US President Donald Trump has signed an executive order targeting technology provided by 'foreign adversaries', in what is widely being called a 'Huawei ban':
The move could have a major impact on video surveillance, particularly since Huawei's HiSilicon is used in many IP cameras and recorders. It also makes it easier than ever for the US to pass a total ban on PRC video surveillance giants like Hikvision and Dahua without needing a new law or raising human rights issues.
In this post, we examine the US' moves and video surveillance consequences:
What Happened
E.O. Opens Path For Total PRC Manufacturer Ban
Hikvision, Dahua, Sanctions Risk
Huawei HiSilicon Directly Affected
Impact on HiSilicon Users
Conclusion
What ********
***********, *** ******** ** government ******* **** ******** yesterday:
This should blow over. I heard that Huawei has hired a college professor with a dapper wardrobe, and is opening a cyber security source code review center to appease any concerns that they are a risk.
We have heard from many manufacturers over the past few months saying that they have been working to remove Hisilicon from their products, due to the NDAA ban. This new ban will add further momentum to this process.
One thing we did not mention in the post is the potential impact on Huawei's AI offerings. NVIDIA and Intel are two of the biggest global suppliers. This may block Huawei from using their products which could be a material problem for Huawei in video surveillance. There are certainly emerging providers inside of China though it is not clear how ready they are, especially since e.g., Hikvision is using Intel for deep learning processing in their latest line (see Hikvision DeepinView Camera Analytics Tested)
For any manufacturer exporting products, it is always recommended to check new customers on the Commerce Department's Consolidated Screening List available at https://www.export.gov/csl-search. In addition to the Denied Entities list mentioned above, the consolidated list also includes screening from the Departments of State and Treasury for any sanctioned companies or individuals.
I've been working with Commerce for nearly a decade now, and checking customers against the list is one of the first things they recommend. In those years I haven't yet worked with an entity on any of the lists, so checking customers against it hasn't been burdensome or restrictive to our business.
Crazy idea for Huawei: fork out 100 million USD and invest it in ambarella stock-> become material share holder in ambarella thus making it an affiliate of Huawei and also banned.
Repeat the same with all publicly listed competitors till USA administration capitulates and removes ban.
fork out 100 million USD and invest it in ambarella stock-> become material share holder in ambarella thus making it an affiliate of Huawei
Ambarella's market cap today is $1.5 billion so 100 million won't come close to being material. And Hisilicon for video surveillance, in the greater scheme of Huawei, is not a major factor (easily less than 1% of Huawei's revenue).
Repeat the same with all publicly listed competitors
Intel's market cap is $203 billion. Does not sound like a great plan.
The comment was made tongue in cheek, but actually in Ambarella's case, the largest institutional shareholder's (Vanguard) investment is worth ~114 million USD in shares
Having a 7.6% stake in a company does not give control (i.e., Vanguard $114 million / Ambarella market cap $1.5 billion). A company in that position is just a passive shareholder.
From my time Dahua I did not see much involvement from the Chinese government. That being said, if ANYONE from the government was visiting, then the doors were completely open. With or without government ownership a company like Dahua would do whatever they were told to do. I assume it would be almost exactly the same for all Chinese companies. They either do what they are told, or go to jail then.......
I could see that. I was just curious since the level of Chinese government involvement/ownership seems to play a role in the banning of specific manufacturers by name. Why not just blanket ban all surveillance products from China?
It’s a soc. I get the governments concern about infrastructure like 5g. But come on, we are talking about something as low level as a video camera. If Huawei was installing chips in toaster ovens I could care less. If some idiot IT “professional” installs a camera on the same network as a top secret DOD computer terminal then lock him up. Is it really a matter of national security if a camera pointed at a fence on a department of interior national park office has a hisilicon chip in it?
If China wanted to find the super secret classified files at the national park service I think $15,000 to a worker who goes several weeks without pay in the next budget crisis will be an easier and more powerful tool than a Honeywell 720p camera.
Geniuses in WAshington are more focused on this than the out of control debt they are responsible for? It’s not a swamp, more like a kindergarten in DC.
