|Snapshot of Southern Fujian's Security Industry|
|Source: BY JILL LAI | Date: 10/23/2007|
|In Southern Fujian, three biggest cities are Fuzhou, Quanzhou and Xiamen . Most importantly, security industries are gathered there. Fuzhou and Xiamen are well-known for CCTV lens manufacturing, while Quanzhou is known for its alarm systems. Intercom manufacturers are located among those three cities. Innovations toward products and sales strategies are what they aim for. Some players have potential to enter worldwide markets now. The Middle East, Eastern Asia, Eastern Europe, the United States and Europe are their target markets.
In China, the three major security industries can be broadly divided into the northern region, the eastern region and the southern region. In the south, Fujian and Guangdong are the two major business provinces. Although Guangdong gathers most of the mid-to-smallsized security companies in different product sectors, the Southern Fujian industry featuring CCTV lenses, wireless alarm systems and intercoms plays a certain role in the Chinese security industry.
Like most of Chinese manufacturers, Southern Fujian security companies are new to the worldwide security market and their overseas sales are still in the burgeoning stage. Strictly speaking, 90 percent of the companies here focus on manufacturing. Through mass production and lower labor costs compared to overseas workers, Southern Fujian companies are able to provide the most cost-effective products for mid- to low-end markets, posing an enormous threat to their competitors in other regions of China, Taiwan and Korea. However, based on our observation and interviews with leading companies in the region, many of them are actively looking for innovation of product features, marketing strategies, corporate/ factory management and manufacturing methods. They are preparing for fierce competition in the market.
External Design Getting Sophisticated
Some changes have been carried out by Fujian manufacturers. One big change is the external product design becoming more sophisticated and aesthetically pleasing in intercom products. According to some industry experts, the overall quality of intercoms and video door phones of different brands is becoming more similar, as the entry requirements for producing these products are not high and the number of large residential buildings worldwide is increasing. Under those circumstances, the current market is affording Chinese manufacturers a good chance.
Take Aiphone, the leading Japanese brand. It usually costs five times more than Chinese brands. Korean brands, such as Commax or Hyundai, will be three or four times more expensive. Then, what is still holding Chinese products back? The answer is genuine external product design, said Aurine's General Manager, Ying Zhu and Marketing Manager, Yangbao Shi at Genway. Aurine is strong in the Chinese market, depending on its background in system integration in low-voltage systems for buildings. Zhu has exhibited at many worldwide trade shows since last year. Although no big orders have been received yet, Zhu was astonished by the simple and dedicated style of European product designs. At the same time, Zhu also was inspired by cell phone design. "Cell phones have become a fashion accessory to people. The design for cell phones is being updated very fast. People buy cell phones not only because for their functions, but most importantly, for the design," Zhu said. Therefore, Zhu decides to follow this kind of concept. Aurine updated their designs twice in the past four years. It invested a great deal in designing its products and acquired patents for its unique designs.
Genway, on the other hand, started exporting in 2003. Within three years only, Genway has expanded its staff to 500 employees, including 160 R&D staff, becoming one of the biggest Chinese intercom companies in scale. Genway has several overseas agents and sells to 118 countries. To date, its global users have already exceeded 20 million, and the growth rate of its sales volume is averaging 54 percent per year. About its designing concept, like Apple, Genway follows the idea of "making the complex simple," which is a catch phrase in its advertising. It is easy to find this idea behind all Genwayˇs internal and external product design.
Overseas customers tend to prefer to simpler design compared to Asian customers, Shi said. Besides the external design, Genway also created added-on designs to fit user needs. For example, its two types of video door phones includes one with a sliding cover design, and another with a flip-over cover design that hides multiple buttons and cabling inside. These two video door phones are very popular in European markets.
In the CCTV industry, Fran M&E, a professional CCTV lens cover manufacturer, pays attention to its unique optical mold design. It imported electric injection molding machines to make sure the accuracy of the curvature for its spherical cover. Even though the lens cover is just one component of CCTV, its quality strongly relates to the total performance of the camera, such as the resolution of images and durability of different temperatures and resistance to water, sand and vandalism. "Of our total exports, 50 percent are exported to Korea, Japan and Europe," said Minzhong Pan, General Manager of Fran M&E. "According to our market research, only major international companies are able to produce CCTV covers by themselves. Therefore, the market, for us, is still very big." Fran M&E entered the market early with few competitors at the time, focusing on professional cover manufacturing, which depended on Panˇs background in molding and optics. Pan mentioned that to meet its customersˇ needs, Fran M&E developed its own optical molds. In the current market, few companies are able to provide such a wide selection for CCTV covers, with its self-developed molding technology.
R&D Direction Responds to Market Needs
One general drawback of Chinese vendors is blindly chasing the most comprehensive functions and highest specifications. Especially for a hightechnology industry, it is easy for many Chinese manufacturers to get lost in the competition for new features, such as compression algorithms, megapixel lenses for CCTV and so on. However, the advancement in technology does not mean it is closed to the customerˇs needs. The key point is to understand customer needs first, especially in different regions, and then change the R&D direction to get closer to them. Zhu understands clearly that the products that sell well in China do not mean they will sell overseas, due to the different living habits and cultures. That is why Aurine established one independent R&D team specifically for export products to develop four-wire and digital wireless video door phones. The digital wireless video door phones that allow for easy DIY installation, therefore, is favored by European users.
