Prophecy from Security 50: Time for Solutions!
Editor / Provider: Jill Lai, a&s International | Updated: 12/1/2014 | Article type: Hot Topics
This year's Security 50 rankings again proved the year 2013 was another fruitful year. The top 50 companies grew 8.2 percent on average. Even without very dramatic growth, it symbolizes that 2013 indeed was a turning point for the whole industry: time for solutions!
2013 was another rewarding year for the winners of Security 50. Even though the average growth rate was comparatively moderate compared to the past two years, the top 50 still contributed US$16.9 billion in total sales revenue in 2013. Top 10 companies, Honeywell, Bosch, Hikvision, Safran, ASSA ABLOY, Dahua, FLIR, Axis, Samsung, and Tyco Security Products, remain the same as last year's rankings. However, due to the explosive growth of two Chinese giants, the top 10 rankings have slightly changed. Hikvision has been ranked third, with 2013 being the first time it produced over $1 billion in turnover. Dahua, who had the most obvious growth, beat Axis, Samsung, and FLIR, and has been ranked sixth. These two Chinese companies' outstanding performance again impressed the whole security industry.
Steady Growth From 2012 to 2013
The average turnover growth rate for the Security 50 was 8.2 percent in 2013. The 8.2 percent growth rate also corresponds to current researchers' predictions on the global security market growth — 8 to 10.8 percent in 2013, according to IHS and MarketsandMarkets. The result proves that the top 50 companies grew quite steadily in 2013. However, the figure also shows a slight slowdown, compared to the average 12 percent growth in Security 50 reports, per year, after 2010.
Multinationals among the top 50, which mostly develop multiple security systems, ranging from video surveillance, access control, and alarm, grew exponentially and have become much more profitable compared to our findings in 2012 and 2011. In 2013, they grew 15.6 percent, compared to 9.5 percent in 2012. Their profit growth is 15.7 percent on average, double compared to 7.1 percent in 2012.
The top 10 companies with the fastest growth made a remarkable 44 percent growth on average. ITX led the group and grew 82.8 percent. Avigilon came in second, growing 77.9 percent from 2012 to 2013; followed by Dahua, Hikvision, TKH, Tamron, Tyco, Milestone, Infinova, and VIVOTEK.
In addition, Milestone grew 28 percent, exceeding its annual growth in the past two years. Recently, the VMS company also launched its NVRs, to quickly respond to the current market demand for easy-to-use and -install IP video surveillance systems. In contrast, some IP video surveillance companies, focusing on developing devices and products only, have experienced a year-on-year slowdown since two years ago, predicted by past a&s security 50 reports.
Tamron also had a fruitful year in 2013. The professional security/surveillance lens company has successfully transformed its main focus to OEM business with other Asian manufacturers. The Asian manufacturing industry, especially China, has become the most important hub in the whole world, which plays a crucial role in Tamron's latest success.
Corporate Consolidation Still Continues
The top 10 multinationals, led by Honeywell Security, ranked number one among the Security 50, contributed 74.2 percent of the total revenue of the top 50 companies. Due to the consolidation via frequent corporate merger and acquisitions becoming obvious, major multinationals have dominated most of the global product sales market.
The most significant merger and acquisition in 2013 was Avigilon's acquisition of access control company RedCloud. With this acquisition, Avigilon has been able to reach out their business beyond the video surveillance sector. Right at the end of the same year, Avigilon also acquired video analytics company VideoIQ. With its recent acquisitions, the company successfully became a total solution provider in the security industry. The company continues growing its investment and specialties in verticals such as casinos, energy, education, healthcare, critical infrastructure, and retail, managed by a specific business development team.
Despite corporate consolidation, multinationals also spin off to become more focused and agile. The best known, Allegion, a spin-off from Ingersoll Rand, made its debut in Security 50, ranking eleventh. Allegion continues to explore non-industrial security market sectors, which differs from its mother company Ingersoll Rand.
Decreased Profit Growth, but Good Gross Margin
To maintain valuable profit, margin is an ultimate goal for all the companies. Telling from this year's Security 50 rankings, the average gross margin in 2013 was around 33 percent. The top 50 companies kept consistent growth in gross margin at around 30 percent, per year, in the last four years. Yet, the average profit growth slightly dropped to 5.9 percent, which is also a slowdown from 14.6 percent in 2012 and 9.8 percent in 2011. Companies strive to gain sufficient margin; however, have continually been meet with challenges from the price reduction over standardized products, market competition, and global economic impact.
Among the 28 companies, which generously shared their gross profit figures, Avigilon, DynaColor, and GeoVision, were able to maintain both high profit growth and gross margin. Fourteen companies kept above-average gross margin at 33 percent. We also found that these companies have fully developed integrated systems ranging from IP video surveillance, access control, and smart home, becoming the most profitable companies among the top 50.
IP Video Surveillance Enters Late Growth Stage of Product Cycle
Some major pure IP video surveillance companies have started to experience the slowdown during their growth momentum, based on their financial reports in 2013 and the first half of 2014. Their growth rate over the past two to three years have even reach almost 25 to 30 percent on average. However, their latest growth rate turned moderate. Explosive growth in the IP video surveillance sector is now gone, which symbolizes technology for IP video surveillance is now well-developed and there is fierce competition over multiple suppliers in the market. To maintain growth, Axis and VIVOTEK also start to develop IP video surveillance systems. They recently developed NVRs and management software and systems, which well demonstrated the future for security industry.
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Prophecy from Security 50 <II>:
Time for Integrated Systems!