Facial recognition, digital ID firms land on DOD’s list of Chinese military companies

The U.S. Department of Defense always marks the start of a new year by updating its list of Chinese companies operating in the States which it classifies as military contractors for Beijing. This year’s Section 1260H list adds some familiar names to the list of 134 total firms, including several operating in the biometrics and digital identity market.

While inclusion on the list has no formal legal consequences, it is not intended as a compliment. Per the DOD’s website, Section 1260H of the National Defense Authorization Act for Fiscal Year 2021 “directs the Department to begin identifying, among other things, Military-Civil Fusion contributors operating directly or indirectly in the United States.”

In other words, the Section 1260H list puts a large red flag on civilian companies (including biometrics firms) whose operations could help build Chinese military might, which can ultimately lead to sanctions and dissuade international customers from engagement. It has already caused shockwaves in the stock market, causing several firms’ value to tumble by millions of dollars.

In 2020, then-President Donald Trump ordered a ban on U.S. investments in entities on the Section 1260H list. He returns to the White House for his second term this month.

Biometrics firms classified as military contractors by DOD

While the intent of the list is clear, its definition of what constitutes a “military company” goes far beyond missiles and munitions. According to the update, the following firms have been designated Chinese military companies.

Aisino Corporation is a large technology and telecoms company that, in 2023, had a public tender contract to provide passports to the government of Chile cancelled, allegedly over data privacy concerns.

Guangzhou-based facial recognition provider Cloudwalk has been on the list before. Its biometric algorithms have been ranked near the top of the U.S. National Institute of Standards and Technology’s benchmark for accuracy.

Dahua Technology is a large biometric surveillance systems provider based in Hangzhou. Dahua recently spiked five contracts between its subsidiaries and local governments in China’s north-western Xinjiang region. The company has been tied to allegations of repression against the region’s Muslim Uighur minority through biometric surveillance with ethnicity detection. There is speculation that the incoming Trump administration is creating pressure on firms to distance themselves from the situation in Xinjiang.

Hikvision’s scenario is much the same. The Chinese biometric surveillance tech group likewise cancelled five contracts with local governments in Xinjiang. Its operations in the territory – like Tibet, a so-called Autonomous Region – have already landed it on the U.S. government’s trade restriction “entity list.” The sanctions reportedly forced it to lay off about a thousand workers in October 2024.

For many, Huawei will be the most familiar name on the list. In recent years, the world’s largest provider of telecommunications equipment has ramped up its work in national digital infrastructure and identity projects, supporting a larger global digital transformation. It is also closely tied to 5G wireless technology, which has generated its own share of controversy.

Beijing-based SenseTime recently pivoted away from facial recognition technology to focus on generative AI, in what leaders called “a repositioning of the company’s strategic direction and core business areas.” The company has seen some instability since the death of billionaire co-founder Tang Xiao’ou in December 2023. It has also appeared on the Section 1260H list before, but calls its inclusion “baseless.”

Tech titan Tencent has also landed on the list. While it is well known for gaming and its social media app, WeChat, the firm also runs research in artificial intelligence and deepfake detection through its Youtu Lab, on top of its work in biometrics and digital payments. Tencent has balked at its inclusion, telling the BBC, “we are not a military company or supplier.”

Shanghai’s facial recognition developer Yitu Technology is another firm with prior Section 1260H appearances. Yitu, which has had financial backing from Sequoia Capital China, works in AI-assisted FRT for smart cities, banking and other use cases. As a provider of surveillance tech, it has also been alleged to have ties to human rights abuses in Xinjiang.

Megvii falls off list after inclusion last year

One lucky firm has been removed from the Section 1260H list: Megvii, which landed on the U.S.’s danger list alongside Yitu last year, is no longer classified as a military company. It provides a face detection, recognition and analysis platform for websites, mobile apps and smart TVs.

For its part, the Chinese Foreign Ministry has called the legitimacy of the list into question, saying it will “take all measures necessary to firmly defend the lawful rights and interests of Chinese companies and uphold its legitimate rights to development.”

China’s use of AI, biometrics pose significant, persistent threats, DOD says

Article Topics

Aisino Corporation  |  biometrics  |  China  |  CloudWalk Technology  |  Dahua Technology  |  Department of Defense  |  digital ID  |  facial recognition  |  Huawei  |  Megvii  |  military  |  Tencent  |  Yitu Technology