Hikvision’s Top North American Exec Discusses China Ties, Market Goals
Jeffrey He explains the Chinese video surveillance leader’s structure and eagerness to deliver value.
February’s annual Business Issue of SSI includes a profile of Hikvision, which has grown tremendously in the past 10 years to become the world’s No. 1 video security surveillance products and solutions manufacturer. However, as the company has disrupted the U.S. marketplace by delivering products that perform at levels typically found in higher priced alternatives, so too has it come under fire due to its communist China base. Hikvision USA/Canada President Jeffrey He, a 25-year security veteran (GE, Bosch, DSC, Verint) who is also featured in the print piece, addresses the controversy here as well as other aspects of the firm’s operations.
Let’s address the elephant in the room and attempt to clear the air regarding questions out there about Hikvision’s financing and relationship with communist China’s government. How can you help U.S.-based security professionals feel good about doing business with Hikvision?
Jeffrey He: Thank you for that opportunity. This is a pretty large question. I’m not really an expert on the national politics, or the macro economy. But let me try to explain a bit of the structure of the company. There are two state-owned enterprises that own 42% of the company, with other people and venture capital investors owning the rest, including 18% from private equity in Hong Kong. Then in the open stock market there are shareholders all over the place. Some of the shareholders are foreign investors, as well.
For people who don’t really understand what state-owned enterprises are, and they’re trying to equalize them with the government, that’s too simple and sometimes naÃ¯ve or purposely misleading. You can’t equalize state-owned enterprises to the government, that’s No. 1. No. 2, even though we’re partially owned by these SOEs, we’re also owned by many other legal entities or private parties. We are responsible to those shareholders as well. Many believe we have received funding from the government. In fact, yes or no, I am a Canadian myself. I worked for a Canadian company in the past. When we did research, we could apply a research grant from the Canadian government. If it’s approved or not approved is a different story. In the past, the company I worked with received a certain grant. So Hikvision has a certain grant from the government as well, for research and development.
On the commercial side, we go out for tender. That will be a totally different story. The tender has a different element, different requirements. As part of the tenders, the end user or the controlling agent decides what aspects they will look for to select the winner. With the growth of the economy in the past 10-15 years, certainly the size of the security industry has tremendous growth in China. If we look at the reports, the China security industry is probably bigger than the United States. Certainly that helps Hikvision grow in the market segment, and we’ve had growth of the company getting stronger. Certainly, more people would like to invite Hikvision to submit a tender. The winning probability is getting higher. So I think naturally that’s what it is.
One other element is concerning some of the major projects. Customers would have to select a reliable partner. We have over 2,000 sales and support associates in China, and 200 in North America. We’re working with end users; we’re working with the partners. This is such a strong workforce. Certainly you would have a better winning opportunity.
Let’s bring it down to a more basic level. I’m a U.S.-based dealer or integrator visiting Hikvision’s booth at a trade show and I bring up this concern. I’m considering making Hikvision my main partner as a video supplier, but I have reservations due to these kinds of reports and rumors. What would be conveyed to set my mind at ease and make me feel comfortable?
He: Again, we can answer that on the larger scale, or in a much more commercialized scale. On a commercial scale, I’d say look at the amount of financing, and this is a line of credit. So basically we can choose to use that money under the commercial terms and conditions set for that financing. Or we can choose not to use it. In my opinion, this is some sort of recognition for a company’s stability and financial performance. Most importantly, we are not only receiving the $3 billion from the one bank, but also have received previously from other banks. This includes Citibank, which is a U.S. bank; HSBC, which is headquartered in London, I think; and other international institutions. So there’s a lot of lines of credit being offered to Hikvision commercially. I would say that there’s a strong recognition for Hikvision’s performance. Therefore, I would say to our partners rest assured they are working with an outstanding company for the long run.
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