Thai market spiced up

Talk to any business professional in Thailand, and the term AEC — ASEAN Economic Community — is bound to come up, as the entire country prepares itself to be the center of (and driving force behind) this thriving economic entity by year 2015 when zero tariffs on almost all goods and free flow of human resources are legally and officially permitted. It is estimated, according to US Commercial Service, that the overall market for security equipment and system sales (at the manufacturer to distributor level) is between US$200 to $300 million, growing at a CAGR of 25 to 30 percent.

While everyone agrees that the country's growth potential is phenomenal, considering the various financial and economic crises across the globe, this security market still requires those who wish to capitalize on the uptick to take the time and effort to cover their bases: product/solution reliability and affordability; people and connections; and specialization, verticalization and education.

Security is not a brand new concept to Thailand or its people. In fact, analog security systems can be found all over the vast country, with some of them having been around for more than two, three decades. “The annual video surveillance equipment market is roughly US$70 million; the installed analog base is easily 10 times that, so business potential is definitely huge,” said Sakchai Somsuk, MD of TSolutions.

With the three pillars of the Thai economy (agriculture, manufacturing, tourism) thriving healthily, even MNCs like Axis Communications and Bosch Security Systems are confident in achieving much better and faster growth in this exciting market, which was troubled by sociopolitical unrest not too long ago. “From the quick recovery from the floods last year, we can see that Thailand's fundamentals are really strong. New buildings and infrastructure are continuously being built,” said Sivakumar Pichai, GM of Thailand, Bosch Security Systems. “We expect the overall market to grow at a rate of at least 10 to 15 percent. In surveillance in particular, 2011 saw 25-percent growth, and in this year and the next few years, annual growth of more than 25 to 30 percent can be expected.”

Axis saw a minor setback in growth in the first quarter of this year, but the second quarter quickly climbed back to the usual 30-plus percent. “In addition to the typical city surveillance and critical infrastructure (border, rail and utilities) segments that we serve, we are also working with our partners on quite a few midsized projects involving 100 to 200 cameras each,” said Oh Tee Lee, Regional Director of South APAC, Axis Communications. “The benefits of IP-based security systems might not be immediately clear to this demographic, so we have to invest more resources in reaching out, educating. After we demonstrate an overall lower TCO and the management and operation headaches saved over a five-year period or more, security professionals in this country get onboard and catch up really fast.”

For Sony, the country is on par with Australia and Malaysia, with each surveillance market sized at roughly $100 million. “The entire region is growing stably at a CAGR of 16 to 20 percent, and we have quite some room to grow in terms of market penetration,” said Riki Nishimura, GM of Security Solutions in APAC, Sony Professional Solutions (a Sony Electronics company). “Analog still accounts for about 80 percent of new purchases, but we expect IP to catch up to 50 percent by 2015/2016.”

As Southeast Asian economies continue to expand and integrate and global investments increasingly pour into these markets due to limited prospects elsewhere in the world, Verint believes that video security opportunities in this region will rise significantly. “We believe governments and businesses will continue to invest — some more cautiously than others — in video surveillance solutions, regardless of macroeconomic conditions,” said Wilson Chin, VP of Marketing for APAC, Verint Systems. “Our video surveillance and analytics solutions are well-recognized in the government, critical infrastructure and transportation sectors, thanks to our many years of experience in securing complex projects, high reliability, proven performance and technology innovation. ‘Partners-focused' has always been our go-to-market strategy, and we are investing more in recruiting, training and enabling our partners in this region.”

Making Commitments
To properly serve a huge, fragmented market like Thailand, many solution providers have resorted to a two- or three-pronged channel strategy. “We work with Smartcomputer (SMC) Group, which is one of the leading distributors with well-connected dealers and integrators throughout the country, on large-scale installs,” said Rio Mao, APAC Sales Director for Dahua Technology. “At the same time, we also work with IT retail outlets, to help SMBs and the general public with DIY projects.” The shift to IP and budding growth in smaller cities and towns are not unnoticed. “Together with SMC, we are offering more IP training courses and affordable, bundled DIY kits (such as NVRs and cameras with PoE capability), to lower the barrier of adopting network-based solutions.” These are equally popular in Indonesia, Cambodia and Myanmar, as they look up to Thailand for growth patterns and models.

D-Link, which has been committed to cultivating the Southeast Asian region with a multilayered, team-oriented approach for the last 17 years, is also appreciative of the rapid changes in technology adoption and buying behavior of an evolving Thailand. “We have spent more than 10 years in this country building up a solid, strong retail network,” said Sam Wong, Regional Sales Director for D-Link International. “Mobility is very high in Thailand, so we make sure anyone can find our easy-to-install/use business and home solutions in any of the top four IT chains. Advances in technology also mean that you can get more features today at half of the price last year. To cope with such dynamics, we will very soon have in place a dedicated business development manager, to service this market with the right portfolio and training seminars.”

From a components point of view, the transition to and adoption of IP-based, megapixel solutions in Thailand are much faster than the rest of the region, observed Tetsuji Emori, Operating Officer for the Optical Devices Business in APAC, Fujifilm. “All of our lens sales here are megapixel. The double-digit growth doesn't come automatically though, as competition from Chinese lens suppliers is not something to be overlooked. We organize customer visits regularly, to educate on plastic versus glass quality differences via on-site demos and shoot-outs.”

