent March" they will have buyers. Price is always a question.

The challenge for Infinova is them keeping March could cause the value to fall significantly if March customers start to balk.

I am not discounting this will be a complicated issue for Infinova / March but there's certainly a path to divestiture that may be in the best interests of all involved.

Agree
Disagree
Informative: 1
Unhelpful
Funny

think of SASC as you would think of a bank in the West.

When you go to the bank to borrow money for your business or to finance a home purchase, the bank controls you. It will not sit and scrutinize your sales pipeline, or tell you what font to use in your brochure, but it has the power to come and take everything you own if you don't perform and miss out on payments.

the same is with SASC, they can help you with financing, but if there is not return on their investment they will foreclose...

I personally think that it is far fetched to think that there is a conspiracy theory or some evil plan of the CCP to control the world through IP cameras. Any problems with hik, dahua or infinova cameras are probably the results of shoddy workmanship due to costing down. Nonetheless, anyone doing business with China needs to be aware that at the end of the day it is a country ruled by one-party that can boss anyone around, regardless if they are controlling share holder or not.

if you dont trust the PRC government, dont buy PRC products, there are still plenty of options out there.

Agree: 3
Disagree: 4
Informative: 1
Unhelpful
Funny

think of SASC as you would think of a bank in the West.

No, that's wrong. SASAC does not even think of itself that way. Don't believe me. Simply review SASAC's own English language website for yourself:

It is an explicitly political organization. Including declarations such as:

Like a commercial bank, SASAC has an interest in financial performance but unlike a commercial bank, SASAC has an explicit and clearly stated political purpose.

It is fair to argue how far the PRC will go with using its assets but "think of a bank in the West" is simply a false analogy.

Agree
Disagree
Informative: 3
Unhelpful
Funny

A new article today from the Nikkei Asian Review covers this trend - Deal breaker? China nationalizes strategic tech with eye on US - Nikkei Asian Review , quote:

A total of 165 listed Chinese companies changed ownership in 2019, roughly 60% more than the year before due to China's economic slowdown, according to the China Securities Journal, a newspaper backed by the state-run Xinhua News Agency.

Of those that changed ownership, 44 companies, with a combined market capitalization of about $36 billion, were acquired by state-owned companies or government-run investment companies. Many were involved in highly strategic fields like surveillance and information systems.

They make mention of both Infinova and Netposa from our industry:

Shenzhen Infinova, bought by a Shenzhen government investment company, produces items like surveillance systems for law enforcement. Its products have been sold to over 100 countries, including in North America and Europe.

Another surveillance system provider, NetPosa Technologies, was acquired by Sichuan Province's investment arm.

Agree
Disagree
Informative: 2
Unhelpful
Funny

From what I understand, their Searchlight product integrates with the core transaction processing software/server at the bank. Every teller line and ATM transaction is captured and the customer's face from recorded video is tied to the transaction.

This poses severe consequences if there were a vulnerability in this product. This goes well beyond the risk of having a back door or buffer overflow to hijack an IP camera.

If you wanted to stick it to your enemy nation, attack the transaction server of a major bank.

Agree: 3
Disagree
Informative: 4
Unhelpful
Funny

Amazing. Great stuff Charles!

It's "almost" as if there has always been a strategy passed down from the top of the P.R.C. to all of the businesses operating in the myriad industries that China has destroyed channel strategy and profits in. ;)

I think it is about time, well overdue actually, that our industry took notice and started actually caring about the P.R.C.'s mass take overs and very intentional "Chinese Dumping" strategies, and that we get aligned with companies that actually care about having a decent future. A future where "security" really does mean something.

I wonder how this information can be utilized/useful? A lot of us distributors/manufacturers, and the higher level integrators & installers that actually care, all conversing to each other here on IPVM is great, but it's obvious the mass majority of companies and end-users don't know nor do they care.

Do you, anyone, think it is merely a problem of education & awareness? That if everyone actually knew about this (among the other China problems) then they'd certainly care?

