Manufacturers of electronic security products in different regions of China have different advantages that give them the edge in fierce global competition. Among these are an eye for detail, a commitment to quality, a nexus of closely related suppliers and access to solid logistics. This is not a new development, according to those interviewed. Eastern China has been long renowned for its craftsmanship. A&S China Best Buys talks to several players in every region to get their views on the strengths of companies, respectively.
The editors of A&S China Best Buys would like to emphasize that the views expressed are those of the interviewees alone. In addition, many of those interviewed also wished to emphasize that, when drawing comparisons and contrasts between companies from other parts of China, there are always exceptions to the rule. Their remarks were intended to provide a general pattern of regional characteristics.
Northern Players — Growing steadily and stable
In northern China, reputed Chinese security players are mostly located in Beijing, the capital and Tianjin — another historical city which was, once upon a time, colonized by nine countries. Important players are BlueStar, Hangban, JEC, Tiandy Digital and Yaan. According to a security player, northern players in China are intended to focus on research and development to design the right products, catering to government regulations. This leads these players to win several critical domestic projects, such as transportation, financial and city surveillance. This provides a great backup for local manufacturers while expanding overseas markets.
"Our key to success is our people," said Romeo Kwok, Senior VP and Executive Director at BlueStar SecuTech. "Our high-caliber management team trains all employees to stay competitive." About 25 percent of the company's workforce is dedicated to the R&D of high-quality DVRs and network platforms.
Tianjin Tiandy Digital Co., Ltd. aims to provide prompt responses to the market and direct communication with customers. To cater to different requirements, the organization has invested 22 million USD for the new manufacturing base from 2008. The new 50,000-metered square manufacturing base is aimed to be "digital products R&D and manufacturing center" — the largest security manufacturing base in northern China. Meanwhile, Tiandy, this year, has been awarded "Chinese Well-known Brand" by Chinese authorities, which is the one and the only in security industry. JEC is a professional camera manufacturer, especially speed domes and PTZ. The organization sees increasing demand of PTZ system in Chinese as well as overseas markets. JEC has a R&D center with more than 30 experienced personnel. Lately, it came out with sophisticated new PTZ system for vehicle and aircraft applications.
Rules and regulations of different market segments and countries are the main obstacle for many Chinese companies to enter the international arena. In 2008, after a series of testing and reforming, BlueStar's success in China's banking segment finally prepared itself for worldwide exports.
Developing countries are the company's top priorities. "Last year, we secured and completed projects for national banks in countries such as Panama, Columbia and Indonesia," said Kwok. In terms of applications, transportation, chain stores, correctional services and courthouses are of great interest to the company.
Quality manufacturing and effective management provide a great launch pad for Tiandy's overseas sales. From 2004, the company has put great effort toward overseas expansion. Tiandy's products — fiber optic transceivers, speed domes, matrices and video servers — have been shipped to more than 30 countries, including the U.S., Australia, Brazil, India and Russia.
JEC established a manufacturing unit in Shenzhen for more overseas business opportunities as foreign buyers wish to visit production lines, and Shenzhen is close to market hub Hong Kong, providing accessibility for foreign buyers. Today, JEC targets on mid and high-end markets and its products are doing well in North America and Europe.
Eastern China — Meticulous Craftsmanship
Eastern China, said Xu Feng, Vice General Manager of Hongben, has had a good reputation for high-quality craftsmanship since well before 2000. "A number of entrepreneurs in the region have long been active in manufacturing IT, electronics and telecom," said Xu. "That has delivered strong skills when it comes to mechanics, electronics and electronic security."
There are fewer electronic security companies in eastern China, said William Zhou, Regional Manager of Overseas Market at Dahua Technology Co. Ltd., but their products are much more meticulous than those made by companies in other parts of the country. The company, which was established in 1993, came out with its first DVR in 2001. In 2003, it started exporting and, in 2005, it came out with its second generation DVR. Since then, the company and its products have become world-renowned.
