Asia, a sourcing hub for smart home cameras

Asia is the largest manufacturing base of home security cameras and surveillance kits, with hundreds of competing suppliers. For these suppliers, the major export markets for smart home security cameras and surveillance kits are areas with well-developed network infrastructures, such as Europe and the U.S.

Asian suppliers at the SMAhome International Conference & Exhibition 2014 (powered by Secutech) are primarily traditional surveillance, telecommunication and multimedia companies. For them, it is a new business opportunities. However, it is a whole new market, with different priorities and demands. Therefore, no player in each industry has an extreme advantage. The smart home market is new for the surveillance industry in terms of applications and user experiences. From the interviews, no killer application is mentioned so far. Not all surveillance companies are enthusiastic about this market. Nevertheless, some companies plan to enter the smart home market with DIY offerings and a new brand for their smart home product lineup.

Home security cameras require network connectivity and easy-to-use software in addition to reliable hardware. The telecommunications-based companies like Sercomm, Zinwell and Senao Networks boast their strong cloud services or high Quality of Service (QoS) for networks. As for the companies who are experts in audio and video processing, like DXG, Compro and PiXORD, they aim for high-quality images through IC, digital image processing and optical designs as their core competencies. Those companies are strong competitors to traditional surveillance companies in the smart home market. As for brand-centric companies, foreign companies like Bosch, Axis and ADT may be their greatest competitors.

We explore export markets, business models, sales channels, and major applications along with major product features we've seen at SMAhome 2014.

US LEADS THE MARKET
North America is still the largest export market for Asian manufacturers, followed by Europe. Market acceptance, mature network infrastructure and consumer affordability are three major factors to boost the market. For some interviewees, more than 50% of sales revenue is contributed by the US market. In the U.S., the DIY market is booming. Alan Chang, Vice President of International Sales & Marketing Dept of DXG, whose major export markets include Europe and North America, thinks that the ubiquity of smartphones and proliferation of 4G network are two driving forces of the market.

William Ku, Vice President of International Business Div. of Vivotek mentioned that TV and door are two key areas for the smart home market.

Russia, Brazil and Southeast Asia are viewed as 3 export markets with a lot of potential. Emerging countries are considered to be the next promising areas. Russia and Brazil are said to be 2 fast-growing regions over the next 2 to 3 years. The improved network infrastructure, strong buying power, and conversion from analog signals to digital are 3 major factors. "Russia is a potential market due to its high consumption capability," said Bruce Wang, Marketing Manager of Compro.

China is another promising area, but will likely see less growth compared to the above-mentioned regions, some exhibitors said. In China, India and the Middle East, home security still caters to the high-end market. As for India, wealth inequality and low profit from channels can be 2 reasons that make foreign suppliers reluctant to enter the market.

BUSINESS TYPES DIFFER BY REGIONS AND CUSTOMERS
Asian manufacturers' security cameras are distributed under their own names or customers'. OEM, ODM and private label businesses are major types for manufacturers of electronics products. For home security cameras and surveillance kits, OEM and ODM are 2 major business types. A few companies emphasize on own-brand business. For example, 3S PocketNet emphasizes its own-brand business, selling its network cameras and bundled software to end users and SIs. With strong design and manufacturing capabilities, Asian suppliers work with SIs and distributors via private label business for global project cases. Of course, there are also companies that offer only OEM and ODM services, like Sercomm and Zinwell.

To stay competitive, some Asian suppliers strengthen their vertical integration capability via in-house design capability or upstream subsidiaries. For instance, Vatics, a spin-off from the SoC solutions department of Vivotek, offers SoC for network cameras. PiXORD, a subsidiary of ELAN Microelectronics, prides itself on image processing from the side of IC design.

Due to geographical differences and consumer behaviors, own-brand products are distributed via distributors or companies' local branch offices. Some companies of professional surveillance products offer smart home products under new brands—for example, Hikvision thinks this is a better approach because it sees the smart home market as a new market, rather than an extension of traditional surveillance. The company released smart home related products and solutions under its EZVIZ brand so that consumers can differentiate its smart home business from its professional surveillance segment.

MAJOR CHANNELS
When it comes to product distribution, online and retail stores are 2 major sales channels of branded products for the DIY market, especially in North America and Europe. For DIY users, online stores are important channels due to the convenience of direct ordering. In the U.S., there is a large market of DIY consumers who prefer to shop online or at retail stores.

Distributors are important to enter the European market. Own-brand products from Asian manufacturers are mostly sold to European online shops and retailers through distributors. The distributors are also important for Asian makers to enter the South American market. Dylan Tseng, Senior Sales Manager of Sales Center Business Unit of Pixord stated that the company entered the Brazil market through partnerships with local distributors.

