The physical security market is undergoing a significant transformation, influenced by a host of factors from technological advancements to geopolitical shifts.
The physical security market is undergoing a significant transformation, influenced by a host of factors from technological advancements to geopolitical shifts. In this article, drawn from Memoori's latest research into both the Video Surveillance and Access control markets, we will explore just a few of the key trends and challenges our research indicates will be the most influential in shaping the industry over the coming years.
Current state of the video surveillance market
Memoori's latest report into
The Global Video Surveillance Business explores market prospects for cameras, storage, software & analytics from 2023 to 2028. Our latest estimates, based on a comprehensive analysis of the performance of a total of 322 companies operating in the global market, indicate that it generated revenues totalling $30.4Bn in 2022. While the era of double-digit annual growth appears to be over for video surveillance, factors including AI related innovations, expanding provision and demand for more sophisticated analytics, the ongoing shift to IP cameras and improving camera resolution will continue drive market growth. We forecast that this market will experience a Compound Annual Growth Rate (CAGR) of 5.7% between 2023 and 2028, with revenues totalling $44.8Bn by 2028.
The AI imperative
The integration of advanced Artificial Intelligence (AI) and Machine Learning into video surveillance is reaching unprecedented levels of maturity. Key drivers of this trend include:
- Practical Implementations: Earlier discussions on AI in surveillance have moved from theoretical to practical, with more real-world applications coming to the fore.
- Sophisticated Analytics: The analytics capabilities have grown increasingly refined and reliable, reducing false alarms and allowing for more nuanced and actionable insights.
- Cost Decline: The falling costs of implementing AI and Machine Learning are making these technologies accessible to a broader range of applications.
- Availability of Edge-Based Analytics: There's a widespread rollout of edge-based analytics, based on dedicated AI chip System on Chip architectures that offers the ability to process data closer to its source, alleviating network bandwidth constraints and helping end-users to minimize the risk of transferring or processing privacy related data.
We forecast that by 2028, the percentage of network security cameras with onboard AI capabilities is projected to rise from today's 18% to over 50%. These advancements are fuelling new features like object recognition, behavior analysis, and other forms of intelligent monitoring.
However, the growth in AI capabilities comes with its own set of challenges. Infrastructure issues such as bandwidth limitations, latency, and cyber protections can impede the full utilization of AI-enhanced cameras. Moreover, the lack of standardized data practices and testing methodology further complicates the landscape. These challenges necessitate responsible and transparent implementation of AI technologies.
As data volumes and the demand for analytics rise, we expect the market for Video Management Software (VMS) & analytics to significantly outpace growth in the wider market, here, we are forecasting growth at an 8.4% CAGR from 2022-2028. Here, the progressive transition to cloud-based analytics driven by requirements to amplifying the power of video analytics by leveraging centralized computing resources is set to continue.
Geopolitical shifts move the goalposts in the video surveillance market
Geopolitical tensions and shifting trade barriers have progressively transformed the global landscape of video surveillance market over the past five years. While initial moves by the US government imposed relatively minor tariffs and limited sales to particular US government agencies, more recently blanket U.S. bans on the sale of equipment in the US by Chinese market giants Hikvision and Dahua enacted under the National Defense Authorization Act (NDAA), have much more profound impact. These progressively more stringent restrictions have significantly disrupted supply chains, forcing a recalibration of power dynamics, and generated growth opportunities for Western, Korean and Japanese manufacturers such as Axis, Hanwha Vision, IDIS, Secom. These players and others have developed new strategies and supply chain relationships that seek to fill any voids left by the withdrawal of Hikvision & Dahua from US markets.
For several of these companies, the is already having a major impact on their fortunes. For example Hanwha Vision reporting 86% sales growth in the Americas from 2021 to 2022, capitalizing on its NDAA-compliant status, while IDIS saw overseas revenue jump from $50m to over $80m after the NDAA ban.
US manufacturers are increasingly plugging their “Made in the USA” credentials, while Western manufactures such as Axis Communications are leveraging their NDAA-compliant status to help boost sales in North American markets. Several are also touting their stringent data security policies and practices to further reinforce their market positioning for end users that are increasingly cognisant of cybersecurity and ethics related issues.
Other notable Chinese surveillance companies including Tiandy Technologies, Infinova, TVT Digital Technology, and Raysharp witnessed revenue declines between 3% and 40% in 2022 compared to 2021. While much of this decline might be attributed to the adverse impact of COVID-induced lockdowns in China, and overall slowdown in the Chinese economy over the period, the trade restrictions have also undoubtedly been a contributing factor. While they’ve not been as directly impacted as Hikvision & Dahua, these other Chinese manufactures will be nervously looking on from the sidelines, at the further adverse impact that potential equivalent restrictions on their US operations could have, moves which are being advocated for
in some quarters.
The political impetus and related media exposure generated by the scale of US regulatory moves is also having ripple effects beyond the US, for example influencing
several major UK retailers to announce plans to drop Hikvision and Dahua cameras due to ethical concerns, as well as ongoing legislative moves to restrict usage of the companies’ devices in various public sector bodies in several territories across Europe and beyond.
This evolving regulatory landscape will require firms to maintain agility, adapting their strategies to navigate a shifting patchwork of trade barriers and regulations that are emerging in different regions.