Update: Huawei's CEO has published a charged letter, key excerpts:
It is expected that one day, all the advanced chips and technologies in the United States will be unavailable, and Huawei will continue to serve its customers.
Today, when fate turns to this extreme and dark moment, the superpowers relentlessly interrupt the technological and industrial systems of global cooperation and make the craziest decision to place Huawei on the list of entities without any basis.
analysts say that although Huawei’s HiSilicon may be China’s most advanced chip designer, it relies on Taiwan’s TSMC to make its chips and would thus suffer if the US put pressure on Taiwan to abide by its sanctions.
but 'every sovereign nation makes its own IoT' is clearly hyperbole.
hyperbole in the sense that it’s ridiculous as a practical matter, yes.
however I stand by the implication.
would you agree that:
the stated reason for the ban is to protect from foreign espionage/sabotage by prohibiting the domestic use of network/communication equipment that are manufactured by, or under the control of a foreign adversary?
and if viewed from China’s perspective, this could apply to the U.S.?
and to Russia, perhaps any non-NATO country?
also, Russia would prefer not to be vulnerable to China, yes? And adversaries change over time.
taking the long-range 10+ year view of this, if this threat is truly the danger stated, the surest way to mitigate the vulnerability to any other state, is to roll your own.
ok, no to China, but is Vietnam ok, how about Turkey?
if this threat is truly the danger stated, the surest way to mitigate the vulnerability to any other state, is to roll your own.
It's not to 'any other state'. Is Canada afraid of Chile? Is Chile afraid of Cyprus?
prohibiting the domestic use of network/communication equipment that are manufactured by, or under the control of a foreign adversary?
Sure, but most countries do not consider most other countries foreign adversaries. Does the US consider Sweden, Germany, Denmark, Canada, etc. adversaries? No.
I don't think I'm even making an interesting point here. The consensus of International economics and politics experts is the potential for a China bloc vs Us bloc faceoff, not a 'every country' vs every other country one.
If the US does not consider Sweden and Germany adversaries why are they considering putting 25% import duties on BMW, Mercedes and Volvo imports for "national security" reasons.
Andrew, I don't follow the automotive industry close enough to have a meaningful opinion. That said if you think that, e.g., Sweden and the US consider themselves as fundamentally adversaries, feel free to make the case. I don't see that anywhere else - i.e., political or economics experts contending such a point.
I don't believe that Sweden (or even Germany) sees the US as a fundamental adversary. On the other hand the current US administration seems to have a zero sum view of the world where any foreign import is per se a bad thing.
Here in Europe I would think that most people view the latest US measures against Huawei and other Chinese companies as being rooted in protectionism rather than national security. We are after all happy to buy smartphones from Huawei, Xiaomi etc that offer 99% of the functionality of an overpriced iPhone for less than 50% of the cost.
Andrew, the PRC is the king of protectionism. PRC has been banning companies for years (US tech companies like Google, Facebook, etc.), stealing IP (e.g. Microsoft Windows), and erecting unfair barriers to foreign companies (required joint ventures, high tariffs, etc.). For example, Milestone's execs, a European company, discussed such problems recently. And another European company, Axis, has had its business long been undermined inside of China, despite China's massive surveillance market and Axis strong industry position.
There are certainly genuine cybersecurity and espionage concerns, but even outside of that, how long should foreign countries accept this treatment from the PRC?
I do grant you that the PRC's twin tactic of protectionism and selling goods cheaply to foreigners wins supporters (for example, your comment and certainly people in the US) but how long do you want other companies to tolerate this overall situation from a country?
This situation with Microsoft Windows is a bit more nuanced than that. Piracy has enabled them to become the absolutely dominant OS in China, seeing off all competition - see this article
My basic position is that you don't encourage a country into a rules based international system by threats, blanket tariffs and dubious non-tariff barriers, nor does it help your case to annoy most of your natural allies (Canada, Germany, Japan, UK) by labelling their exports as spurious threats to US national security.
Andrew, yes, I have read that article. So Microsoft has delivered tremendous value to China for years, no one doubts that. And what does Microsoft get? To be the dominant OS in China with an absolute fraction of revenue? Think about it this way. I steal stuff from you and then justify it by saying that you are my top supplier.
you don't encourage a country
How else would like to 'encourage' the PRC? They have been in the WTO for nearly 2 decades, during that time they have systematically and massively cheated and stole.
