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Hikvision says US ban to impact revenue in short term, but profits unchanged

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Hikvision says US ban to impact revenue in short term, but profits unchanged

The Chinese surveillance video producer and software-maker Hangzhou Hikvision Digital Technology Co. Ltd. said recent U.S. sanctions will impact its revenues but not its profits on a conference call with analysts Oct. 9.

The U.S. Department of Commerce made 28 additions to its entity list Oct. 7, which took effect Oct. 9. Hikvision and seven other Chinese companies are "enabling activities contrary to the foreign policy interests of the U.S.," the department claimed. The companies have been "implicated" in human rights violations taking place under China's high-technology surveillance of Uighurs, Kazakhs and other Muslim minority groups.

Hikvision mainly relies on China-based suppliers for camera lens and optoelectronic components and depends more on U.S. suppliers for graphics processing units, or GPUs, and central processing units, Hikvision's general manager, Hu Yangzhong, said on the call.

"The servers are not our main business. We rely on [our video surveillance] software business more for profit," Hu said. "It does not matter [if we] produce more or less back-end products," he added.

Hikvision has many substitutes for GPUs such as artificial intelligence application-specific integrated circuits, which are essentially AI-focused chips, Rex Wu, a telecom, media, and technology equity analyst at Jefferies LLC, said in an Oct. 8 distribution note. Traditionally, AI chips have been cheaper than GPUs, Wu said.

Analysts earlier said most of Hikvision's components imported from the U.S. are replaceable. Therefore, long-term impacts of the U.S. ban are limited.

On the call, Hikvision executives said the company will design its own chips if necessary, without disclosing details on plans. They added that a human rights investigation report, conducted by a U.S. legal team, will be available in early November.