China blacklist creates supply chain confusion

Of the eight commercial entities added to the blacklist, six of them are some of China’s most successful digital forensics, facial recognition, and AI companies. However, the two surveillance manufacturers who made this blacklist could have a significant impact on the global market at large—Dahua and Hikvision. 

Putting geopolitics aside, Dahua’s and Hikvision’s positions within the overall global digital surveillance market makes their blacklisting somewhat of a shock, with the immediate effects touching off significant questions among US partners, end users, and supply chain partners. 

Frost & Sullivan’s research finds that, currently, Hikvision and Dahua rank second and third in total global sales among the $20.48 billion global surveillance market but are fast-tracking to become the top two vendors among IP surveillance camera manufacturers. 

Their insurgent rise among IP surveillance camera providers came about due to both companies’ aggressive growth pipelines, significant product libraries of high-quality surveillance cameras and new imaging technologies, and low-cost pricing models that provide customers with higher levels of affordability. 

This is also not the first time that these two vendors have found themselves in the crosshairs of the U.S. government. In 2018, the US initiated a ban on the sale and use of Hikvision and Dahua camera equipment within government-owned facilities, including the Department of Defense, military bases, and government-owned buildings. However, the vague language of the ban made it difficult for end users to determine whether they were just banned from new purchases of Dahua or Hikvision cameras or if they needed to completely rip-and-replace existing equipment with another brand. Systems integrators, distributors, and even technology partners themselves remained unsure of how they should handle the ban’s implications, only serving to sow confusion among U S customers. 

In addition to confusion over how end users in the government space were to proceed regarding their Hikvision and Dahua equipment came the realisation that both companies held significant customer share among commercial companies throughout the U.S. market—so where was the ban’s line being drawn for these entities? Were they to comply or not? If so, how? Again, these questions have remained unanswered since 2018. 

Hikvision and Dahua each have built a strong presence within the US market, despite the 2018 ban. Both companies are seen as regular participants in industry tradeshows and events, and remain active among industry partners throughout the surveillance ecosystem. Both companies have also attempted to work with the US government to alleviate security concerns and draw clearer guidelines for their sales and distribution partners throughout the country. They even established regional operations centres and headquarters in the country. 

While blacklisting does send a clearer message to end users, integrators, and distributors—for sales and usage of these companies’ technologies—remedies for future actions still remain unclear. When it comes to legacy Hikvision and Dahua cameras, the onus appears to be on end users and integrators to decide whether rip-and-replace strategies are the best way to comply with government rulings or to just leave the solutions in place and hope for the best.

As far as broader global impacts of this action, these will remain to be seen. While the 2018 ban did bring about talks of similar bans in other regions, none of these bans ever materialised. Dahua and Hikvision maintained their strong market positioning, even achieving higher-than-average growth rates in the past year. Blacklisting does send a stronger message to global regulators though, so market participants outside the US will just have to adopt a wait-and-see posture to see how, if at all, they may need to prepare their own surveillance equipment supply chains for changes to come.