I do agree that the US should better support its natural allies but what viable tactic will work with the PRC at this point?
Sure, but most countries do not consider most other countries foreign adversaries. Does the US consider Sweden, Germany, Denmark, Canada, etc. adversaries? No.
yes, but the U.S. still spies on them nonetheless. the only reason we wouldn’t is if we couldn’t...
you expect Germany to be ok with that? in the long term, as I indicated.
But have we forgotten the cold war? If China is pushed into a corner the likelihood is that they will seek to form closer trading ties with Russia and we will end up with the 2 blocs and the remaining nations taking sides. Trump has created a toxic imbalance by siding with Putin and NK and distancing himself from NATO/EU. So where does this leave China? It has no shortage of manufacturing capacity and skill - and they will seek to retain this at all costs.
In recent years the Chinese were selling to most countries which helped diminish the old 2 bloc norm, together with the collapse of the Soviet Bloc. The world opening up a global free market essentially showed the communist regimes that there is perhaps a better way to make your countries richer. So do we really want to return to those days or seek better arrangements than what may exist at the moment? Your say not "every country vs every country" but as states align, this would be a default position albeit surrogate bloc vs surrogate bloc. So regardless of your views of the Chinese, they have played a part in breaking down the bloc system and have, by and large, remained neutral between the US and Russia. Consider if they are only left with Russia, Iran, Afghanistan, Venezuela, Cuba, a bucketful of African states and Palestine as trade partners. Is that really going to prove a net contribution to the electronic security market and a safer new world order?
Lets overlook the military aspect here, as saber rattling is Trumps preferred negotiating tool. On a conservative estimate, China has positioned itself close to parity with US in recent years and coupled with Rusia and or NK would present a significant threat to the West.
This is not doom and gloom - we have been here before and anecdote speaks louder than anyone's comments on the forum. It's generally accepted that the US can be insular in its dealing with the outside world and can lose sight of the many other countries that rely on multi-state trading and political balancing to manage the day to day life of its population. So whilst the US retreats on an America First agenda and builds walls (not only metaphorically) its selfishly tells the rest of the world - you are either with us or against us. This is exactly what we are seeing with the tariffs, the anti-NATO threats and the destruction of any arrangement (however uncomfortable) that seeks to preserve peace. It's unfortunate that the US cannot comprehend how that feels outside of the US where the choice of supply is based upon an edict from your bloc dictator leader as to what you buy and who you buy it from. The aim here is for the US to get richer at everyone else expense whilst living in the shadow of war - and that is nothing to be proud of.
Few states can roll out their own tech solutions at this level and will simply defer to the bloc solution. How quick we are to forget the dark days when this used to be the norm. The world benefits from collaborative, bloc free trade. Anyone would think there were US elections coming up....oh wait....
In a world of liberalized trade, the rules end up benefiting the totalitarian state, since its companies can access the protections of our legal system, while our companies are subject to perfectly legal shakedowns in China.
Moreover, as they observe:
There was once hope China could behave as a rule-of-law country internationally, even as it remained a dictatorship at home. There was also a belief that China’s economic advances would lead to an opening up of its political system. That hasn’t happened. If anything, the Xi Jinping regime is turning back the clock on individual freedoms.
To your point:
seeks to preserve peace
This is increasingly not the 'peace' that the free world wants with the authoritarian PRC.
That's a viewpoint but not one that I agree with. If China is turning in on itself as the article suggests, this is a result of the US tariffs and rhetoric (mirrored by your comments regarding "cheats" and "thieves"). this is of course exactly what Trump wants as it makes commercial sense, but does not address the geopolitical instability it creates or the increased cold war scenario. What's changed here is not China but US foreign policy to which we are seeing a chinese reaction. The US has grown fat and greedy using the lower manufacturing costs in China - but now those costs are rising due to higher standards of living and working (slowly) toward climate change obligations, this is making China less attractive for the US manufacturing so Trump is now seeking to turn the tables and aim to crush China as a competitor having taken advantage of it for years.