"Eastern Chinese companies are the strongest in China when it comes to electronic security," Zhou said, while observing that this is not the case in Shanghai the region's largest and most important business center. "There, companies can make much more money selling products from other companies. Since we do not have the same large market, we have to rely on manufacturing to make money."
R&D, Technology Powerhouse
"Companies in eastern China," said Karl Yu, Sales Manager, Delos International Group Ltd., "invest more in R&D and to target innovation." Currently, the company invests up to 20 percent of annual revenue in R&D. Delos' prowess at research and development is understandable.
"We pay a lot of attention to design," continued Yu. "We are currently consulting with some design companies with experience in IT to help us improve our electronic security products. There are not many suitable firms at home in China so we go overseas to do so."
To further enhance the software capabilities, Hikvision is currently working with the major video management software suppliers, such as Milestone, in order to complete the whole product infrastructure. "We are working with Milestone on the integration between our IP surveillance products (IP cameras and digital video servers) and their video management software."
Xue Shenyue, Marketing Director, Dali Technology Co. Ltd., explained that, when it comes to DVR manufacture, most companies are located in eastern China, particularly Hangzhou. The skill set and level of precision present in the region ensured that, early on, Hangzhou also became the center of IP research in China. "This was taking place here as far back as 2000," said Tony Shi, General Manager, OB Telecom Electronic Technology Co. Ltd., "way before many overseas companies dared to venture into the field."
Entrepreneurial, Management Acumen
Eastern Chinese companies, said Shi, have always benefited from their location in Zhejiang and Jiangsu provinces as these were relatively prosperous even when the rest of China was quite poor and undeveloped.
"Companies in the region," said Shi, "have always been known for their business and management acumen. Development was from the bottom up not top down as in Beijing, where the government tended to dominate business. People here really understand how to make things happen; they are natural-born business people."
In East China, continued Shi, companies are not engaged in fast production. "It takes us longer to get it right because we do not cut corners. That is why you will not find our products being sold on street corners. We take a long-term approach to doing business. That is part of our management culture."
"It is easier to find businesspeople and entrepreneurs in eastern China," said Charlie Wang, General Manager, Pearmain. "We recognize that we have strong opportunities overseas. It does, however, take time and effort as well as money to develop international markets. You have to look at the long term, and that requires careful planning. We have made a lot of effort and it is paying off. Today, companies are emailing, faxing and calling us not the other way around."
Fujian — Chinese Lens Center
Most Chinese CCTV lens manufacturers are centralized in Fujian province, such as F&H, Keekoon, Leading, Ricom and Senview. They are mostly located in two major cities — Fuzhou, the capital of Fujian province, and Xiamen. The centralized lens industry has established a mature and stable peripheral supply chain of frame components suppliers and material suppliers. Some other CCTV lens manufacturing cities are Shenzhen, in Guangdong province, such as Fuguangchanglong; Changchun in Jilin province, such as Dongya Optical.
Most of lens manufacturers in Fujian are exporting, with about 45 percent of Fujian lens products being shipped overseas. Two factors drove Fujian lens makers to enter international security markets. First, the Chinese domestic market did not provide large demand for lenses in the 1990s. Also, the Chinese lens industry developed later than the Japanese one, as even domestic users preferred Japanese products until now. While Chinese lenses are in the low-end for technical development, they have the advantage of low prices, making the huge international CCTV lens market an attractive opportunity for early Chinese manufacturers.
However, today, Chinese lens manufacturers are focusing on upgrading manufacturing equipment imported from Japan, Korea and Taiwan. A CCTV lens is built with frame components and optical glass. Some leading manufactures imported advanced equipments, such as Computer Numerical Control (CNC) equipment, improving capability and production efficiency.