Currently many home automation vendors, such as intercoms and alarms, eye the manufacturing opportunities in the home-network system. In China, very few manufacturers are able to produce or even sell home-network systems. Genway, on the contrary, spent three years on R&D. It is now ready to market the product and its products are successfully adopted in some Chinese cities. For oversea markets, it is also ready for distribution. One major innovation for Genwayˇs C-5 home-network system is adopting CAT 5 cable transmission technology, thereby replacing traditional cabling. The advantage is CAT 5 transmission has anti-interference ability, balancing the communication of video and audio more smoothly. Because of the united audio, video and data connector, CAT 5 transmission can ensure the compatibility of each device. In the meantime, the time and cost spent on cabling are reduced 50 percent. Plus, the C-5 home-network system includes an anti-thunder and anti-static design, making the product more responsive to overseas usersˇ needs.
For Fran M&E, they are developing a special coating to prevent moisture from fogging the cover. They use different coating and manufacturing technologies to fulfill the needs of different applications. For example, in some places, store owners may choose a cover with a tinted coating for privacy reasons. For some highway traffic applications, waterproofing and the image resolution requirements are very high. Extra-large covers may be requested by special customers. Pan said very few buyers or users want extra-large covers now, but Fran M&E can accommodate such special orders. It can also provide the highestlevel cover suitable for 36-time zoom cameras.
Management Tool and Facility Updates
To increase the quality of products and accelerate revenue growth, many companies pay attention to their corporate management tools and keeping their manufacturing/testing facilities updated. Genway is one example. It recently adopted the ERP (Enterprise Resource Planning) management system, which is used to integrate and manage the enterpriseˇs logistics, fund flow and information flow. With ERP, it utilizes corporate resources more efficiently and is able to draft specific marketing plans for the future. "Because we introduced this system into our internal management system, our marketing and sales plans are closer to the market customersˇ needs. That is the key reason why Genway is able to expand its overseas sales to 118 countries within three years," Shi said.
In addition, for CCTV lens industry, the overall quality control is far more important than anything. Zhongrong Ke, Deputy Superintendent of the Fujian Optical Academy, said the general requirement toward CCTV lenses does not change much over time, due to the wide adoption of Japan-made CCDs. Therefore, whoever can produce high-quality products in large quantities is likely to find its own markets. The manufacturing technologies for CCTV lenses in Fujian are gradually upgrading from labor-oriented manufacturing toward machine-oriented manufacturing. The company Leading, located in Xiamen unlike from other lens companies in Fuzhou or Quanzhou, foresaw the importance of quality control and investment in facilities early on in 2001, when it was established. "Moving from Fuzhou to Xiamen is to get away from the cost/price centralized competition, to take our own way in the market. Our first priority is quality not quantity," said Eagle Wang, Vice President at Leading. In order to achieve this, its testing process, criteria and even the level of its machining manufacturing is close to Korea now, which obvious from a factory tour in the company, differentiating it from other players. One example is its purchase of a multiplelayer coating machine. Leading now has become one of the few Chinese lens manufacturers targeting high quality and is an early Chinese lens player entering overseas markets with a solid reputation.
Avemia, comparatively, entered the lens export business later in 2003 and entered worldwide markets in 2005. Its strategy is to first sell a large quantity of low-priced lenses in China, then use the earnings to invest in facility and quality control from 2005 onward. "Now, each year, we spend a third of our earnings for our employeesˇ salaries, a third in facilities and a third in buying raw materials," said Anna Xing, International Manager of Avemia. "From joining many worldwide trade shows and interacting with overseas major companies from Japan, Korea and Europe in the past three years, the main difference between our testing facility and quality control is the thing shocked me greatly. Since then, we decided to largely improve these in our factory." Later, Avemia increased its quality control staff to 80 employees out of its workforce of 600, focusing on the supervision of every step of the manufacturing process and for raw material selection. Every year, it imports facilities from Korea and Japan for roughly US$200,000.
Manufacturing in Large Quantity
In addition to the highly developing lens industry in Fujian, another big city Quanzhou is also well-known for manufacturing low-cost alarm systems and detectors. Unlike another manufacturing center, Shenzhen of Guangdong province, it focuses more on wireless detectors . Feng Guang Li, Sales Director, at Karassn, said, "The most important reason is that Quanzhou has been well-known in China for radio communications devices, such as walkie-talkies. So Quanzhou manufacturers have an edge in wireless communications." Karassn, Hongtai, Longtai, Shike Alarm System are listed as top four vendors here. Take Karassn, for example, one of the top 10 alarm brands in China. Its main products were wireless alarm systems and detectors first, then shifted to wired products. Although Quanzhou alarm manufacturers tend to focus on low-cost product manufacturing, many of them are also eyeing the overseas markets, firstly in the Middle East, then the U.S. and Europe. In order to expand its overseas business, Karassn products have passed CE certification. It is now working on RoHs certification, reducing radiation problems in radio frequencies, stabilizing its wireless transmission and using dual technology to reduce the frequency of false alarms to increase its export business.
Huan Yu Tong is another intercom manufacturer in Xiamen. Just like other intercom manufacturers, Huan Yu Tong sells around 50 percent black/white video door phones and 25 percent color video door phones to the market. What makes Huan Yu Tong special is that it also produces some intercoms inside of prisons, health centers and homes. Even though the amount is still small, the market is comparatively less competitive. This provides another opportunity for Huan Yu Tong. Following the same direction as other leading brands, Huan Yu Tong also focuses on producing its own unique external design by having its own molds and manufacturing factory.