As for manufacturers, home security cameras are distributed all over the world primarily by branded companies, SIs, telcos and distributors. Most of the manufacturers rely on SIs, value-added resellers (VAR), dealers and distributors to distribute products overseas. Allan Chien, Associate Vice President of Branding Business Dept of Senao Networks said VARs could be major partners.

Telcos like AT&T, SFR, Qivicon and Verizon offer home monitoring and control, as well as home security and automation services. Offering home surveillance services with free or rented network cameras is one of the approaches for telcos to spur market growth. Apart from European and US telcos, there are also opportunities in emerging markets like Southeast Asia and South America. Southeast Asia is one of Zavio's major export markets. Shauchau You, Vice President of Zavio indicated that it is common for manufacturers to sell home cameras or solutions to telcos in Southeast Asia through local SIs and distributors.

To approach telcos, most Asian manufactures work with SIs, distributors or branded companies by private-label business for telco projects. They take the same approach as they do with alarm monitoring and security service providers. Only a few large-sized companies like Sercomm or those whose specialty is in telephony or set-top boxes, like Zinwell, can approach the telcos directly by offering value-added services like free small cell or provision of total solutions. Almost all of their products are sold through OEM and ODM projects.

SECURITY TAKES THE FIRST PLACE
The smart home market comprises home security, automation and energy management. For suppliers at the show, the home security market is their main battlefield, generating the most profit. Home automation is a space they are targeting next, although they position these products and services for the high-end market.

Network cameras are major contributors to the home security market, in terms of sales revenue. The products can also be used for small offices and retail stores. Ben Huang, Digital Product Marketing Specialist of Product Dept of Zinwell Corporation indicated that the home security camera is the first product line to target for entering the smart home market.

Interviews conducted at the show reveal that Chinese companies tend to offer surveillance kits that consist of cameras and 4-channel NVRs or home NAS for the home security market. Moreover, the consumer-centric smart home market forces manufacturers to focus on user-friendly software and user application to make their products more appealing in a highly competitive market.

Home automation is the next focus for Asian makers after security. Bruce Wang of Compro said that home automation is a value-added feature for home security cameras. Compro offers a cloud camera based on ZigBee technology, featuring power saving features and a long life cycle. So far, home automation solutions are considered as the high-end segment of the smart home market. Most Asian network camera manufacturers enter the market by providing video door phone cameras, peephole cameras or indoor cameras with motion detection. Products like Brinno's PHV MAC feature easy DIY and senior-friendly setup. Video surveillance, video recording and DIY alarm monitoring are common features. They co-work with leading companies like Control4 to enter the market.

The other way to enter the market is to release network cameras with simple home control functions. The providers are required to have design capability in software integration and wireless networks. Take Compro for example, its cameras are bundled with C4Home software to enable home automation by remotely controlling home appliances with the built-in IR remote control.

Energy management is becoming more important, too, especially in Europe. Only a few companies offer simple functions like indoor temperature alarm and control through PIR or temperature sensor. For instance, StarVedia released its Temperature Alarm System (TAS), which offers intelligent surveillance for homes and stores. Users can ask the babysitter to turn off the air conditioner through the built-in speaker and infrared thermometer of its network cameras. We can expect more and more new network cameras that support simple energy management functions like temperature control as value-added features.

USER-FRIENDLINESS IS KEY
Smart home product features are simple, useful and affordable. For home users, user-friendly software and experience are two decisive factors before making a purchase. Home security cameras, mostly referring to those network cameras, are ranked as entry-level products, in terms of hardware specs. Makers don't emphasize on advancements in technology, but on practical and fascinating user experiences.

Cloud services are a selling point when talking about storage among Asian makers. At present, both local and cloud storage media are available. SD memory cards can be one major adoption for alarm-triggered recordings. Some choose 2CH or 4CH NVRs as the recording bank, although a home NAS may be a more affordable alternative. Cloud storage saves costs for the user, with many manufacturers offering free-of-charge storage. However, privacy can be an important issue to notice when it comes to any free service. Therefore, they offer secured personal cloud storage, including free space at Amazon server, Dropbox and Google Drive for privacy. Traditional surveillance companies prefer to promote surveillance kits with local storage solution; new entrants like telecommunications-based companies tend to promote cloud storage solutions.

Of course, any home device requires a trendy exterior, and home security cameras are no exception. Sleek design and compact size are 2 distinguishing features for the home use models among network cameras. Regarding form factor, cube models are currently the mainstream. This year, suppliers promoted models that support PTZ functionality, along with mini dome and bullet models for outdoor use. Models with fish-eye lenses are also promoted.

Moreover, Asian manufacturers promote new value-added features, such as waterproof (IP66) and ROI (region of interest). ROI offers bandwidth and storage optimization through targeted image capturing of specific important areas for preview and recording.

H.264 is the mainstream video streaming format. Models supporting H.265, which was approved by ITU in 2013, can be seen as early as late 2014.