Asia Torn Between Growth and Decline

Compared to last year's ranking, this year's Asian companies struggled in general. Even though economic indicators portray Asia as the region least affected by the recession, many of the top 25 Asian companies of Security 50 were not immune.


Top Asian 25 Security Ranking


The verdict is divided. The Chinese companies in Security 50 have seen the most growth among the Asian bloc. The Koreans mostly grew, whereas the majority of the Japanese and Taiwanese companies hit flat growth or declined. On average, growth rates have slowed, with a few exceptions such as Dahua Technology, CNB Technology, Hikvision Digital Technology and newcomer RCG. The feature highlights this year's top 25 Asian manufacturers' take on industry performance and plans to move forward.


Growth Factors
Several Asian manufacturers have grappled with the price/performance conundrum, and those who managed to strike a balance have enjoyed considerable growth. "Providing reliable products at reasonable and competitive prices gives us an edge," said Tony Yang, International Marketing Director of Hikvision.


Some, like China Security & Surveillance Technology (CSST), rely on both organic and inorganic growth to bolster revenues. "We've continued to look into different opportunities to raise our profile within China and globally," said Terrance Yap, CFO of CSST. This year, the company acquired Shanghai Forever Security and Beijing Emergency Security Service Center for Maintenance and Repair.


Both CSST and Hikvision agreed that strengthening brand recognition in new markets is a defining feature of their success. "We take branding seriously and have undergone a number of marketing and promotional activities worldwide, including increased advertising, attending exhibitions, hosting road shows and actively responding to a range of media requests," Yang said. "We also joined the ONVIF and PSIA while many others are not yet committed."


Differentiators
Major differentiators from companies with good performance include continued investment in R&D and shifting from selling "simple" products to total solution offerings. Video surveillance companies such as C-Pro Electronics have developed their own DSPs, rather than rely on external providers. "This means that from 2010, our full lineup of DSPs will help us better design and sell user-friendly products," said Rak Kee Choi, Deputy GM of Overseas Sales for C-Pro. Dahua and GeoVision have also pushed forward with their R&D efforts.


Increasingly, total solutions are becoming better adopted. Users are gaining fluency in the language of security, which results in more sophisticated requirements. "Previously, we developed and sold access control and employee attendance software. This year, we focused on delivering turnkey solutions to our clients, including biometrics and RFID, rather than mere hardware devices," said Dato' Lee Boon Han, Deputy CEO of RCG.


Loss Factors
On the whole, made-in-Asia products' competitive prices and quirky innovations make them preferred choices. Some, however, suffered on both fronts in 2008. "Profits have been slashed significantly due to price war," said Andy Lee, Product Manager of AVTECH.


Some camera makers have experienced sales increases in newer network cameras and drops in analog cameras. Next year, more focus will be on IP-based devices, said Eric Chiu, Marketing Manager of DynaColor.


Opportunities in Emerging Markets
In terms of size and security needs, China and India are, clearly, veritable hotbeds for projects and investments. "China remains our strategic market for organic growth, and we've landed significant Safe City and E-City bids with the Chinese government," Yap said. Most Chinese companies agreed that the concept of security surveillance is relatively new in China, and that there remains a huge amount of work as well as opportunities before the market is saturated.


For RCG, its strong foothold in emerging markets like Southeast Asia, Greater China and the Middle East means less negative impact from the global financial crisis, Dato' Lee said. From 2007 to 2008, the company enjoyed 39.
2 -percent revenue growth, among the highest of the top 25 Asian players.


CSST also expanded internationally and took advantage of the Dubai listing platform to land strategic partnerships throughout the United Arab Emirates, Pakistan, India and Africa, Yap said. The growth in the Middle East and Africa, in particular, stems from a relatively small but growing customer base. "It's expected that growth rates in these emerging markets will be huge in the years to come," Yang said.


To ensure success in these growth markets, resources must be allocated to education and training, added George Tai, CEO of Geovision.


Growing Verticals
Key growth sectors are finance, transportation and public surveillance, said James Wang, Overseas Product Manager at Dahua. Yang added that the banking sector, while mature in developed countries, will be very promising in emerging markets.


Additionally, new commercial installations, especially in the Middle East and Southeast Asia, include chain store projects, Tai said. Although SMB markets have not experienced the growth that large government installations have had, they have, nevertheless, garnered increasing contributions.


Product Road Map
Innovative technologies such as H.264 and megapixel network cameras are the top offerings from this year's Asian manufacturers. Korean and Taiwanese companies have paid special attention to megapixel cameras, whereas some Chinese companies were more conservative and maintained that hybrid solutions were still picking up momentum.


Over the past two years, IP-based solutions have undergone a major transformation. Before, frame rates and image resolution from IP-based solutions were low, while analog solutions offered stable 30 fps and resolution. This year, IP-based offerings are at least more mature in Taiwan, Wang said.


Chinese companies continue to accumulate know-how and gain experience with IP. "Even though analog cameras remain the major revenue generator, network cameras are picking up rapidly. We've seen an increase in our network camera sales, and 2009/2010 should yield even higher growth," Yang said.


For storage, hybrid and mobile DVRs with higher resolution and H.264 compression are gaining popularity; for fully IP-based solutions, NVRs are gaining traction. More focus on making hardware compatible with third-party software providers will help raise Asian products' international profile.


"In access control, biometrics are gaining ground, and intelligent controllers and RFID readers characterized our successful product launches this year," Dato' Lee said.


Growth Playbook
Providing adequate technical services and support, as well as educating users, distributors and even internal engineers and staff, is a major hurdle for many Asian solution providers. To gain market share and react to criticisms of Asian products lacking support and being of inferior quality, technical support and reliable customer services are imperative, Yang said.


In terms of education, some companies, like GeoVision, have hosted training sessions at security exhibitions. Others, like RCG, have pointed out that specialized technologies such as biometrics and RFID require internal staff (including technical and sales divisions) to be well-versed in functionalities and capabilities.


Granted, overall performance has suffered, but most of the Asian 25 are optimistic about the opportunities in many recovered economies. In comparison, Asia has received only a minor setback from the recession, and continued investments in R&D, marketing and education will see this year's top 25 Asian manufacturers through the crisis.