Korean Manufacturers Respond to Price Competition With Differentiation
Editor / Provider: John Shi | Updated: 10/14/2011 | Article type: Hot Topics
Since 2010, competition among manufacturers in China, Taiwan and Korea has heated up ferociously. The rapid rise of Chinese security is catching up to its overseas counterparts, changing Asian dynamics. Chinese security companies have matured, with more players understanding overseas markets better. Coupled with low labor costs, these factors accelerate the profile of Chinese leading companies. The first competitors hammered by Chinese manufacturers are Korean companies, particularly DVR manufacturers. a&s talked to Korean companies about how they deal with challenges. Their strategies include stronger quality and product differentiation. They also bring new technologies to market sooner and work closely with overseas clients. Most importantly, Korean manufacturers are crystal clear about their future directions. The following companies offer insight into Korean security.
HDPRO was established in 2004 and began to focus on cameras in 2007. While the company is new, its management team is made up of industry veterans. It specializes in mechanical design, making cameras easier to install and adjust, while increasing stability and reliability as well.
In the face of Chinese competition, HDPRO distinguishes itself with high-end cameras, said Yoon-Hwoa Ko, President of HDPRO. It dedicates 10 percent of its revenue to R&D, quickly responding to customer needs through intensive trade show attendance and collecting customer feedback. This is demonstrated through 10 new product launches in three month, adding to a portfolio of more than 500 products.
The company grew more than 50 percent each year, even during the economic recession in 2008 and 2009. Most products are brought to market quickly, making product development this company's strength.
HDPRO's sales are evenly split between OEM and branded sales. Its own-brand sales are carried by distributors in different countries. Sales growth comes with the expansion of local distributors.
With the emphasis on R&D, HDPRO currently holds more than 100 patents. Some new developments include:
● Dome cameras with an air purifier function, ideal for dusty indoor environments, such as basements.
● Dome cameras with wireless transmission and wireless power: Connecters are often the Achilles' heel of IP66-rated cameras. Fewer wires also save installers time for cabling.
For now, HDPRO will not develop network solutions because Ko believes the analog market is still large enough. The energy and strength of HDPRO should be saved for enhancing qualities. Ko's focus is not on beating the competition but overcoming challenges.
Established in 2007, MicroDigital believes own-brand sales are the only way to survive in a highly competitive market. It works with professional distributors to target the middle and high-end markets. In France, for instance, the company partners with local distributors, who set up an exclusive sales team for MicroDigital.
MicroDigital‘s sales and R&D teams focus on developing distinctive features to set the brand apart and create a market niche. The company produces a complete DVR product line, along with a series of network megapixel cameras and HDcctv cameras.
It also launched an IR bullet camera, which enables focus and focal length control via coaxial cabling. MicroDigital's main market is Europe, with planned expansion into the Middle East. Its sales are evenly distributed between DVR and camera products. The company's distinctive approach puts it in a position that is not threatened by Chinese competition, said Bruce Lee, Director of MicroDigital.
Regarding the potential of HDcctv, Lee said that most 16-channel DVRs support two channels for HD and will be upgraded to four channels of HD. He also believes that HDcctv prices will drop soon. While IP surveillance remains dependent on bandwidth and other networking issues, HDcctv offers a good alternative. Lee is optimistic about the future of HDcctv in the next two to three year, as more products reach the market and become more affordable.
Pinetron was established in 1999 as an ASIC company, then moved toward HDD storage. In 2006 and 2007, as many SoC companies moved into the DVR business, Pinetron remained strong due to its core competence of SoC programming.
When starting its stand-alone DVR business, Pintron won orders from Japanese clients and learned about their exacting demands for product design and manufacturing.
Since OEM constitutes 70 percent of Pinetron's business, its brand is less well-known. Pinetron promotes its own brand by having one distributor per country. Chinese brands did not come to the attention of Pinetron's customers until 2010. However, current Chinese products do not directly threaten Pinetron. To accentuate its brand position and company values, Pinetron came up with a new slogan: “Our passion is your safety.”
To distinguish itself, the company focuses on its technological proficiency. Pinetron targets middle and high-end markets, such as military projects, retail stores, casinos and prisons.
Banks are an especially important target for the company. For gaming, casinos demand HD resolution but not necessarily IP.
Sales growth for 2010 to 2011 is expected to double due to the company's complete product line for storage. Its lineup includes five DVR models ranging from entrylevel to high-end and DVRs supporting IP transmission over analog cables through Intersil's security link over coaxial (SLOC). Pinetron has also developed and IP lineup of network cameras, NVRs and hybrid DVRs.
The company is an early adopter of SLOC cameras, as HDcctv's bottlenecks include limited transmission distances and one-way transmission. Pinetron wants to offer an alternative with SLOC video surveillance, befitting its guiding principles of innovation.
Comart started with PC - based DVRs. To avoid price competition, Comart began its HD-SDI development in 2009. The results were well-received, as its solutions have been deployed along Korean highways and pachinko parlors in Japan.
As the market grows, more players have entered and have shrunk Comart's profit. For example, Comart's 1,080p DVRs with four channels were undercut by 720p models from competitors at half the price. To overcome this price war, Comart plans to launch products with higher price-performance by the end of this year. Beside DVR price wars, camera prices have also dropped precipitously. An analog camera that retailed for US$600 in 2008 is now worth $150 and could plummet to $100 by next year. The bright side of this price drop is that market share for HD-SDI may reach 1 percent next year and could pick up fast.