As America seeks to escalate the threat of war with Iran, NK whilst distancing its allies and NATO itself, I would never want to be associated with the kind of Peace that Trump is seeking.
Your own personal views are that you would wish China to be isolated the leadership crushed. Be careful of what you wish for, the US is not exactly successful at regime changes and putting China in the corner will have profound effects on the US and the rest of the world far beyond the use of Hikvision cameras filling IPVM column inches.
You have fed the animal for years, and now you want to starve it - the last time you did this was with the Taliban and that worked out really well didn't it?
The article also points to some useful advice - "China is not our enemy. But it is not our friend." The article also suggests "To counterbalance China, we need allies" - but this is exactly what Trump is not doing. He is attempting to distance virtually every trading partner, military partner and getting up close with Putin, Mohammad bin Salman and Kim jong un - but in fairness, he's in great company with these tyrants and can share many traits with them.
If China is turning in on itself as the article suggests, this is a result of the US tariffs and rhetoric
The PRC has been doing this for years. Xi Jinping becoming president for life was done before US tariffs. The PRC with high tariffs on foreign goods for many years was done before US tariffs. The Xinjiang concentration camps was done before US tariffs. The various foreign businesses and websites blocked was done before US tariffs.
Will the PRC turn even more inward now? Their actions in the past month say yes.
But what should we do? Let them do whatever they want?
I do think the US should work more closely and productively with their democratic allies but that does not mean we should allow the PRC to continue wronging the free world.
So why has an arguably private company been singled out for individual action if not as political blackmail by the US?
The US is sowing the seeds of its downfall as a trusted supplier if long term commercial arrangements between businesses can be destroyed overnight by the arbitrary action of politicians. This is the kind of thing we expect from third world countries not the champion of capitalism.
Simple. America is running scared with a headless chicken foreign policy.
They are simply terrified that Huawei will grow to crush its domestic product (which it will) and inventing fear to justify the paranoia.
This is well documented but not widely understood.
An unfortunate parallel does exist:
Hermann Göring explained how people can be made fearful and to support a war they otherwise would oppose: The people don't want war, but they can always be brought to the bidding of the leaders. This is easy. All you have to do is tell them they are being attacked, and denounce the pacifists for lack of patriotism and for exposing the country to danger. It works the same in every country.
This sounds scarily like what I've been reading about China in IPVM and the US media in general - should we be worried? You bet....
Andrew, what do you propose be done about the concentration camps, the blocking of foreign companies, the long-standing tariffs, unfair rules, etc. that the PRC does? Nothing? Something else?
The other 'gentleman' has been cheating and stealing for years. If the other 'gentleman' had been playing by the rules of the game, this would not have happened.
PRC government publication Global Times says retaliation against US firms coming:
China will certainly retaliate for barbaric suppression Huawei received. It's a unanimous attitude of officials and ordinary people. I believe Beijing is selecting retaliation targets and approaches, minimizing damage to itself and not weakening confidence in China's opening up.
CCTV 6, the movie channel of China’s main state television broadcaster, has gone trending on Chinese social media today for changing its schedule and playing three anti-American movies for three days in a row.
An HBO spokesman said China restricted Tencent from airing “Game of Thrones” due to the trade dispute with the U.S.
Speaking as someone who has never watched nor has any interest in this TV series, this is wild and a great reminder of how repressive and petty the PRC is.
The chinese people are better off anyways without the GOT finale. Honestly, America would have been better off if the Finale was banned rather than Huawei.
And it's not just Google. "Chipmakers including Intel Corp., Qualcomm Inc., Xilinx Inc. and Broadcom Inc. have told their employees they will not supply Huawei until further notice," Bloomberg reports.
Another update: the US has just released a 90-day reprieve for Huawei to "maintain existing networks," Reuters reports:
The U.S. Commerce Department will allow Huawei Technologies Co Ltd to purchase American-made goods in order to maintain existing networks and provide software updates to existing Huawei handsets.
The company is still prohibited from buying American parts and components to manufacture new products without license approvals that likely will be denied.
