Daybreak - Globally sanctioned Chinese companies rule India's $5 billion surveillance market

Episode Date: May 16, 2024

CP Plus, one of the most popular CCTV camera-makers in India, gets 80% of its supplies for its parent company, Aditya Infotech Ltd (AIL), from the Chinese security-equipment manufacturer Dahua Technology.Dahua and Hikvision, another Chinese surveillance-tech firm, are facing sanctions in the UK, US, Australia, and other countries, for their connection to the Chinese government.But in India growing surveillance tech market, both these companies enjoy more than a 50% market share. And bringing them under control is turning out to be complicated for the government.Tune in.Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Raman Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production.

Sita and I are still reeling from the intensity of our first studio recording. Intermission launches on March 23rd. To get an alert as soon as we release our first episode, please follow Intermission on Spotify and Apple Podcasts or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. India is growing and apparently so is our need for surveillance. But CP Plus has got that covered for us.

The CCTV camera maker has set up the world's third largest manufacturing facility for surveillance products here in India. Let me read out an excerpt from an advertorial that it recently published in a popular newspaper. And I'm quoting, with its dedicated endeavors under the Made in Bharat Initiative, CP Plus is determined to realize the inherent potential of India. Celebrating the spirit of Indianness, the brand has launched many steps to align with Prime Minister Modi's mission to turn India into a global powerhouse. end quote.

Now, you may have actually seen some of CP Plus's ads. That was Bollywood actor Salman Khan in a video ad campaign for CP Plus. A few years ago, I remember seeing massive billboard ads for CP Plus all around Delhi. And they featured Salman Khan dressed in very Mission Impossible Ethan Hunt like clothes complete with a bulletproof west. But it was the tagline of the ad that I found a bit unnerving. It said, Upurwala's Sab Dekra He, which essentially translates into something around the lines of Big Boss is watching you.

In his book, Harsh Kameka, the chairman of CP Plus explained that Upurwala meant God. He wrote about how the creative team came up with the idea that they thought would resonate with most Indians. Anyway, CP Plus also happened to be one of the main sponsors of Big Boss. Of course. But I'm not here to tell you about the ethics of surveillance today. I'm talking about CP Plus because these advertisements skip a very important piece of information about the company. You see, 80% of CP Plus's supplies for manufacturing as well as trading activities for its parent company, Aditya Infotech Limited, come from Chinese surveillance equipment manufacturer, Dowwa technology.

And the problem is, Daua and Haigian, another major Chinese security tech manufacturer, are facing regulatory action in the US, the UK, Australia and other countries for their close links to the Chinese government. But in India's growing CCTV market, which, by the way, is said to be worth 5,000 crore rupees, both of these companies are leaders. Today, they enjoy a market share of more than 50%.

And it's not like the government is oblivious to what is happening, especially since the tensions with China along the border have escalated more than once. But restraining these companies is not as easy as you might think. It is a super tricky policy challenge. Welcome to Daybreak, a business podcast from the Ken. I'm your host, Nagygham. Sharma and I don't chase the news cycle. Instead, every day of the week, my colleague Rahal Philipos and I

will come to you with one business story that is worth understanding and worth your time. Yes, you heard that right. We are taking daybreak daily from this week onwards. And we have something special for you stored for this Friday. Today is Thursday the 16th of May. High questions links to the Chinese government were first reported back in 2019. It was found that the company was supplying its cameras to surveil mosques, schools and concentration camps in China's Xinjiang region. They were being used against the persecuted minority community of the Uyghurs.