For end users that are not yet ready to embrace IP-based solutions either technically or managerially, high-resolution alternatives that rely on analog cabling infrastructure, such as HD-SDI, are available. “Establishments like banks and jewelry shops require HD footage but don't need to stream it elsewhere,” said Jackey Kim, Director of Netinfo. “HD-SDI caters to such needs. We are increasing our market education and partner recruitment efforts here, as well as in Malaysia and the Middle East.”

Outside of the video surveillance realm, there is a significant presence of access control, time and attendance, intrusion detection and fire safety solution providers actively developing the Thai market. “We have spent two years of R&D efforts on an integrated megapixel camera with facial recognition capability built in,” said Allen Hu, Marketing Manager at ZKTeco. “This technology is good for airports, as well as time and attendance or access control applications in the education, office and residential sectors of this market. We are also working on alarm products that are integrated with video, locks and smoke detectors.” The company now has 70 to 80 dealers nationwide, with a dominating market share in fingerprint verification.

XID is also coming to the market with facial recognition to target the mid- to high-end market. “Biometrics are intuitive, and our facial recognition technology has overcome technical obstacles such as position, distance, lighting and 3-D surroundings with our proprietary illumination techniques and algorithms,” said Carmelo Pistorio, Chairman and CEO of XID Technologies. “It's good for construction sites — which there are many in this country — commercial establishments, banks and shipyards.”

Not every market segment, as Pichai adequately pointed out, requires high-end, engineered products; sometimes, “good enough” products would suffice. “We have been around since 2003, and our focus has been on aesthetics, without too many seldom used features,” said Steve Ho, International Business Executive at Archtron Research & Development (Bluguard). “Our home alarm system comes with easy-to-configure home automation functionality, and is very popular in Malaysia, Indonesia and the Middle East.” Thailand, Vietnam and Cambodia are not too far behind in terms of potential, and the company is working on releasing mobile apps for instant alerts soon.

In fire safety, the government has started to enforce the building inspection law more rigorously as the country welcomes more foreign investments and construction projects of various sizes, said Warodom Sucharitaku, Country Coordinator of National Fire Protection Association. “American standards such as UL and FM are adopted here in Thailand, just so we can inspect and certify tens of thousands of buildings in a more timely fashion. We are also working with banks to provide building owners with low-interest loans for necessary system upgrades.”

Verticals Galore
Based on US Commercial Service estimates for the nonresidential property market, growing demand is expected in the government and retail sectors. City surveillance, airports, rail, government offices and ongoing mass rapid transit projects account for half of system sales to nonresidential property; retail and office complexes account for 30 percent of the market; industrial facilities and universities make up the remaining share.

“Public projects rely quite heavily on IP-based systems, and the retail and banking sectors use a mixture of hybrid and IP,” Nishimura said. Emori seconded the observations, as Fujifilm is ready with a megapixel zoom lens for long-distance requirements (up to 10 kilometers) in applications such as city surveillance, traffic monitoring, airports and oil/gas facilities. “High-end, infrastructural projects look at long-term TCO and ROI, and our transmission solutions work particularly well with large or multisite applications like airports, hospitals, hotels, universities and banks here in Thailand and elsewhere,” said Francis Ng, Regional Sales Manager for East Asia, Network Video Technologies.

Bosch's revenue breakdown is also reflective of US Commercial Service's estimates. “We are very strong in the public sector, with about 50 percent of the revenue coming from government projects and 10 to 20 percent from the education sector,” Pichai said. “We are also looking at the commercial sector, such as shopping and industrial complexes, for more growth.” Medium-size projects in the retail, hospitality, health care and SMB sectors are also on Brickcom's radar, said Ethan Lee, Regional Sales Manager.

 
The retail vertical is of particular interest, as average disposable income of Thai people and purchasing power of visiting tourists continue to increase by leaps and bounds. (Data source: CBRE Research)

No Easy Pickings
Some observe that the size of the Thai electronic security market might not be very substantial at the moment, but the potential will be quite significant and noticeable in the very near term. “Selling IP cameras alone will be increasingly challenging,” Wong cautioned. “You need to have balanced feature sets, product/solution portfolios and dedicated partners that are convinced of your goal and approach.”

Despite being one of the biggest economies in the region, there is still room for improvement for Thailand. “The public network infrastructure at the moment is a major challenge for business development and security implementation,” Nishimura said. “While we have our work cut out for us, we at Sony are still looking to outpace the average national growth of 17 to 18 percent, at 20 to 25 percent. Business practices are relationships-driven here, so we will engage in more face-to-face meetings and training seminars with our channel partners and local trainers, both in and out of Bangkok.”

Physical, electronic security continues to be a highly fragmented market. “Competition in the hardware market is particularly intense in APAC, with many suppliers from China overpromising and underdelivering. But as customers become more sophisticated and knowledgeable in the solutions they purchase, they start looking for value-added features and services, and Thailand is no exception,” Chin said. And the next section of this feature looks at how the market fragmentation has given rise to channel players of different calibers that work to address varying solution and service needs.