US Government Puts Export Control On Hikvision's Chinese Government Parent

By: Charles Rollet, Published on Aug 07, 2018

Chinese media and the Chinese stock market have not only been concerned about the NDAA bill banning Hikvision for US government use. Additionally, Chinese media has been reporting that "The United States sanctions 44 Chinese companies!", including mentioning the stock impact on Hikvision.

The US government has placed strict restrictions on exporting products to a select number of Chinese entities, including on numerous subsidiaries of Hikvision’s parent company CETC, but not Hikvision itself.

Inside this note, we examine what this means, how Hikvision is related to this and what the potential impact to Hikvision could be.

******* ***** *** *** Chinese ***** ****** **** not **** **** ********* about ******* **** ******* ********* for ** ********** ***. ************, ******* ***** has **** ********* **** "*** ****** ****** ********* 44 ******* *********!", ********* ********** *** stock ****** ** *********.

*** ** ********** *** placed ****** ************ ** exporting ******** ** * select ****** ** ******* entities, ********* ** ******** subsidiaries ** *********’* ****** company ****, *************** ******.

****** **** ****, ** examine **** **** *****, how ********* ** ******* to **** *** **** the ********* ****** ** Hikvision ***** **.

[***************]

Entity **** - '*********** ** ******'

** ****** *, **** the ** ******** ****************** ******* “********” ** *** “Entity ****.”

***** ***** ********* ** ********** *** want ** **** ***** to ***** ***** ***** are ********* ** *** Export ************** ***********, **** as ********* *** ***********, must ****** * *******. ********* **** * ******* is ****** ********* ** the ******* ****** ****** officially ******** ***** * “presumption ** ******.”

** *** ** ***** Department ******** [**** ** longer *********]:

*** *.*. ********** ******** exports ** ********* *********, software *** ********** ** a ***** ** ******* our ******** ******** ********* and ******* ****** **********

Impacted - *** ** *****, ******, ***** ******** **********

** ********* *****, *** key ****** ** **** controls ** ***** ******** company **********, *.*., ***** and ******.

***** ****** *** ******** ** *** *** **** its "************** ******** *** subject ** *** ****** Regulations, *** ***** (********* its ************ *********) *** an ****** ******* ** place ** **** ***** export ********** ***********." *** commerce **********'* **** ** ********** *********** ****** **** ** ********* all ************* **** *********** speed ** * ****** or **** *** **-*** or ****, ** * clock ********* **** ********* 25 ***. ***** ********* detailed ***** ** *** products' ***** ************ *** ****** ********** ********. *** **** ***** beyond ***** ******* *** requirements. ** ** *******, the **** ** ********** used ** **** ***** ****, *****'* ** ******, all *** **** **** than * ****** *** are **-***.

****** *****'* ******** ******* the ******** **** ***** does ***** *** *****' export ********, *******, *** high ***** ** *** DGX-1 ****, ***** ** is ******* **** *********, **** *** ******* *** ********.

Global ******

*** ****** ** **** export ********, ****** ** tariffs, ***** ** **** globally, ***** ** ***** block *** *** ** US ********** ** ******-********** Chinese ******** ********** ** where ***** ******** **** ultimately **** (*.*., *** US, **, ******, *****, etc.).

CETC ******* ********

** *** ** ******** added, ** *** ********** by ******** *********** ********** [**** no ****** *********]*****: * ******** ********** and ** ** ***** subsidiaries. *** **** ** a *****, ***% *****-***** defense *** ** ************ that **** * ***** number ** ******** *** scientific ******** ********** (********* *********).

*** ********** ******** *** their ***** ** ********* are:

  • ************ *********, ***** (**************)
  • ************ *********, ******* (*****; it ** ***** ** the********** [**** ** ****** available]” ** *****’* ***** industry)
  • ************ *********, ***** (***** *** ******** *********** [link ** ****** *********])
  • **** ******** *********, ******* (**************** *** ***** ** ******** products )

Reasoning *** ***** ************ ******

*** ******** ********** ****** the ************ **** ******* due ** *** ********** illegally ***** ******** *** military *** ** *****, noting:

** ********** ***** ** believe, ***** ** ******** and *********** *****, **** all ** ***** ******** are ******** ** *** illicit *********** ** *********** and ************ *** ************ military ***-*** ** *****

** **** ******** ******* were ********.

*** ******** **** **** believed “** ** ********, or ** **** * significant **** ** ***** or ******** ********, ** activities ******** ** *** national ******** ** ******* policy ********* ** *** United ******.”

**** ** *** ******** mentioned ** *** **** appear ** ** ******** involved ** ***** ************ production, ** ** ****** ****** of ***** ************ ** Hikvision *** *** ********.

CETC *** *********

*********’* *********** *********** ** CETHIK, ***% ***** ** the ****, ***** *** CETC's **** ******** ********* owns ******* ***** ******* of ********* ** ******** in *********’* ****** ********* ******. *********’* ********, **** Zongnian, ** **** *** director ** *** **** *********. The ******* ***** ***** the ************:

********* ******* **** ***** to *** **** ******. According ** ***** **** **********, ********* ** “*** most ********** ****** ***** CETC” *** ** **** accounted *** **.*% ** the ************’* ****** *******. ********* ****** **** *** of *** ****’* **** ******** ********* ** ********, which ** ******* ***** to.