I have a question, and perhaps this is not even the right thread to ask this, but here goes:
In relation to the Dahua and Hikvision ban and the language regarding state or private projects that may be funded by federal money, and the clause about the cameras needing to be removed . . . what is the method of enforcement? What agency has been tasked to go around the country and inspect every camera installation that may have received federal funds to check for Dahua and Hikvision cameras or any of the dozens of OEM brands? What about large cities that have hundreds of installed Chinese cameras that may have been purchased using homeland security grant money before the ban went into effect, are they going to self-enforce and rip out all of their cameras? What would be the consequences if a city decided to ignore the ban?
That said, given the current environment, it would be a very imprudent move to be the guy who wanted to test what the US government wants to do if one violated this.
How ironic, the same company selling themselves on the premise of dangerous Chinese cameras uses the same dangerous chip inside their own products. Huakada needs to find a new ODM fast before they get slammed by the August NDAA.
The escalation continues: Huawei Founder inside of China says US conflict invetiable, Huawei will stand on top of the world:
Ren Zhengfei to Chinese media:” I’ve sacrificed myself and family for the sake of a goal that we will stand on top of the world. To achieve this goal, a conflict with the U.S. is inevitable.” #huawei#tradewarpic.twitter.com/MhaT7GZunh
This Order goes well beyond just prohibiting the U.S. government and its agencies from buying Huawei telecom products; it will impose a general ban on purchasing such products byanyU.S. person/entity. It is an absolute, nationwide ban.
The Order itself does not refer to Huawei specifically. It refers only to “foreign adversaries” and it gives the Department of Commerce 150 days to publish the foreign adversaries list. We can though assume for now that at a very minimum Huawei will be on that list. [emphasis added]
Within 150 days of the date of this order, the Secretary, in consultation with the Secretary of the Treasury, Secretary of State, the Secretary of Defense, the Attorney General, the Secretary of Homeland Security, the United States Trade Representative, the Director of National Intelligence, the Administrator of General Services, the Chairman of the Federal Communications Commission and, as appropriate, the heads of other agencies, shall publish rules or regulations implementing the authorities delegated to the Secretary by this order.
While Huawei is certainly assumed, given the discussions about sanctioning Hikvision, Hikvision could reasonably be on that list.
150 days from May 15, 2019 (when the EO was signed) is October 12, 2019.
Update: the Biden administration has renewed for one more year the "national emergency" declaration that made this Trump executive order possible, per a White House announcement. This is another sign the Biden admin is not letting up / going easy on China companies as some have hoped.
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Comments (55)
Undisclosed #1
This should blow over. I heard that Huawei has hired a college professor with a dapper wardrobe, and is opening a cyber security source code review center to appease any concerns that they are a risk.
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John Honovich
Charles, good reporting.
We have heard from many manufacturers over the past few months saying that they have been working to remove Hisilicon from their products, due to the NDAA ban. This new ban will add further momentum to this process.
One of the surreal aspects of this the US is not the only one fighting with Huawei. Hikvision is battling with Huawei as well. On the one hand, Hikvision is Huawei Hisilicon's largest video surveillance customer. On the other hand, Huawei's declaration of entering the video surveillance product market has increased risk and challenges for Hikvision who now faces a much larger competitor in their own home market. And Huawei has disparaged Hikvision and Dahua, saying their "Strategy Is Just To Provide Cheap Cameras". Likewise, Hikvision has said that Huawei will fail in video surveillance.
Between the tariffs, the NDAA ban and the Huawei ban, the pattern is that this 'war' is heating up.
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John Honovich
One thing we did not mention in the post is the potential impact on Huawei's AI offerings. NVIDIA and Intel are two of the biggest global suppliers. This may block Huawei from using their products which could be a material problem for Huawei in video surveillance. There are certainly emerging providers inside of China though it is not clear how ready they are, especially since e.g., Hikvision is using Intel for deep learning processing in their latest line (see Hikvision DeepinView Camera Analytics Tested)
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Cameron Javdani
05/16/19 04:13pm
For any manufacturer exporting products, it is always recommended to check new customers on the Commerce Department's Consolidated Screening List available at https://www.export.gov/csl-search. In addition to the Denied Entities list mentioned above, the consolidated list also includes screening from the Departments of State and Treasury for any sanctioned companies or individuals.
