Ambarella falls as Commerce Department adds Hikvision to entity list

Fermi Wang, CEO, AmbarellaJustin Solomon | CNBC Shares of chipmaker Ambarella fell as much as 12% in extended trading on Monday after one of its Chinese customers, video surveillance company Hikvision, was blacklisted by the U.S. government.Hikvision was one of 28 companies the Commerce Department added to the so-called Entity List, restricting its ability to do business with American firms. Several component companies have been wrapped up in the U.S. government’s efforts to limit hardware manufacturers from transacting with Chinese companies, most notably Huawei. As the trade war intensifies, the list is expanding.Ambarella, which makes processors for cameras and other vision systems, said in its most recent annual report that its video processing solutions are used by Hikvision, though it didn’t say what percentage of revenue comes from the Chinese company. Hikvision sells video cameras, video recorders and related equipment, and its products have reportedly been deployed to help with surveillance in China’s Xinjiang region, where Muslims have been placed in “re-education camps.”Ambarella warned about the potential for trade conflicts to emerge in its latest quarterly report:General trade tensions between the United States and China have been escalating in 2018 and 2019, which has, in our view, created and will continue to create an uncertain business environment. While tariffs and other retaliatory trade measures have not yet had a significant impact on our business or results of operations, we cannot predict future developments. In particular, if additional tariffs or trade restrictions are imposed on our SoC solutions or the products of our customers, or trade restrictions are imposed on our ability to conduct business with certain customers, there could be a negative impact on our operations and financial performance. For example, if trade restrictions were placed on a significant customer, such as our China IP security customers, affecting our ability to do business with them, it would likely have a material adverse effect on our business and financial condition.Ambarella is based in Santa Clara, California, and has a $1.9 billion market cap as of Monday’s close. Other customers include Alphabet and GoPro. Hikvision is based in Hangzhou. In addition to Hikvision, Chinese artificial intelligence companies Megvii and SenseTime are being put on the Entity List, according to an update to the Federal Register that is scheduled to be published in Wednesday.WATCH: Qualcomm president optimistic U.S.-China trade tensions will be resolved

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