Security

US-China Trade Tensions Driving Video Surveillance Market Bifurcation

Geopolitical tensions between the United States and China have continued to escalate in recent years, resulting in a series of tit-for-tat legislative actions aimed at restricting access to each other's markets. These actions have especially impacted the video surveillance market, with the US government banning products from major Chinese manufacturers and Chinese firms developing alternatives for US components. As the world’s two major superpowers jostle for economic superiority, it is creating a bifurcation of the global market, according to our latest research. “The US shows no signs of easing restrictions on Hikvision, Dahua and other Chinese firms amid ongoing tensions. The US is also considering further export controls and investment restrictions specifically targeting Chinese video surveillance companies,” our new study of the Video Surveillance market reads. “A bill was proposed in 2022 to ban imports from blacklisted Chinese video surveillance firms and more such proposals are possible. Hikvision could potentially face sanctions under the Global […]

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Geopolitical tensions between the United States and China have continued to escalate in recent years, resulting in a series of tit-for-tat legislative actions aimed at restricting access to each other's markets.

These actions have especially impacted the video surveillance market, with the US government banning products from major Chinese manufacturers and Chinese firms developing alternatives for US components. As the world’s two major superpowers jostle for economic superiority, it is creating a bifurcation of the global market, according to our latest research.

“The US shows no signs of easing restrictions on Hikvision, Dahua and other Chinese firms amid ongoing tensions. The US is also considering further export controls and investment restrictions specifically targeting Chinese video surveillance companies,” our new study of the Video Surveillance market reads. “A bill was proposed in 2022 to ban imports from blacklisted Chinese video surveillance firms and more such proposals are possible. Hikvision could potentially face sanctions under the Global Magnitsky Act, the toughest US human rights sanctions tool, which has only been used on Huawei so far.”

The Foundation for Defense of Democracies (FDD), an opaquely funded US non-partisan think-tank, is proposing a ban on another Chinese video surveillance manufacturer, Tiandy. Arguing that it should be blacklisted and sanctioned by the U.S. and allies due to its involvement in human rights abuses against Uyghurs in Xinjiang and its sales of surveillance technology to Iran. It recommends sanctions under the Global Magnitsky Act, adding Tiandy to export control lists, revoking visas for company officials, and cutting off its access to the global financial system.

The trade dispute has also influenced M&A strategies that are now being designed to adapt to the new geopolitical and regulatory landscapes. For example, Dahua's acquisition of Lorex from FLIR Systems in 2018 was a move to tap into North America's consumer and SMB sectors. However, facing potential U.S. regulatory action, Dahua divested Lorex to Taiwan's Skywatch in 2022 for $72 million, effectively distancing itself from regulatory scrutiny while making a profit at the same time. We should expect to see more deals like this as the trade tension continues.

US China Trade Restrictions Video Surveillance

Other Western nations, such as the UK, EU, Australia, and New Zealand, have all begun to introduce restrictions on certain Chinese companies, based on similar reasons but at a smaller scale to the US. India banned Hikvision and Dahua from government tenders in 2020 as it tries to promote its own domestic video surveillance manufacturers as alternatives to China. And, in 2021, South Korea banned camera models from Hikvision, Dahua and Uniview for one year over falsified test reports then allowed them to resume activity, but South Korea may also have benefited from the US-China trade dispute according to our new report.

“The imposed restrictions on Hikvision and Dahua have created favourable conditions for other international video surveillance vendors. With the decrease of low-cost competition from these Chinese giants in the US and other Western markets, vendors from Europe, Japan, South Korea, Taiwan, and India are presented with opportunities to fill the gaps,” explains our in-depth report. “The changing regulatory landscape clearly favors Western brands and those vendors with transparent supply chains that exclude proscribed Chinese entities.”

The Chinese government has not taken trade actions lightly, imposing retaliatory measures and restrictions on foreign technology companies. In 2019, China announced it would create its own “unreliable entities list” to sanction foreign companies, organizations and individuals that damage Chinese interests, although it is yet to add any entities to this list. China has also begun requiring those operating critical information infrastructure to allocate a certain proportion of their IT and technology procurement budgets to domestic vendors rather than foreign providers, a common practice globally but prohibitive for foreign firms entering the Chinese market.

Impact on Global Video Surveillance Supply Chains

Western-focused video surveillance vendors are being forced to diversify their supply chains beyond China to mitigate risk, but finding alternate suppliers and manufacturing bases after years or decades of China-centric operations cannot occur overnight. Chinese companies are being forced to reduce reliance on US technologies, however, breaking free of supply chains anchored in the US or friendly countries is extremely difficult.

These trade tensions are fundamentally restructuring global technology supply networks, which will take years of investment and effort, and the result will be bifurcated markets evolving independently.

“The trade barriers and tensions between the US and China will accelerate major shifts in the global supply chains for video surveillance equipment and components. With impending FCC regulations, it becomes imperative for video surveillance entities to rigorously reassess their sourcing and manufacturing, ensuring the absence of NDAA-banned components,” warns our latest report. “Those unable or unwilling to adapt risk diminishing their stronghold in the US market.”

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