In the video surveillance product sector of Security 50 rankings, company performance is strongly correlated with its overall product strategy. If we divide the video surveillance companies by their tendency to develop systems versus single devices, the average revenue growth and profit growth of these groups were found to be different. Overall video surveillance companies grew 9.2 percent on average.
Time for Integrated Systems
In the video surveillance product sector of Security 50 rankings, company performance is strongly correlated with its overall product strategy. If we divide the video surveillance companies by their tendency to develop systems versus single devices, the average revenue growth and profit growth of these groups were found to be different. Overall video surveillance companies grew 9.2 percent on average. Companies developing systems grew 14.4 percent, 5.2 percent more than those that only develop devices. In addition, the average profit growth for overall video surveillance is 38.9 percent. System developers grew 14 percent versus negative 2.2 percent in the device part. Gross margin of some companies, from the device part, barely kept single-digital growth.
To stay profitable and competitive in the market, offering devices only is not enough. Successful suppliers provide systems suitable for different types of projects. IP video surveillance systems, for instance, are well designed for solutions in different applications and vertical sectors. Most importantly, they are well tested and configured and ready to be integrated into a management platform, which saves a lot of headache and troubles for systems integrators and installers. On the other hand, for some small to medium-sized companies, the capability to tailor-make certain unique features in systems for different projects are also required.
Developing integrated systems, which are ready to use for different projects, is not only a buzzword but also exactly what is happening right now for the most profitable companies in security. Keen Yao, International Marketing Director of Hikvision Digital Technology pointed out, “Almost all the big suppliers give total solutions. Hikvision, we also are a total solution provider. Our R&D resources make Hikvision very powerful in different vertical markets. We have seven vertical markets — we call them Seven Stars. For different vertical markets we have different solutions that combine almost all security functions, including access control, alarm systems, surveillance systems. So this is Hikvision's strategy.”
Tim Shen, Marketing Director for Overseas Business Center at Dahua Technology continued, adding, “We are also in the transition stage from device to solutions development. Dahua is one of the few companies which are able to develop solutions in China. To develop solutions, it requires not only a complete wide range of product portfolios but also takes higher level of profound know-how to bring them together for a better integration purpose. Dahua has proven to do several large projects in bank, city surveillance, transportation and commercial sector not only in China but also overseas. We are able to transfer our know-how in China to provide suitable products for solutions in overseas market.”
Taiwanese and Korean Companies Prepare for Their Next Leap
From Security 50 reports over the past few years, major Taiwanese and Korean companies continue to be in recession, which has lingered a little bit longer than expected. It is never easy to transform from a device supplier to a systems or solution provider and even harder to change the corporate focus from OEM business to branding. However, the rising of Chinese companies has forced these companies to differentiate themselves. IDIS, a leading video surveillance company in Korea, is one of the most significant ones that have started to promote its own brand business in Europe since two years ago. Even though the outcome for its brand business has not been confirmed yet, the company seems to be headed in the right direction, developing positively in the future.
Some of the traditional, analog-based Taiwanese companies might take a little while to take off; however, the IP/IT-based companies, such as VIVOTEK and GeoVision, have maintained steady growth over the years and are active in the market. We predict that in the near future, there will be more corporate consolidation among Asian companies.
The security market is still full of opportunities. Some small to medium-sized Taiwanese and Korean companies are striving to find their own “blue ocean,” to differentiate themselves from Chinese companies. EverFocus also provided a good example here. The company is ready to demonstrate its capacity to develop an integrated security system to its clients, too. Even though it has gone through obstacles, the company has started to receive some positive outcomes. Jemmy Huang, Chairman & President of EverFocus Electronics also shared, “Now, customer's demand for security products has become much more diverse. They expect the system to integrate with more devices and realize multiple purposes. For example, the customers might have some special requirements for the synergy between video surveillance systems and elevators whenever an emergency happens in the building. ” Therefore, “we've transformed to be a solution provider, our open-platform central management system is well designed to integrate with a wide range of systems and extremely scalable for future expansion. With this system, we can make sure systems integrators have no further problems in product integration to meet customization requirements perfectly and ensure their projects can well be completed.”
Looking to 2014 & 2015
Looking into the financial reports for the first half for 2014, the companies which are more likely to continue growing significantly both in 2013 and 2014 are Avigilon, Dahua, Hikvision, ITX, and Tamron. These five companies were ranked in the top 10 companies with the highest revenue growth. However, out of the 29 companies, who shared their financial figures in the first half of 2014, the average growth rate fell to 2.8 percent. Twelve companies are in recession. Korean and Taiwanese companies have experienced even bigger challenges in the first half of 2014, which can be obviously found in their reports.
Cross referencing profit growth and gross margin of these 29 companies in the first half of 2014, it is also confirmed that the companies that have developed fully integrated systems outperformed the ones which develop only devices, again. When we look into 2014 and 2015, we predict that the trend to develop solutions for verticals/applications will be much more obvious.
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