Alf Chang, Senior Consultant for A&S magazines and former installer, looks at hot trends in the Chinese security market. Shanghai, in particular, is expected to undergo explosive growth, making it a bright spot in a slow global economy.
Unlike Beijing's slow security market after 2008 Olympics, the Shanghai security market has an optimistic outlook after the 2010 World Expo. Shanghai will invest US$15 billion in 84 confirmed projects and 32 long-term projects, according to official documents released this year. At least 17 projects will begin this year, which include critical infrastructure projects. China plans to grow in high-speed rail, highways, seaports, industrial parks and more.
The World Expo halted a great deal of construction, silencing jackhammers in a 25-kilometer radius around Expo sites. With more than 50 percent contraction in construction projects compared to last year, the pent-up demand for security will continue after the Expo comes to an end.
Shanghai has countless security opportunities, thanks to an orderly and well-structured market. While demand is high and large projects like the World Expo drive market demand, the market is fundamentally solid. This regulated marketplace enables security to flourish, beyond external capital investment. The World Expo takes Shanghai to the next level, as one of the leading Chinese metropolises. Competition is fierce but aboveboard; few providers win projects by pulling strings and slashing prices.
Local opportunities attract world-class security providers, making Shanghai one of China's more mature markets. Channel players such as system integrators are more knowledgeable about installing and maintaining projects. Electronic security is highly regulated, as a result of 20 years of development, making Shanghai a vibrant market.
Shanghai is a leading city in China, setting the pace for other municipalities. A number of local vendors offer video surveillance and intrusion solutions, with even more international brands setting up shop in Shanghai. The port city's convenient location attracts the likes of Pelco, Tyco, Honeywell, Panasonic and CBC.
Even inland vendors work on entering the Shanghai market. Having a Shanghai presence is a boon for networking and opens up doors throughout China. Once a foothold has been established in this highly competitive market, expansion is simple. This held true for multinationals such as Carrefour, Wal-Mart and Intel.
The majority of local contractors started out as small private companies, who grew thanks to explosive market growth. Nearly a dozen building automation integrators command revenues of more than 100 million yuan, or US$14 million, which is tied to government funding. Yan-Hua Smartech is a notable example, providing integration for hotels and hospitals. It has come a long way from its humble beginnings, with services centers for northern, southern and central China.
Projects must be by the book in Shanghai. Take Safe City projects as an example. Vendor A will define everything in the planning stage, such as how many project phases, equipment, funding, objectives and maintenance. Even details like mounting poles, power supply and number of monitors for control rooms are specified. After-sale responsibilities will be explicitly laid out, to prevent project lapses.
Shanghai is equally by the book about timely payments. Users will foot their bills rather than be stingy, ensuring security installers and manufacturers stay solvent. Smart users are careful about paying for their security needs, to receive the right services.
The Shanghainese are known for their cleverness, so vendors need to do their homework in order to drum up business. User education is crucial, with representatives plainly discussing the limits of their solutions. This presales communication prevents misunderstandings and keeps customer expectations realistic.
Quality equipment is an emphasis. Security products must function continuously, to be on the alert for events. Shanghai's security authority inspect product manufacturers for quality control, checking production and test facilities. If a complaint is received, the authorities will check if the manufacturer cut corners, switched parts or used inferior materials.
The Shanghai authority has set product specifications for perimeters alarms, DVRs, analog cameras, intrusion alarms and so on. All regulations have expiry dates, being subject to change, and exceed national standards. These product benchmarks will spur manufacturers to comply, in order to win local projects.
Shanghai contractors are not certified indefinitely. Instead, they are subject to repeat certification checks by the Shanghai security authority, to make sure they know what they're doing. Physical security certifications prove installers are qualified to work on major projects, as uncertified contractors cannot make bids.
Certified installers are kept on their toes as well, with any wrongdoing resulting in their certification being downgraded or revoked. The latest certification terms for 2010 include after-sales service, to keep projects running. Minimum downtime is four hours, extended to eight hours for remote sites. Within this time frame, the problem must be resolved. If a technical mishap is unfixable, product replacement must take place within 24 hours.
The Shanghai authority has a designated security plan for the World Expo sites, with contractors required to keep maintenance logs. Should an installer be at fault or out of line, it will lose its certification. Companies outside of Shanghai will be barred from doing business within the province for two years, which penalizes unscrupulous companies out to make a quick buck.
IP Integration The rise of IP has given way to more IT contractors, who have entered the security market. As Shanghai has grown into a financial center, more IT data centers have emerged. Each data center requires emergency response equipment , increasing demand for security. Biometrics secure more locations, with even iris and vascular recognition coming into play. IT companies have recognized the importance of security, resulting in increased investment and development.
IT companies have strong integration capabilities, particularly in low-voltage systems, building automation and networking. However, security has its own rules, such as personnel certifications, product standards and installation requirements. While they may be ignored in other cities, Shanghai IT contractors are required to master security as well. This increases their professionalism and experience.
The security market in Shanghai is changing from quantity to quality. Product trends are taking advantage of IP, particularly for network cameras, high-resolution cameras and intelligence. At the World Expo, 12,000 HD cameras with onboard analytics were deployed by the Shanghai city government. Shanghai is not only an early adopter of cutting-edge video surveillance, but has also used RFID, intelligent transportation solutions and detection technologies to keep people safe.
Shanghai is China's portal to the world. With world-class security and endless room for growth, the metropolis has enormous potential.