Asian manufacturers re-evaluate and regroup

Asian manufacturers re-evaluate and regroup

Growing awareness of the importance of security amongst the general population over the past decade has hastened the development of the industry. The need for new applications, quality products and reliable manufacturers spurred the development of Asian security industry during the same time period. In recent years, Asian security players reevaluated their market strategies and positions in face of changing market conditions. a&s speaks to top industry players for the inside scoop.

Revenue Growth Stagnates
The majority of the products exported to the global market most likely originated from Asia, and it is no different in the security industry. Korean and Taiwanese companies flourished in the industry during the past decade, but many have found recent years challenging. While some companies are reviving themselves and have embarked on a survival path, most are still lost. In short, Asian security industry players need to adapt to remain on course.

Internal and External Factors
The difficult situation faced by many Asian companies can be attributed to several factors. Internally, many of them are struggling because the ship for IP has sailed and they have missed it. When the IP market took off in the 2000s, many of the traditional security companies continued to focus on their analog product lines. Now that the migration to IP is well underway, these security companies find themselves struggling in vain to enter a market that is already occupied by early adopters.

These internal factors are compounded by external factors that came into the picture around the same time. Global financial uncertainty and the rise of Chinese manufacturing have hit Korean and Taiwanese manufacturers alike. First, financial turmoil cooled global demand and second, the rise of Chinese manufacturing is a force that Asian manufacturers simply cannot dismiss. With its vast resources and low labor costs, China is quickly carving out its own reputation as an OEM partner and manufacturer. OEM competition in Asia is no longer between Korea and Taiwan, as Chinese products are rapidly dominating the market with their lower priced products. For example, IMS Research (an IHS company) ranked Hikvision as the No.1 worldwide supplier of DVR products and video surveillance equipment categories in 2011. While some argue that Chinese products tend to be standardized and of lower quality, Chinese companies are maturing and some are producing higher quality products with attractive prices. The situation is clear — the past three years have been tough for Asian manufacturers.

Product Strategy
Many of the Asian companies have charted out to new territories in their road of transformation. There appears to be two directions in the product development strategies of Asian companies. Taiwanese manufacturers prefer to play it safe and develop several technologies at the same time, such as IP alongside HD-SDI and 960H. On the other hand, Korean manufacturers are more ambitious and tend to place all their bets on developing a single technology, such as HD-SDI. “In the aftermath of the 2008 recession, Taiwanese manufacturers repositioned themselves and focused on either IP or HD-SDI, while most Korean manufacturers tend to focus on HD-SDI,” observed Garrett Li, Manager of Product Marketing at DynaColor.

Placing bets on several technologies as Taiwanese manufacturers do may be playing it safe in the short run, but it may be harder to expand in the long run. In contrast, focusing on a single technology may seem risky in the short run, but placing the right bet could raise the company up to market leader status and reap in vast rewards in terms of profits and market share.

Differentiation is another strategy. In the DVR market, which is currently dominated by China's Hikvision, Asian companies differentiate themselves with non-standardized DVR products. For example, Taiwanese c ompany EverFocus Electronics is offering something new to the maturing DVR market. “EverFocus sees tremendous potentials in the high-performance 960H DVR solutions and that it is indeed trending. This means that EverFocus will not be dropping DVRs in the product portfolio any time soon within the foreseeable future. We see potentials for growth in the HD-SDI market. EverFocus is one of the pioneers to penetrate and invest in this market,” said Tony Lin, Manager of Strategic Planning at EverFocus Electronics. In doing so, EverFocus is betting on both HD-SDI and IP. “At the same time, our R&D continues to strengthen our IP product roadmap, with a series of high-quality and cutting-edge IP solutions, perfect for specific vertical markets,” added Lin.

For other Asian companies, their product strategy involves M&A, so that they can expand and increase their product lines within a short period. Win4NET, for example, merged with Indigo Security to bring standalone DVRs to its product offerings.

For companies such as Win4NET and AVTECH, transformation involves branding. They have introduced their own brands alongside their traditional OEM businesses, as China is quickly replacing Korean and Taiwanese manufacturers in OEM partnership deals. Andy Lee, Marketing Manager of AVTECH noted that the company plans to reduce the percentage of OEM projects from the current less than 20 percent of its portfolio to focus on branding instead. “In the past years, we devoted ourselves to manufacturing quality security products to our distributors, dealers and loyal customers around the world, and put less emphasis on marketing and advertising. With IP-based products being the future, AVTECH is going to focus on end-user market and cooperate with our business partners to build a global brand.”

Future Direction
Overall, the 2011-12 figures suggest that Asian companies are in a tough environment. Faced with both internal and external challenges, some Asian companies have embarked on a new path. As the market is still debating over HD-SDI or IP, Asian companies have each placed their bets on the winning technology, whether in OEM or branding. Some are playing it safe, while others are going all out. The verdict will come when the market decides.

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