HD-SDI's compatibility is one of the urgent issues to be solved. HD-SDI selections are limited and not interoperable between vendors.
Chang Hoon Seol, CEO of Comart, felt that insufficient R&D know-how is the main reason why cameras failed to meet SMPTE standards. As a result, when various HD-SDI cameras are connected to third-party DVRs, compatibility bugs occurs. To make it worse, valid transmission distances varied between companies as well.
Currently, HD-SDI cannot handle PTZ camera controls, audio or bidirectional transmissions. While establishing related standards is important, Soel felt that reaching a consensus between manufactures would take too long. Soel said SLOC is most relevant for network cameras, as it presents a transmission alternative.
KT & C acquired a machine vision and traffic management camera company three years ago, expanding its portfolio. It focuses on developing and launching new products, such as megapixel cameras, HDcctv cameras and DVRs.
KT&C's target verticals for HD-SDI are mainly government and police projects, prisons and royal palaces. The maximum resolution for traditional surveillance cameras is 600 to 700 TVL. Once the distance between objects and cameras reaches certain distance, it is difficult to identify, which is overcome with HD-SDI. KT&C's main oversea markets include Russia, the U.S. and Europe. Sales in the Middle East and South America have also done well. It entered the China market in 2004, which is now one of its top five markets. Zoom cameras are among its bestselling product in China, resulting in KT&C establishing Chinese factories to meet local demand.
This year, KT&C will launch HD PTZ cameras,2-megapixel HD-SDI cameras and compact HDcctv cameras. The HDcctv cameras are small, but are easy to integrate and withstand high temperature. KT&C's major competitors are CNB and HDPRO, while several Taiwanese companies are co-petitors. Its revenue has yet return to prerecession levels, particularly in the Russian market, but the company expects a strong recovery in 2010 and 2011. [NextPage]
Established in 1976, Kocom got its start in audio phones. It branched out into home automation, surveillance, LED lighting and eventually solar power — positioning itself as a provider of home automation and energy solutions. Kocom's CEO once said, “Anyone who purchases Kocom products has to be rich.” Besides clear strategies, Kocom emphasizes product quality and partner relationships.
Chun-Ho Ko, Overseas Business Manager, Kocom, points out smartphones and the emergence of a middle class with more education, income and familiarity with technology allow more end users to embrace home automation. While this group represents a fraction of the market, they can attract a large following. However, due to the dominance of single-unit homes in the U.S., widespread deployments will take longer.
Kocom's broad product portfolio targets real estate developers, so it goes to market with the same channel partners for intercoms, home automation, video surveillance, LED lighting and solar products. Its newly launched network camera line is carried through existing partners, but not all of them are able to support network video solutions. To promote its network line, Kocom is open to recruiting new distributors.
When asked about future IP application for security, Ko pointed out that market adoption for network solutions is still in its early stages. Most customers are considering IP but not yet purchasing related solutions. However, it is clear that market is moving toward IP.
Pixelplus was established in 2000 as a maker of consumer image sensors, formed by a team of semiconductor and CCD experts. It initially targeted the mobile phone market, but the returns were small in a saturated market.
The company now focuses on security, automobile and medical applications. Its new production process has won business worldwide, creating a market niche. SK Lee, CEO of Pixelplus said the company is among the few component suppliers developing sensors for professional security users. About 60 to 70 percent of sales come from security business.
Unlike mobile phone sensors, which try to cram as many pixels onto a sensor, smaller pixels are unacceptable for security's sensitivity demands. For clear images, pixels on the sensor must be sufficiently large to improve light sensitivity.
Chip design also affects image quality, as analog and digital components can create noise. Noise reduction is crucial for sensitivity and WDR, as automatic gain control will increase image noise as well.
The company develops CMOS image sensors for their low cost with fewer accessories and ease of integration, Lee said. This results in increased reliability. As labor costs increase in China, more production will shift to countries such as India and Brazil. Lee is considering opportunities in these emerging markets for the future.
Starting in 1979, Young Kook is a leading system integrator in Korea. It specializes in thermal imaging for industrial applications, such as metal production, nuclear plants and military projects.
The company developed a 360-degree fisheye dome, which won a product excellence award from the Korean government. It holds patents in more than 20 countries. An outdoor night vision camera can monitor objects from a distance of 70 meters. This solution is suited for education and traffic monitoring.
The Korean market has strong demand for HD, as analog solutions are being replaced. Young Kook also plans to expand overseas, with its specialized product know-how. It is partnering with system integrators for government projects in emerging South Asian countries and China.
HT provides high-end image sensor processors (ISP). It is a fairly young company, established by semiconductor experts with more than 20 years of experience.
To increase its market share, HT plans to launch midrange and budget solutions. It understands security imaging need for quality footage, regardless of the application or time of day.
HT believes that a good camera should deliver WDR for daytime imaging, along with high resolution with low noise, stable AE, AWB and superb color accuracy. At night, the camera should include DNR, 2-D and 3-D filters and clear low-light capability. HT strives to produce solutions that have strong performance.
Sejin Kang, CEO of HT, explains the differences between WDR solutions. One way is to put WDR on an ISP, while another way is to include it on the image sensor. However, the latter method is not recommended. As higher sensitivity is required for nighttime surveillance, WDR image sensors require more processing resources and could sacrifice sensitivity.
Two of HT's future developments for ISPs include intelligent video analysis and full HD imaging, requiring H.264 encoding with low power consumption, Kang said.