US adds Hikvision, SenseTime and Megvii to trade blacklist

The U.S. government has widened its trade blacklist to include some of China’s top artificial intelligence startups, Reuters reported.
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The decision targets 20 Chinese public security bureaus and eight companies including video surveillance firm Hikvision, as well as leaders in facial recognition technology SenseTime Group and Megvii Technology.

The action bars the firms from buying tech components from U.S. companies without U.S. government approval. Earlier, Washington imposed similar conditions on China’s Huawei Technologies on national security reasons.

The Commerce Department said in a filing the entities have been implicated in human rights violations and abuses in the implementation of China’s campaign of repression, mass arbitrary detention, and high-technology surveillance against Uighurs, Kazakhs, and other members of Muslim minority groups.

“The U.S. Government and Department of Commerce cannot and will not tolerate the brutal suppression of ethnic minorities within China,” said Secretary of Commerce Wilbur Ross.

China said the United States should stop interfering in its affairs. It will continue to take firm and resolute measures to protect its sovereign security, foreign ministry spokesman Geng Shuang told a regular media briefing without elaborating.

Hikvision, with a market value of about $42 billion, calls itself the world’s largest maker of video surveillance gear.

SenseTime, valued at around $4.5 billion in a May 2018 fundraising, is one of the world’s most valuable AI unicorns while Megvii, backed by e-commerce giant Alibaba, is valued at around $4 billion and is preparing an IPO to raise at least $500 million in Hong Kong.

The other companies on the list are speech recognition firm iFlytek Co, surveillance equipment maker Zhejiang Dahua Technology, data recovery firm Xiamen Meiya Pico Information Co, facial recognition firm Yitu Technology and Yixin Science and Technology Co.

Hikvision also said that it was assessing the potential impact of the blacklisting and was working on contingency plans.

John Honovich, founder of surveillance video research company IPVM, said Hikvision and Dahua both use Intel, Nvidia, Ambarella, Western Digital and Seagate Technology as suppliers and that the impact on the Chinese companies would be “devastating”.

The blacklisting of Huawei has hurt many of its U.S. suppliers that depended on the world’s largest telecommunications company for revenue and made it difficult for Huawei to sell new products.

Reuters reported in August Hikvision receives nearly 30 percent of its 50 billion yuan ($7 billion) in revenue from overseas.

SenseTime said in a statement it was disappointed by the U.S. move, that it abides by all relevant laws of the jurisdictions in which its operates and that it has been actively developing an AI code of ethics to ensure its technologies are used responsibly.

Megvii said it objected to being placed on the blacklist and that it required its clients not to weaponize its technology or use it for illegal purposes.

IFlytek said its placement on the blacklist would not affect its daily operations, while Xiamen Meiya said its overseas revenue was less than 1 percent of total revenue and that most of its suppliers were domestic companies.