Access control: Mobile gains traction
Turning to access control, our market forecasts for this year’s analysis are still being finalized, but initial indicators are that Electronic Access Control market growth is set to outpace Video Surveillance market growth for the coming 5 years, reversing the dynamics that have been in play across Physical Security for over a decade.
Here, the underlying supply chain and security dynamics are similar, geopolitical uncertainties are having a much more muted impact. Biometrics adoption has been somewhat stalled due to behavioral and attitude changes resulting from COVID, but we see the primary driver for growth being the progressive shift to mobile-based access control.
From a user standpoint, the allure of mobile access control lies in its convenience, enhanced security features, and the flexibility it offers for system administration. Major manufacturers in the access control space, including HID Global, Brivo, and WaveLynx, have been quick to recognize this shift, announcing integrations with Apple Wallet and Google Wallet over the past year to capitalize on the momentum.
Customers, too, are taking note. According to a
recent survey on access control trends, 42% of respondents worldwide now have plans in place upgrade to mobile-ready systems. Our preliminary data aligns with this sentiment, projecting that by the end of 2023, mobile-based systems could constitute around 20% of all newly issued access control credentials for non-residential buildings.
While the transition to mobile-based systems is underway, it isn't without its own challenges. Privacy and cybersecurity remain as key concerns amongst many end users, particularly in cases where personal devices are proposed as the primary means of access control. For this reasons, some organizations remain reticent to back the shift, still preferring the use of physical cards to mitigate the risks associated with personal data exposure on mobile devices.
Infrastructure is another consideration. The shift to mobile-based systems often necessitates upgrades to existing hardware, such as the incorporation of Bluetooth or NFC readers, adding an extra layer of complexity and cost to the transition.
Additionally, some vendors have expressed concerns over the complexity of Apple's process for wallet integration, citing it as cumbersome and potentially slowing down the pace of adoption. It's also worth noting that Apple Wallet incurs additional credential fees, which could be a factor for organizations considering the switch.
Despite these challenges, the trend toward mobile-based access control is unmistakable and shows little sign of abating. As manufacturers continue to innovate and as customers become increasingly aware of the advantages, we can anticipate this segment to carve out a significant share of the access control market in the coming years.
Tying it all together
As the physical security industry evolves, integration continues to move to the forefront as a business imperative. Rather than maintaining each individual security components (video surveillance, access control, or intruder detection) in individual silos, companies are now looking for new cross-functional efficiencies and value add opportunities across the BIoT. There's a burgeoning demand from both users and vendors for unified platforms that not only streamline workflows but also enrich data insights by correlating information across domains. Deeper forms of interoperability that spans data structures, analytics, identity management, and automation capabilities are emerging, fostered by expanded cross-domain partnering networks and improving APIs functionality.
One of the key enablers in this transformation is improving standardisation of security data and its metadata. Providing more contextually rich data is needed to inform more intelligent decision-making across these previously siloed systems, and can be invaluable when integrated into a broader security or building management system, enabling more nuanced and responsive actions like selective door locking or lighting adjustments based on occupancy, or scheduling elevator movements to match patterns of people movement within a building, saving energy and enhancing building user experiences.
While the promise of integration is compelling, successful delivery is not always straightforward. Appropriately skilled systems integrators, endowed with the cross-domain knowledge across IT and OT technologies, video systems access control and even building protocols like BACnet will be essential for implementing complex unified security and BIoT solutions.
Legacy systems, proprietary protocols, and the absence of standardized data formats will also continue to act as common roadblocks to integration until such systems are progressively phased out.
As the industry moves toward more standardized solutions, and cross functional expertise grows, we can expect deeper, more seamless integrations to become the norm rather than the exception.
Looking forward
The physical security market clearly remains in a state of flux, influenced by technological advancements, geopolitical shifts, and an increasing focus on integration and ethics. Companies that can adapt to these changes, innovate, and offer intelligent, integrated solutions are likely to thrive. But this is not a market for the complacent; staying ahead will require constant innovation, ethical considerations, and perhaps most crucially, the ability to adapt to ever-changing conditions.
Other trends which merit consideration and are explored in our reporting include shifts towards multi-sensor in both video surveillance and access control for multi-factor authentication, ongoing skills shortages (especially those with expertise in cross-sectoral applications and artificial intelligence), increased focus on environmental sustainability, and the ever-present influence of cybersecurity risk on products, regulations, policies and end user priorities. These factors are not just affecting the cost structures and policies but are being taken more seriously across the board, influencing both supply and demand dynamics.
Ongoing market success will hinge on continual innovation, ethical vigilance, and a nimble approach to the ever-changing landscape. Firms that keep their finger on the pulse of these multiple factors, and remain open to new ideas and pragmatic investments, will be better positioned to dominate in this evolving market.
About Owen Kell
Owen Kell,
Senior IoT & Security Research Associate, Memoori
Owen Kell is a seasoned business intelligence professional with nearly two decades of expertise in market research into how industry leaders are applying emerging technologies to enhance the efficiency, sustainability, and intelligence of buildings and urban environments. He is recognized for his deep understanding of markets for IoT, Big Data, AI, Machine Learning, and Physical & Cyber Security in the Smart Building sector. Kell has empowered global blue-chip giants and innovative startups alike with strategic insights, actionable intelligence, and innovative solutions. He is a thought leader in the industry, having authored over 20 insightful market reports that have shaped the discourse in the Smart Building landscape.
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