HONG KONG — Zhejiang Dahua Technology, a major Chinese surveillance camera manufacturer, has sold its fully owned subsidiary in the U.S., virtually divesting from the country after it was slapped with a series of sanctions over the years.
Dahua disclosed in its latest annual report, published Monday evening, that the group had completed the disposal of all shares in Dahua Technology USA. The buyer is Central Motion Picture USA, a unit of a Taiwanese filmmaker, which paid $15 million. The deal also included the sale of $1 million worth of inventory products from Dahua’s Canadian unit to the purchaser.
The agreement was signed on Jan. 3 and the transaction was completed by the end of that month, so the American subsidiary has been deconsolidated from the Dahua group. It was the only remaining unit in the U.S., according to the latest annual report.
Dahua did not specify any reasons for unloading the subsidiary, which it had established in 2014 in an effort to extend its international reach. The company had not responded to queries from Nikkei Asia at the time of publication.
But Dahua found itself in the middle of the U.S.-China tech war in recent years.
The company’s security cameras were designated “covered telecommunications equipment or services” under the National Defense Authorization Act (NDAA) of 2019, signed by then-President Donald Trump. After the act took effect in August 2020, Dahua was prohibited from entering into contracts with U.S. federal agencies, along with Huawei Technologies, ZTE, Hytera Communications and Hangzhou Hikvision Digital Technology.
Then-U.S. President Donald Trump holds up the National Defense Authorization Act of 2019 after signing it in August 2018. © Reuters
In the meantime, Dahua was also placed on the Entity List by the U.S. Commerce Department in October 2019. It joined 28 Chinese public security bureaus and companies, including Hikvision and Hytera, along with iFlytek, SenseTime Group, Megvii Technology and Xiamen Meiya Pico Information.
The move stemmed from allegations of links to the mistreatment of Uighur Muslims and other ethnic minorities in the Xinjiang Uighur Autonomous Region. The trade blacklist means these entities were deemed to be “acting contrary to the foreign policy interests” of the U.S. and are thus barred from buying parts and components from American companies without government approval.
In March 2021, the Federal Communications Commission (FCC) concluded that Dahua and four other Chinese peers — the same companies as on the 2019 NDAA list — “pose an unacceptable risk to U.S. national security or the security and safety of U.S. persons.” The Secure Equipment Act was signed into law by President Joe Biden in November that year, obliging the FCC to ban new equipment authorizations for these companies within a year of the legislation.
Tightening the screws further, the Pentagon included Dahua in a group of “Chinese military companies” in October 2022. Being on this list means that the company is considered part of China’s military-civil fusion strategy, which supports the ongoing efforts by the People’s Liberation Army to modernize its weaponry and capabilities.
Dahua categorically denied all these allegations through the years. Nevertheless, it steadily reduced its presence in the U.S.
The Hangzhou-based company sold another wholly owned U.S. subsidiary, Lorex, to the Taipei-based cloud service company Skywatch in December 2022. This deal was in a package with two other Lorex group companies in Canada and the U.K., for a total of 482.03 million yuan ($66.6 million). The group had been acquired from Flir Systems, a Belgian thermal imaging maker, in 2018 for $29 million.
As for the future of Dahua Technology USA, the parent of the buyer is major Taiwanese film and visual content producer Central Motion Picture Corp. (CMPC), established in 1954 through a merger of the Agricultural Education Film Co. and the Taiwan Film Co.
The company was under the control of the Kuomintang during its former one-party rule, along with other media enterprises, but it was privatized in 2005 under the Democratic Progressive Party administration of then-President Chen Shui-bian. Gou Tai-chiang, a younger brother of Foxconn tycoon Terry Gou, took control afterward and remains the chairman.
The Taiwanese filmmaker did not respond to queries from Nikkei Asia on why it made the purchase.