Hikvision Digital Technology, China’s top surveillance camera supplier, has warned it may lose customers and miss out on business opportunities after Washington placed the company on a trade blacklist that restricts it from buying American technology. 

The Hangzhou-based company expects “uncertainties” to persist in overseas markets despite continuous dialogue with customers and efforts to sustain stable component supplies, a senior executive said at an investor meeting on Friday.

People visit a Hikvision booth at a security exhibition in Shanghai on May 24, 2019. (Picture: Reuters)

Hikvision reported a 17% surge in net income to 3.81 billion yuan (US$538 million) in the September quarter against total revenue of 15.92 billion yuan. Full-year net income is forecast to grow 5 to 20%.

“We need time to engage suppliers and customers in ongoing conversations, boosting their confidence through stable supply,” said Hikvision senior vice-president Huang Fanghong in the second investor communication event since the company was added to the Entity List on October 7.

“Some customers may take a ‘wait and see’ approach, wanting to know what would happen to Chinese companies with the sanctions and resume business when it gets clearer,” she said.

The surveillance giant was one of a number of companies added to the list, including its peer Dahua Technology, facial recognition start-ups SenseTime, Megvii and Yitu, voice processing specialist iFlyTek, Xiamen Meiya Pico Information Co and Yixin Science and Technology Co. Chinese telecoms giant Huawei Technologies was placed on the Entity List in May.

The ban comes as China and the US are engaged in a new round of trade talks. Founded in the wake of the September 11 terrorist attacks, Hikvision has grown into the world’s largest surveillance camera maker amid surging demand for security equipment across the globe and the country’s own state-directed efforts to build an “omniscient” surveillance network by 2020.

The company “strongly opposed” the US government’s decision which it said came despite its efforts over the past 12 months to clarify what it called misunderstandings over human rights and security issues.

However, Huang confirmed that some product supplies from the US resumed last week, as materials provided by most American suppliers are “not entirely US originated,” leaving leeway for discussions and evaluation.

Hikvision reported a 70% surge in inventories mainly due to stockpiling of key components in the first nine months of this year, according to its third-quarter earnings report.

The sheer size and business scale of the company has enabled Hikvision to expand its operations and move upwards in the supply chain, according to Huang. “Although we are faced with exterior pressure, we are going with the tide,” she said. The company reported a 30% increase in research and development expenses in the first nine months.

“We expect continuous growth for public security demand both at home and overseas in the long term,” said Huang.

“The international situation we are facing has exceeded what businesses could address,” she said, adding that the company expects impacts to unravel and emerge “more directly” in the fourth quarter.