Selling the Surveillance State

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Exporting technologies of social control

As North Americans we often suffer from an insular outlook onto the world. We wrongly regard our position as the centre, and everything else as the periphery.

While there are a range of reasons as to why this is foolish and self-damaging, it is in the realm of technology that it can be particularly revealing.

For example we still subscribe to the increasingly false world view that Silicon Valley drives innovation and technological development. While the culture and ethos of that part of California continues to influence us all, it is but one part of a larger network of technology and philosophy that shapes the global village.

The Chinese technology industry has arguably eclipsed Silicon Valley in power and influence, although many of us in North America remain relatively oblivious to this.

In the hopes of helping to change this, at least in the context of this newsletter and its readership, we’ll put in some effort moving forward to explore some of the major Chinese technology companies that are active globally.

In today’s issue, let’s take a brief look at Hikvision, a major Chinese manufacturer and supplier of video surveillance equipment. Partly state owned, Hikvision is one of the premiere innovators and exporters of surveillance gear.

For example, check out some of their (seemingly absurd) advertisements, like this one that emulates old school Hong Kong kung fu flicks:

Here’s an ad that highlights the object detection features of their security systems:

And another that promotes their facial recognition:

What I find fascinating about these ads is that they reflect a different cultural approach to surveillance. While the last two are produced for a western audience, they still normalize this surveillance technology in a way that I’m not sure most people would be comfortable with.

Which is not to say that western corporations are not just as in favour of surveillance, but there tends to be more emphasis on both data protection and judicious use. Whereas this tends to frame this technology as neutral and without consequence. Carrying forward the broader myth of convenience as a justification for greater surveillance.

Of course it is also worth noting that in the cloud computing era, surveillance equipment does not operate in isolation. Rather like ET they tend to phone home, and the ongoing concern with Chinese equipment, especially ones produced by a partially state owned firm, is that they’re part of a larger sprawling Chinese surveillance system.

As a result, Hikvision was banned last year by the US government.

Although as with all attempts to ban technology, it may not have been as effective as desired.

And further, these are just attempts to ban the technology from US government agencies who would want to buy them. This does not prevent the rest of the global market from buying this cheap tech.

“The concern is, are the Chinese extra-territorialising their surveillance state? You could make a case that they are when other countries are using technologies like Hikvision that they use on their own citizens. They can now do globally,” said James Lewis, a researcher at the Center for Strategic and International Studies in Washington DC.

Hikvision has rebutted those concerns and said there is no evidence that surveillance collected in other countries using its cameras has ever been sent to Beijing.

But the deployment of the Hikvision cameras without any formal statement of concern by the British government – public records show they are being used in Kensington and Chelsea, Chelmsford, Guildford council, Coventry council, and Mole Valley council, among others – is evidence of how the British and US governments have diverged in their responses to concerns about Chinese surveillance and human rights abuses.

David Lloyd Leisure, the upmarket UK gym chain that has said it has “zero tolerance” for modern slavery, deployed Hikvision thermal cameras in some of its gyms as part of its Covid-19 safety protocol.

How these companies pivot or adapt speaks to how the global surveillance state is being deployed.

But investors should wonder: Even if it weathers the current environment, can Hikvision make the transition to a new-tech company? Despite growth slowing for its public business, Hikvision still leans on Beijing. Subsidies included in profit-and-loss statements grew 73% in 2018 and a further 30% last year, to 413.8 million yuan ($61 million), and added 215 million yuan more in the first half of 2020. Value-added-tax rebates, refunds and the like came in at nearly 1 billion yuan in the first half, after receiving 1.9 billion yuan in 2019.

The company commands fat margins: upward of 40% on a gross basis. The overseas business and Hikvision’s thermal products help, but face growing backlash and are increasingly shut out. The gain on equipment is over 50%, while newer segments – like smart homes and other “innovative” areas — are closer to 39% and 17%. Robotics is lucrative but still small. A change or shift of business will put these at risk as the costs go up.

Hikvision is going big on research and development “to address increasing uncertainties.” It had 19,065 engineers, almost half of its total headcount, in 2019, up almost 20% from the year before. Spending rose 22% to 5.5 billion yuan last year, almost 10% of total sales, and reached 3.06 billion yuan in the first half. Going by its big plans, the company will have to keep that up. Even with some offsetting subsidies, morphing into a high-tech company at scale is expensive. The tech Cold War isn’t leaving it much choice.

These three paragraphs offer an essential insight into the dynamics of this global surveillance technology race. One of the leading global manufacturers benefits from government subsidies and significant state support of research and development. Exporting this tech to the world helps reinforce the competitive advantage and technological lead a company like this can posses.

Especially as a result or in response to this pandemic. As we’ve discussed, surveillance technology is experiencing the largest boom ever, with unprecedented expansion and deployment, in many cases to help support public health measures.

For example check out this solution from Hikvision:

And that’s just one of many. The larger problem being that surveillance is a myth, fostering the illusion of control, which in a pandemic an be dangerous.

Although whether surveillance is a myth may not be as important as the intoxicating effects of being able to surveil. This is partly why surveillance is an easy sell.

As a pyramid scheme it can be incredibly effective at distracting the watcher from who might be watching them. Our gaze goes to where we want, and in so doing, we neglect to think about who is watching us.

Yet that may be the fundamental issue about surveillance technology. Is it even possible to control who can see and access the feeds and data that is created? Given the ludicrous state of our cyber insecurity, why would we open more holes and eyes before we can secure the ones we have?

I guess we should just be thankful for what we’ve got (the ability to surveil) and forget about what we don’t have (like our privacy)?

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