SAN FRANCISCO/SEOUL (Reuters) - South Korean video surveillance provider Hanwha Techwin stands to gain the most from the U.S. blacklisting of China’s Hikvision and Dahua, an industry expert and insider said, as rivals sit poised to snatch share from the besieged market leaders.

Hanwha Techwin is a subsidiary of Hanwha AeroSpace Co Ltd, whose share price rose more than 4% following news on Monday the United States had barred 28 Chinese entities from buying components from U.S. firms without government approval.

The blacklisting ratchets up Washington’s scrutiny of Chinese companies after similar action on top telecommunications equipment maker Huawei Technologies Co Ltd, intensifying tension with Beijing just as the two governments are locked in a trade war that is shaking the global economy.

Hangzhou Hikvision Digital Technology Co Ltd and Zhejiang Dahua Technology Co Ltd have already seen U.S. sales drop since they were barred from federal contracts earlier this year, the two industry people told Reuters.

Hanwha Aerospace said there had been growing interest in its surveillance products since the U.S.-China trade conflict erupted.

“It is true consumer queries about our products and solutions have risen, as things are going between U.S. and China,” Hanwha Aerospace said in a statement to Reuters.

However, the blacklist of Hikvision had not affected its sales yet, Hanwha added.

John Honovich, founder of U.S.-based video surveillance researcher IPVM, said Hanwha Techwin should benefit the most from the latest U.S. action, taken in response to what Washington called human rights violations by Beijing.

Hanwha Techwin holds only 3% of the global share of the video surveillance market by sales, according to Hanwha, but South Korea is a major Asian security ally of Washington.

“They’re a South Korean company with low-cost but relatively high-quality products, and so they’re the biggest alternative to Dahua and Hikvision,” Honovich said.

Hikvision calls itself the world’s biggest manufacturer in a video surveillance market that Allied Market Research estimates to be worth $87.36 billion by 2025, three times its 2017 value.

However, a former Hikvision employee said the company will face problems globally if it can no longer source artificial intelligence vision processors from Ambarella Inc.

Shares of Ambarella, whose U.S. regulatory filings showed it is registered in the Cayman Islands but headquartered in Santa Clara, California, fell around 12% in Monday after-hours trade.

“Almost all Hikvision products use Ambarella chips. So that would crush them,” said the former employee on condition of anonymity, explaining that changing a product’s chips could halt production and give rivals a chance to take market share.

Ambarella did not respond to a request for comment outside of regular business hours.

Last year it said the bulk of its products were made domestically and in Vietnam, and that none of its products for North American markets came from China.

Hanwha Techwin’s U.S. sales rose 24% to 66 billion won ($55 million) in the April-June quarter from a year ago, according to its parent’s earnings statement.

“Hanwha’s performance has been better since U.S. stepped up regulations on Chinese firms,” said Lee Dong-heon, a Daishin Securities analyst. “Mainly it supplies to U.S. government and public institutions, but a wider door is open now to sell to private customers as well.”

LAYOFFS

Honovich said other likely beneficiaries of the blacklisting were Motorola Solutions Inc unit Avigilon and Sweden’s Axis, owned by Japan’s Canon Inc.

Neither Avigilon nor Axis responded to requests for comment.

Motorola Solutions in its second-quarter earnings call with analysts in August said it saw upside from the earlier federal contracting ban.

The former Hikvision employee said the Chinese firm laid off dozens of staff in the United States because of slumping sales in the country, with several going to Hanwha Techwin.

Hikvision did not comment on the layoffs or confirm the use of Ambarella chips. Hanwha also declined to comment on staffing moves.

Hikvision, which has a market value of about $42 billion, receives nearly 30% of its 50 billion yuan ($7.02 billion) in revenue from overseas, Reuters reported in August.