Besides, quality control is also an important stage, especially for lens products, as they require advanced optical testing equipment. Fujian's major lens manufacturers have focused on monitoring and testing their products since their founding. Some manufacturers have spent great amounts of money and time to introduce ISO standards for their quality control process. All these make Chinese lens products gain more business opportunities in the world.
Shenzhen — a Hot Spot of IR Cameras
Southern China plays an important role in the Chinese IR camera industry given its success to international technological to market hub Hong Kong. This makes it much easier for players in Shenzhen to purchase IR LEDs — key components in infrared cameras. This gives them an edge over their competitors in northern and eastern China.
Meanwhile, according to a major infrared camera supplier, demand for infrared camera is greater in southern china. This means that players there have a competitive edge that facilitates development. As infrared cameras are mature, manufacturers are competing on the basis of refined techniques and innovative functionality. Initially, Chinese IR camera players placed IR LEDs outside cameras to prevent heat damage; later, they launched embedded IR domes; now, many are providing advanced IR array solutions.
IR cameras trend to feature cold light, IR array light, laser night vision and IP. The advantage of cold light is on cost. Due to widespread use of arrayed IR LEDs. Prices have fallen to levels that make the products only a little more expensive than standard products. IR array delivers longer life, no flashing, and no reflection from dust or human eyes. Now, it is used mostly by the military. In addition, laser night vision features no red-eye exposure and long-distance irradiation.
Noticeable IR camera suppliers in Shenzhen, such as YES, Dowse, Jiaxinjie and Relong, introduce new products on a regular basis. Take YES. Its latest IR camera features the revolutionary mechanical design — IR LEDs and lens can be replaced separately at any time. This new design satisfies installer's requirement and lowers the maintenance cost.
H.264 is Another Area of Expertise for Chinese Companies
Take Hikvision. It was the earliest to develop and promote the H.264 compression algorithm in video surveillance in China. "We have developed well in the domestic market but international markets require a lot of research, constant contact to get feedback and coordination with overseas sales departments. It also involves a lot of working together with third parties, particularly when software is required. Overseas, this takes a lot longer to develop than in China," said Oliver Zhang, Vice President at Hikvision US Branch.
"As far as I know," said Zhang, "Hikvision was the earliest to develop and promote the H.264 compression algorithm in video surveillance. At that time, it was quite new and so most people were unfamiliar with it. This was a challenge when it came to bidding on projects as a great deal of education was involved before the clients were interested."
Zhou also sees China as being strong in terms of H.264. "I think that H.264 will win out in the next several years because of its improved transmission accessibility. That becomes very useful when you are discussing IP applications."
The only drawback, he said, is that it is a bit more complicated and so less attractive to some customers. "Over the next few years, however, developments should make it much more user-friendly."
Besides H.264, Hikvision is setting up R&D teams to come up with cutting-edge products. "We have developed well in the domestic market, but international markets require a lot of research, constant contact to get feedback and coordination with overseas sales departments. It also involves a lot of working together with third parties, particularly when software is required. Overseas, this takes a lot longer to develop than in China," he said.
Mike Kwo, General Manager at TVT Digital, also sees potential. "While H.264 products did not get a lot of attention at SecuTech or IFSEC, customers at the Essen show were much more interested."
Currently, Hikvision is working with major video management software suppliers, such as Milestone, to complete whole-product infrastructure. "We are working with Milestone on integrating our IP surveillance products (IP cameras and digital video servers) and video management software."
While TVT has IP cameras (CMOS, CCD, wired, WiFi and dome) as well as video servers, "The salability of IP products," said Kwo, "really depends on the infrastructure in the various markets and the cost of networks."
In addition to its main focus - DVRs, Dahua will also develop front-end products and IP cameras. "We are really revving up our R&D efforts to develop high-resolution IP cameras," said Fu Liquan, General Manager at Dahua. "We also intend to come out with five-megapixel cameras designed for e-cop as well as 1.35-megapixel and three-megapixel cameras that are suitable for tollgates and traffic surveillance."