Worrying ************ *** *********

*** ******** ** ****** restrictions ******* **** ******** institutes **** * ******** precedent *** *********. **** ************ *** * bureaucratic ******** ** ** obscure ****, ****** **** ************* easier ** ****** *********** * ************* **** - ** ******** ** votes *** ******** ************ ********************** *** ** ********* a **** ** ****** that ******* ** *** the ************ ********* *** ********* on *** ****** ****.

*******, ********* ******* *** a *********** ************ **** the ******* ********, **** as * ******* **********-***** surveillance ************ *** ** China's ******** ********. *** example,*********'* ******** **** * speech ******* ** **** touting'******** ********' ***********, ********** with * **** ****** ******** ** ******* ***** media ***** ** ********* touted**** '******** ********' *********** featuring *********.

** ********* ** *** 52nd ********* **** ***** to *** ****** ****, Intel ** ****** ***** need ** *** ****-********** licenses ** ****** ***** products ** *****. *** the ******** ********** ***** even ******** *** *** ****** ** *** regulated ***** - ********* the licensing process ********** - ** they ***** ***** ***** were ***** **** **** a ******* ********-*** **** in ******* ***** ** *.*. *****.

*******, ********** ************* *****-** ********* *** to ********* *****’* ***** war, ***** ** ** ********* that **** *** ** the **** ** *** future.

Comments (7)

Charles, good reporting!

One other related thing that Charles has been looking at, that did not make the piece, is that Hikvision aims to develop their own AI chip. At least part of this motivation is the concern / fear of being blocked out of American suppliers like Nvidia and Intel Movidious with such government action discussed here.

And if you think this will never happen, ask yourself, a year ago did you believe that the US government would ever ban Hikvision for US government use?

how would this affect the Turbo HD product line since the TDI chips is an American based technology.

This could effectively put Hikvision out of business

HD-TVI is from Techpoint, an American company. Note: HD analog (i.e. TVI) is a distinct minority of Hikvision's overall business. We will look into whether or not that would be covered. I had not thought of that so thanks for raising it.

Hi, this is a good point. The Commerce Control List includes:

Transmit/receive or transmit modules

transmit/receive MMICs (Monolithic Microwave Integrated Circuit),

Transmit/receive or transmit module technology

There are some minimum requirements to be met, however. See page 12 of this document:

operation at frequencies above 2.7 GHz, and all of the following:

b.12.a. A peak saturated power output (in watts), Psat, greater than 505.62 divided by the maximum operating frequency (in GHz) squared [Psat>505.62 W*GHz2 /fGHz 2 ] for any channel

b.12.b. A “fractional bandwidth” of 5% or greater for any channel

b.12.c. Any planar side with length d (in cm) equal to or less than 15 divided by the lowest operating frequency in GHz [d ≤ 15cm*GHz*N/fGHz] where N is the number of transmit or transmit/receive channels

b.12.d. An electronically variable phase shifter per channel.

 

I'm not sure if restricting access of Chinese companies to certain technologies is the best possible move in this poker game. Maybe it would be better to add government controlled backdoors to Intel/Nvidia chips and sell the hardware for the cheapest possible price so that all countries stop their own development and get dependent on the technology. Later on, the government could use the backdoors and let the chips send foreign company secrets to a trustworthy server?

 

Damn, do you think what I think? Maybe someone had this idea before? :)

Deliberate back doors are a bad idea - just ask HikVision - that’s how they got into this whole mess in the first place:

Oh yeah - that, and being a state owned enterprise for a dictatorship. 

HikVision shares and market capitalization:

52 week high/low: 44.59 / 28.43

News Update:

Senator Marco Rubio (R-FL) and Congressman Chris Smith (R-NJ) have released a new letter calling for Xinjiang sanctions which may further affect Hikvision and Dahua. Here is a news article about the letter, which asks the Commerce Department to add Xinjiang authorities and "any businesses profiting from the expansion of the region's surge in security spending" (i.e. Hikvision and Dahua) to the US government's Entity List.

Being added to the Entity List is less serious than Global Magnitsky but still harmful.

As discussed above, it means US businesses and persons looking to sell most equipment to Entity Listed-firms must first apply for a license from the Commerce Department. These licenses are very difficult to obtain, officially operating a "presumption of denial" policy. This is a double whammy for Hikvision and Dahua, who are now directly under threat of Global Magnitsky (Treasury Dept) and Entity List (Commerce Dept) sanctions.

Being added to the Entity List means nothing if Hikvision and Dahua are already sanctioned under Global Magnitsky, which would ban all transactions between them and US entities. However, one way this could play out is that Hikvision and Dahua do not get sanctioned under Magnitsky but are still placed on the Entity List.
 
This is less severe than Magnitsky since it does not freeze their US assets or ban all US-related transactions. But it would still harm their supply chain, basically making it near-impossibile for US firms like Ambarella to export chips to them.
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