Market competition continues in Taiwan — restructuring of industry supply chain brewing

Looking back on 2016, the Taiwanese security market continued to feel the impact of low-cost products from China. Additionally, further development of new technologies such as the Internet of Things (IoT), Big Data and cloud computing have only blurred the lines even more in traditional security. On top of this security know-how has become increasingly open and diverse. Users know more now than ever before and their requirements have become more rational. Security manufacturers are more thoroughly developing their businesses in hopes that this will help them take back the market. So, after a year of making adjustments to adapt to the market, how has the Taiwanese security industry fared?

The “red” supply chain, a term used to refer to the electronics supply chain in China, remains an ever-present threat in the market. Chinese manufacturers such as Hikvision Digital Technology and Dahua Technology have unceasingly asserted their strength throughout the global market; furthermore, their production volume and low prices continue to wreck havoc on market prices.

Taiwanese manufacturers have had difficulty competing with the low prices of Chinese manufacturers. Close monitoring of this situation revealed that many Taiwanese security manufacturers noted the worsening conditions of the civil-use market in 2016, compared to 2015. Companies have tightened budgets due to the rather gloomy atmosphere of the overall market. This has lead to the current period being deemed the “security industry winter.” However, when it comes to public works projects, security manufacturers have maintained a somewhat positive outlook. Due to a lack of data on the civil-use market, this focuses on the public works market in Taiwan.

Growth in the public works market

In 2016 there were 2,241 public works project tenders worth roughly US$188.8 million, according to statistics from a&s. This is up 682 cases from 2015, a 63-percent increase from $115.5 million. Growth in this market could be contributed to the change in government administration that occurred in 2016, helping to ease the economic slowdown and reduction in government budgets seen in 2015.

As the global economy continues to recover, the new administration in Taiwan has prioritized and pushed public construction projects. In doing so the government hoped to increase demand in the domestic market by shaking up the industry and boosting economic growth.

Leasing instead of buying means providing value-added services

A growing trend toward leasing services is evident based on the data from 2016. The funds from organizations inviting tenders for purchasing systems and equipment has instead shifted toward multi-year lease installation payment plans, such as cloud-service platforms like video surveillance as a service (VSaaS).There are many benefits to using a cloud platform. For example, the investment cost is low, as cost is calculated by how much is used; furthermore, the system can be accessed at any time and installation is simple. As long as there is internet connection, users can utilize excellent cloud image recognition, remote monitoring and local/remote video storage. Manufacturers are responsible for the maintenance of systems during the leasing period, which includes equipment maintenance and upgrade.

By using a service model for pricing, organizations inviting bids do not need to deal with asset management and fixed budgets. This also allows for manufacturers to provide more innovation and diverse services. Nowadays there are more and more transportation, police and campus agencies using leasing services instead of actually purchasing system equipment.

Opportunity in the transportation, tourism and creative industries

There were not many large security projects last year, according to Ming-Hua Hsieh, Deputy GM of Sales and Information Services at Hwacom Systems. Most projects were for equipment expansion and system upgrades. However, the transportation industry is undergoing an “out with the old, in with the new” way of thinking. Some of these new projects have been contracted out, for example the traffic monitoring equipment project from the Ministry of Transportation Taiwan Area National Expressway Engineering Bureau (TANEEB) of the Southern District Office, and video recording and storage equipment project for level crossing by the Taiwan Railways Administration.


Tourism from China has been reduced as a result of the new government administration; however, this has not affected the tourism industry. According to statistics from the Tourism Bureau, there were approximately 10.7 million visitors to Taiwan in 2016, a growth of 2.5 percent from 2015. This is in line with data showing a rise in visitors at museums and scenic areas.


The government is pushing plans to become the Asian Silicon Valley, and encouraging more innovation in smart machinery and green energy. This should increase construction of related companies and manufacturers, as well as bring new opportunities to the market. Additionally, since the IoT and ICT technologies are inextricably linked to the innovation plan these industries will also see growth, which will contribute to development in the security industry.

Waiting for the security spring to arrive

The new government administration released its 2017 budget for public transportation construction; this includes the “Forward-looking Infrastructure Construction Project,” for which the scope is more than $26.5 billion. This project covers railway construction, water environment, green energy construction, digital construction and city/countryside construction. Public works projects should see steady growth, which should have a positive effect on the overall economy and bring about more business opportunities for the security industry.

There is optimism for growth in public transportation tenders; however, growth in the civil-use market remains stagnant. While the proportion of retailers installing IP surveillance systems has increased, China still dominates the low-end of the general sales market. The security industry is now dealing with both economies of scale and differentiation. With the flattening of the supply chain, the Taiwan security industry is working hard to stay in the game. However, despite the promotion of total solutions for the last few years, how many companies have truly been able to accomplish this? The real concern should be finding ways to meet user requirements and user industry know-how to compete.