Agree
Disagree
Informative
Unhelpful
Funny

It's "almost" as if there has always been a strategy passed down from the top of the P.R.C. to all of the businesses

Looking at Netposa and Infinova, the strategy was more of "We're going to grow forever, so make wildly dangerously risky bets."

For example, with Jeffrey Liu, the founder of Infinova, there's no evidence that he was excited or aimed to make a PRC government entity the controlling shareholder of Infinova but given the company's performance struggles that was the best deal available to him.

Likewise, when you look at the dumping strategies, I do think a lot comes from the PRC / CCP top but primarily from the implicit promise to keep PRC growth 3x the rest of the world forever. It's actually logical if you think the market is going to grow 20% per year, every year, to engage in that type of super ambitious, aggressive price-cutting and volume maximization. Unfortunately for all of us, it's becoming quite clear that it was a mistake.

Agree: 1
Disagree
Informative
Unhelpful
Funny

I can't comment on strategy from Netposa and Infinova's points of view, but I can definitely make some judgements & guesses about the PRC's points of view and why they would want to acquire certain Intellectual Properties and technologies/companies (especially companies that are embedded in many banking institutions).

I think it was clear to anyone that can look past the "right now" moment and just think it through for a second that it was a mistake. Assuming that the Chinese companies can also think two or three steps ahead then we can assume they also saw/knew what would come of the strategy, and continued to do so intentionally.

The furniture industry proved that China was dumping and was rewarded. We also know that China has wrecked the Steel industry by dumping. Why wouldn't they do it to our industry? IPVM has proven that Hikvision gets unfair subsidies from their government (I think you reported $6 billion in one case). We know for a fact that China pays Chinese companies to come abroad and "do business" while Americans only get to expense 50% of certain expenses/costs of doing business.

We pretty much know for a fact, at least we can infer if not conclude a posteriori, that Hikvision and Dahua are following/have engaged in the "Chinese Dumping" strategy. Your own articles on their incessant race to the bottom shows this.

I wonder if American companies did win a lawsuit if the damage could even be undone? It kind of blows my mind that I can get an IOT HD imaging device with smart features in a metallic and glass housing for cheaper than I can buy many shirts and shoes...


The Decline of an American Furniture Maker | The New Yorker : John Bassett resurrected a struggling furniture company called Vaughan-Bassett. In 2003, he organized the filing of what was then the world’s largest petition against China over “dumping,” the illegal practice of selling exports to the U.S. that are priced lower than the cost of their materials. He won. Vaughan-Bassett ended up with forty-six million dollars in anti-dumping duties.

Agree
Disagree
Informative: 1
Unhelpful
Funny

does anyone know of a non-chinese vms manufacturer that is linux based (and, moderately priced)?

Agree
Disagree
Informative
Unhelpful
Funny

What's your definition of moderately priced?

NUUO (ack!) uses Linux, but they produce turn-key NVR appliances.

IPConfigure Orchid can run on Linux. If you run it on a Raspberry Pi, it's free.

There are several Linux compatible VMSs that are mentioned in this IPVM discussion: No Native Linux VMS Found, All Windows-Based

Agree
Disagree
Informative
Unhelpful
Funny

Stay tuned... 2020 is going to be a great year for the industry ;)

Agree
Disagree
Informative
Unhelpful
Funny

Network Optix\Hanwha Wave\DW Spectrum. Exacq as well, but depending on needed features, might not be moderately priced.

Agree
Disagree
Informative: 1
Unhelpful
Funny

For any US banks uncomfortable with using March Networks now, they can consider Hikvision.

Hikvision USA is now pitching banks:

That surprised me, to say the least, given the ban, sanctions, China cybersecurity concerns, etc.

Agree
Disagree
Informative
Unhelpful
Funny: 1
Login to read this IPVM report.
Why do I need to log in?
IPVM conducts reporting, tutorials and software funded by subscriber's payments enabling us to offer the most independent, accurate and in-depth information.
Loading Related Reports