In response, many countries began sanctioning Hike Vision. In December 2021, the US effectively banned these companies from selling in the country for, and I'm quoting, the purpose of public safety, security of government for, facilities, physical security surveillance of critical infrastructure and other national security purposes. Just before that, the British government also announced that it would ban High Vision from sensitive areas. Some British politicians were still not satisfied with it and wanted more action

against these Chinese security tech firms. A Guardian report published in December 2021 talked about how High Vision was promoting ethnicity recognition technology to British and European countries. In 2022, Australia too announced that it would remove Chinese-made surveillance cameras from its defence sites over national security fears. So, what is India doing? The Indian government has added these Chinese companies to its radar. In July 2020, the government said through an order that it would not allow companies linked

to entities from countries that share a land border with India to bid for tenders of the central government. This meant that Hike Vision and Daowa could not bid for projects of various ministries, public sector units, union territories or projects funded by the centre. But you see, this was only a sort of a partial ban. Chinese companies like Hikevision and Dowwa are already deeply embedded into our security tech landscape. Stay tuned to find out how. Influence of these two Chinese companies in the surveillance tech industry is far-reaching. And bringing them under control is very, very difficult. The Ken reporter Anushka Jain who wrote about it said that it is like taming a monster with regenerating heads.

You cut off one and another one pops up immediately. And the reason for that is that High Quision and Dawah not only sells surveillance products. They also sell components that are used to make them and the software that is used to power these products. The technology is so superior so far that no Indian manufacturer has been able to figure out the entire value chain. In the past, these companies have managed to win large government contracts, and some of them are in what you may call sensitive areas. They have been leaving their competitors behind own prices. You remember Huawei, right?

The Chinese telecom tech giant? It came and swept markets not just in India, but globally as well. and it was only much later that authorities woke up to its links to the Chinese state surveillance program. The Ken spoke to a senior executive at a multinational company that works in the sector and has been involved in several government projects like smart cities. And they told us that the Indian government order restricts Chinese companies from bidding for central government projects. But that does not mean that their products cannot be used. More on this in the next segment.

You see, in India, High Vision operates as Prama High Vision. It is a 48 to 52 joint venture with an Indian tech company called Prama India, where High Vision holds the majority stake. In September 2021, the Indian Navy actually asked all its formulations to stop the procurement of CCTV cameras and surveillance systems from High Vision. But again, there are no broad restrictions against High Vision. from the government itself. In fact, Haik Vision has also supplied to Bharat Electronics,

and Bharat Electronics works on highly sensitive and classified defence projects in the country. The Ministry of Defence, though, has noted that Haik Vision marketed its projects as made in India. In late 2020, Ashish Dhaken, the managing director and co-owner of Prama High Vision launched another brand called Prama India, which, like CP Plus, parent company Aditya Infotech uses the make-in India tag. And that brings me to Dawa. Dawa's Indian subsidiary was established in 2017, but the company has been active in the country since at least 2009.

This was when it entered into a partnership with Aditya Infotech Limited. Till the year that ended in March 2020, the subsidiary was mostly providing marketing services to the parent company. But after that, the company started. local distribution and billing. According to the filings with the Ministry of Corporate Affairs, Daohar logged over 800 crore rupees in revenue in India in 2022. Over the last four years, the company has strengthened its local presence.

It has expanded its sales teams and set up new headquarters in Gurgaon. Plus, it's not like they're just selling their branded products. Smaller companies also re-label Hyke Vision and Da'a equipment and sell them. The executive Anushka spoke to also told her that before 2020 restrictions, Hike Vision and Dowah would have at least a 20% share in government CCTV surveillance projects. For example, Hikevision supplied cameras to state-owned Railtell Corporation of India Limited. Railtel provides security and surveillance facilities to the Indian Railways. Daoah has also supplied cameras to the Delhi Transport Corporation.

So, India is their largest market outside of China. So you see, what Anushka meant when she compared them to a monster with regenerating heads? Even if they're not allowed to bid for government tenders, these companies have businesses and partnerships with private enterprises. Cut that head off and we still have retail sales. And apart from all of these, there are a range of electronic products, from baggage scanners to switches to interactive boards for classrooms that they're. these companies are selling.

And of course, the Upalala that is watching everything. I meant the CCTV camera components. Daybreak is produced from the newsroom of the Ken, India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form feature stories, newsletters and podcast extras. To subscribe, head to the Ken.com and click on the red subscribe button. on top of the Ken website.

Today's episode was hosted by Snikta Sharma and edited by Rajiv Siyah.