I've been working with Commerce for nearly a decade now, and checking customers against the list is one of the first things they recommend. In those years I haven't yet worked with an entity on any of the lists, so checking customers against it hasn't been burdensome or restrictive to our business.
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Undisclosed #2
Crazy idea for Huawei: fork out 100 million USD and invest it in ambarella stock-> become material share holder in ambarella thus making it an affiliate of Huawei and also banned.
Repeat the same with all publicly listed competitors till USA administration capitulates and removes ban.
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Undisclosed Integrator #4
It’s a soc. I get the governments concern about infrastructure like 5g. But come on, we are talking about something as low level as a video camera. If Huawei was installing chips in toaster ovens I could care less. If some idiot IT “professional” installs a camera on the same network as a top secret DOD computer terminal then lock him up. Is it really a matter of national security if a camera pointed at a fence on a department of interior national park office has a hisilicon chip in it?
If China wanted to find the super secret classified files at the national park service I think $15,000 to a worker who goes several weeks without pay in the next budget crisis will be an easier and more powerful tool than a Honeywell 720p camera.
Geniuses in WAshington are more focused on this than the out of control debt they are responsible for? It’s not a swamp, more like a kindergarten in DC.
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John Honovich
Update: Huawei's CEO has published a charged letter, key excerpts:
FT has an interesting observation about the US potentially pressuring Taiwan not to make HiSilicon chips:
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Undisclosed #3
It’s a mistake to ban Huawei unless the endgame is that every sovereign nation makes its own IoT.
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Undisclosed Manufacturer #5
"When the gentlemen can't win the game, the gentlemen change the rules."
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John Honovich
PRC government publication Global Times says retaliation against US firms coming:
It is fair to say things will get even more heated.
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John Honovich
The PRC has now retaliated by blocking the Game of Thrones finale:
Speaking as someone who has never watched nor has any interest in this TV series, this is wild and a great reminder of how repressive and petty the PRC is.
On a more serious note, the PRC has been holding 2 Canadians hostage for months, the day after US action against Huawei, the PRC formally arrested those Canadians. It's a bizarre and brutal act of retribution to take it out on Canadian citizens.
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Undisclosed Integrator #7
I have a question, and perhaps this is not even the right thread to ask this, but here goes:
In relation to the Dahua and Hikvision ban and the language regarding state or private projects that may be funded by federal money, and the clause about the cameras needing to be removed . . . what is the method of enforcement? What agency has been tasked to go around the country and inspect every camera installation that may have received federal funds to check for Dahua and Hikvision cameras or any of the dozens of OEM brands? What about large cities that have hundreds of installed Chinese cameras that may have been purchased using homeland security grant money before the ban went into effect, are they going to self-enforce and rip out all of their cameras? What would be the consequences if a city decided to ignore the ban?
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Undisclosed Manufacturer #11
There now seems to be a 90 day temporary license in place for Huawei as just reported on the news here.
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John Honovich
The escalation continues: Huawei Founder inside of China says US conflict invetiable, Huawei will stand on top of the world:
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John Honovich
Update: A prominent China law blog points out an important point I have not seen widely made:
They are certainly correct as the EO clearly states:
While Huawei is certainly assumed, given the discussions about sanctioning Hikvision, Hikvision could reasonably be on that list.
150 days from May 15, 2019 (when the EO was signed) is October 12, 2019.
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John Honovich
Update: The US Commerce Department has issued subpoenas for multiple unnamed 'Chinese' companies in the past month based on this order, see: U.S. Secretary of Commerce Gina Raimondo Statement on Actions Taken Under ICTS Supply Chain Executive Order | U.S. Department of Commerce and U.S. Department of Commerce Statement on Actions Taken Under ICTS Supply Chain Executive Order | U.S. Department of Commerce
We are tracking this closely.
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Charles Rollet
Update: the Biden administration has renewed for one more year the "national emergency" declaration that made this Trump executive order possible, per a White House announcement. This is another sign the Biden admin is not letting up / going easy on China companies as some have hoped.
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