The Security 50 providers represented about 68 percent of the total global security equipment market in 2012. The 12.3-percent average growth rate for 2012 doesn’t seem very promising. This shows the uncertain macroeconomic outlook is still affecting the majority of leading security suppliers.
The Security 50 providers still played a crucial role in the global market in 2012. They contributed around 68 % of the total global security equipment market and over 40 % of the video surveillance market.
The Security 50 generated US$14.7 billion in global product sales revenue in 2012, with more than $5 billion in video surveillance equipment sales. Of the Security 50, 22 companies made the sales revenue of at least $100 million in 2012. Amongst them, Honeywell Security, Bosch Security Systems, Safran, and Hikvision Digital Technology even reached the $1 billion mark. It was worth noticing that Hikvision set a record sales revenue of more than $1 billion in 2012.
The global security product market was valued at $21.5 billion, with $11.9 billion in video surveillance, according to an IHS report in 2012. Other global markets for security products are followed by access control ($2.9 billion or 13.6 %), intrusion ($2.6 billion or 12.1 %), perimeter ($350.6 million or 1.6 %), and entry control ($3.7 billion or 17.1 %). North and South America combined made up 41 % of worldwide trade for physical security equipment and services. Asia was next at $33 billion, followed by the collective Europe-Middle East-Africa (EMEA) region with $29 billion. Security growth for 2012 in Asia was 13.3 % in APAC, compared to 3.8 % in America and 4.2 % in EMEA, found IHS.
Mild Growth for 2012
The Security 50 average growth rate in 2012 was lower at 12.3 %, compared to 14 % in 2011. It was also lower than predicted by industry experts for 2012 —15% growth. As growth slowed, 27 companies from the Security 50 started to experience the pain in 2012.
We found companies with the greatest drops in 2012 revenue either had significant market share in Europe or a high volume of sales dependent on public/government sectors.
Mobotix was “particularly affected by the debit crisis in Europe,” read its 2012 financial report. “The slow macroeconomic growth that has been seen over the last few quarters in nearly all European countries has now intensified, and a continued recessionary trend appears very probable in the short to medium term.”
Key factors for mild growth amongst the Security 50 are fierce competition in all regional markets and “moderate” growth from emerging countries, such as the Middle East nations, Brazil, India, Thailand, Indonesia, and China. Growth is further hindered by a slow recovery in developed countries in Middle and Western Europe and in the U.S. Especially in the emerging countries, such as the Middle East, political instability and economic uncertainty hampered growth.
Assa Abloy said “the mature markets were marked by subdued demand for most of the year, affected by the fiscal problems and tough austerity measures in Southern Europe and a deepened economic slowdown in Western Europe.”
Synectics Network Systems, a division of Synectics, also mentioned it experienced some growth in the Middle East region, which was slower than expected outside of the oil and gas sector.
Government Spending Continues to fall
In 2012, Security 50 figures reflected strong impact from global economic uncertainty. This“leads to reduced levels of investment, changes in government spending levels and/or priorities, the size and availability of government budgets, customers' and suppliers' access to credit, consumer confidence, and other macroeconomic factors affecting government, industrial or consumer spending behavior,” wrote Flir Systems in its financial report. The companysaid its 2012 sales performance was negatively impacted by reduced spending from US and Middle Eastern government agencies, along with the Eurozone crisis.
Tyco International also said its governmental and institutional customers have experienced budgetary constraints, which mayreduce demand. When the public sector reduces spending, the security industry will be severely tested. The trend appeared even more obvious in 2012.
IP Video surveillance Enters moderate-development Stage
Since growth for IP video surveillance depends on the number of new installations, the slow growth in emerging countries dampened the growth rate of IP video surveillance companies. One bright spot for IP is demand for retrofit projects in developed countries. However, the rate of end users replacing their old legacy analog systems with new IP systems has not exceeded expectations.
IP video surveillance is still hot, but revenue growth is tapering off, as seen in the earnings from Axis Communications, Mobotix, and Milestone Systems. Axis Communications grew 28.7% in 2010, 22.9% in 2011 and hit 17%in 2012. Mobotix grew 19.9% in 2010, peaked to 35.9% in 2011 and fell to 11.5% in 2012. VMS provider Milestone grew 55.8% in 2010, which dropped to 22.5% in 2011 and 19.4% in 2012. VIVOTEK grew by 57.5% in 2010 and 62.1% in 2011; however, growth slowed significantly to 20.7% in 2012.
Of the IP providers, only Avigilon remained in the comparatively high-growth stage. Its revenue grew 67% in 2012, which was at 86% in 2011, and 91.2% in 2010. Although the factors for moderate growth include myriad global economic influences, major IP security companies will be challenged to maintain annual revenue growth above 20 % with high profit margins in the next few years.
Fierce Competition
The maturity of IP video surveillance has resulted in falling equipment prices. Meanwhile, Chinese manufacturers are providing more cost-effective products with improved quality to the world, which makes a saturated market even more competitive.
Hikvision ranked fifth in the 2011 and 2012 Security 50 rankings, but moved up to fourth place in 2013 with $1.1 billion in revenue. Dahua Technology ranked 10th in 2011 and 2012, coming in 9th in 2013. Dali Technology also improved from 48th to 42nd. The rise of Chinese manufacturers has impacted Asian companies from Taiwan and Korea. China will compete with more non-Asian companies on more than just price.
Less M&A
The value of merger and acquisition deals in 2011 was $9 billion, representing a rise of 23 percent over the previous year, according to Memoori Business Intelligence. In 2012, it declined 27 percent to $7.2 billion. Poor economic trading conditions reduced the confidence of major suppliers to go for growth through mergers and acquisitions.
The 2012 Security 50 providers also made fewer mergers and acquisitions. Among the Security 50 companies, Flir acquired Lorex Technology for $60 million and Traficon International for $46 million at the end of 2012. TKH acquired Augusta Technologie and Aasset Security International. In 2012, the acquisitions contributed $115.6 million (€ 87 million) in revenue and $10.6 million (€ 8 million) in net profit for TKH.
Optex Systems acquired Raytec to obtain and expand products, technology, and distribution routes for video lighting systems for the security business. Infinova also completed its March Networks acquisition in 2012. Instead of acquiring new businesses, Tyco International broke up into three units — ADT North American residential security, Pentair flow-control products and services, and Fire and Security.
2013 Top Security50
