Fingerprint Software China Can't Touch

While lenient interpretation of post-Tiananmen Square export restrictions has allowed some American tech companies to help China modernize its law enforcement, others, such as Cogent Systems Inc. (COGT ), have been blocked from selling to the Chinese police.

Based in Pasadena, Calif., Cogent makes software for storing and comparing fingerprint images. It reported revenue of $160 million last year from sales around the world of programs used to identify criminals and register voters. CEO Ming Hsieh has long had his eye on the market in China, where he was born and raised. He started Cogent in 1990 after studying engineering at the University of Southern California.

Despite his Chinese ties, Hsieh has been able to do nothing but fume in recent years as the country's public security bureaus have bought fingerprint software from Cogent's international rivals. Such programs are among the few high-tech products explicitly prohibited from U.S. export to China under the post-Tiananmen Square sanctions.

Cogent's prime competitors, Sagem Morpho Inc. of France and Japan's NEC Corp. (NIPINY ), aren't similarly restricted. Even some American companies can pursue fingerprint analysis contracts in China, as long as they haven't created the technology. Unisys Corp. (UIS ) acts as a general contractor on some deals involving fingerprint systems, but it is prohibited from using the wares of American manufacturers. "The result is an unfair and uneven playing field," Hsieh complains.

As recently as last year, Cogent officials discussed a potential deal with Shanghai's police department, based on the company's hope of winning an exception from the Commerce Dept. But while company representatives were meeting with officials in Shanghai, Hsieh says, a Chinese competitor, Eastern Golden Finger Technology Co., notified U.S. officials. A Commerce official soon appeared at Cogent's Pasadena headquarters and grilled executives about their Shanghai meetings, Hsieh says. (Commerce declined to discuss the episode, and Eastern Golden Finger didn't respond to requests for comment.)

Despite Cogent's insistence that it hadn't discussed any sensitive technology with the Chinese, Commerce rejected the company's request to pursue the Shanghai deal. In the end, says Hsieh, the business went to Eastern Golden Finger.

By Ben Elgin

    Before it's here, it's on the Bloomberg Terminal.
    LEARN MORE