EMEA’s security market generally had a good 2022 and saw growth, which is expected to continue next year. However, the specters of supply shortages, inflation and the war in Ukraine present uncertainty and risk.
’s security market generally had a good 2022 and saw growth, which is expected to continue next year. However, the specters of supply shortages, inflation and the war in Ukraine present uncertainty and risk.
EMEA’s security industry generally performed well this year on various positive factors. “The EMEA region has been performing well for Bandweaver and probably only second to Asia in terms of revenue generated. There was strong growth in the telecoms and utility sectors and of course the oil and gas sector remains strong as the price of crude oil has recovered strongly from the crash of 2020. Demand from the EMEA region remains high as we look towards 2023 with continued investment in the region,” said Mark Horton, VP of Bandweaver Technology.
“2022 has been a very strong year for the security industry, with particularly noticeable growth in the UK, France, and Germany,” said John Davies, MD of TDSi. “Overall, market growth in the UK has been significant in 2022 and we have seen a number of projects go live in the Middle East following the relaxation of COVID restrictions there.”
“While COVID was still an issue in some countries at the beginning of 2022 – depending on the incidence – the Ukraine war triggered some uncertainty in the markets from the end of February 2022. Nevertheless, it was clear that security – physical or digital – is increasingly a topic of the future and that the companies operating in this market have good growth prospects,” said Thomas Lausten, CEO of MOBOTIX.
COVID influence on security
Indeed, COVID impact has waned in EMEA, yet the lessons learned from the 3-year pandemic are now deeply influencing security. “The security sector in EMEA has bounced back well from the impacts of COVID and probably quicker than other comparable regions. That said, we are seeing some changes in security strategy as part of lessons learned from the pandemic. There is more of a focus on real time reporting and data convergence, with AI powered solutions in high demand as end users look to reduce the requirement for operator involvement in alarm events. The goal there is also to replace traditional manpower with security technology,” Horton said.
“It’s no exaggeration that COVID put great pressure on people’s safety and wellbeing — and that influenced a lot of the security spend we experienced. Security teams began to prioritize video analytics like occupancy counting and measuring the distance between people, to help support COVID safety efforts,” said Uri Guterman, Head of Product and Marketing at Hanwha Techwin Europe.
Technologies and verticals
Technology-wise, AI and cybersecurity
continued to dominate security in EMEA. “Security in EMEA in 2022 saw many organizations embrace artificial intelligence (AI) and associated technologies like deep learning and machine learning. Security leaders are becoming more AI-literate, it’s becoming core to security tech stacks, and that’s really exciting to see as AI not only improves security but delivers the insights needed for business leaders to improve their operations. Greater accuracy, foresight, and situational awareness are just some perks that AI-powered video analytics can offer,” Guterman said.
"We see cybersecurity and AI in particular as general growth drivers in the market. On the one hand, it has become clear how important cyber-secure infrastructures are, and on the other hand, AI-based solutions are opening up entirely new, forward-looking security solutions that are convincing on the market," Lausten said.
As for verticals, retail
showed strength as retailers reopened and dealt with increased customers amid a waning of the pandemic. Meanwhile, Ali Enser, CEO of Reliance High-Tech, cited the following as verticals that also showed robustness.
“The key ‘larger’ universities have continued to prosper, particularly as foreign students return to campuses and intake numbers grow. Large corporations, banking, data centers and blue chip organizations all have significant change programs in place, either changing and consolidating footprint, or utilizing existing systems such as security and building management systems (BMS) to provide business analytics, data and insight into areas such as building occupancy, energy consumption, health and safety,” he said.
Banking, meanwhile, was especially strong in the Middle East
. “In the Middle East we saw continuing high demand in the banking and finance sectors, as institutions pushed ahead with upgrading their video capture, storage capabilities and centralized monitoring capabilities in compliance with the stringent regulatory standards which have been driving the market for the last four years, most notably the SAMA regulations. Our largest banking customer in The Kingdom of Saudi Arabia continued to upgrade newly acquired branches, traditional ATMS as well as drive-through ATMs that important for so many consumers,” said Dennis Choi, GM of IDIS Middle East & Africa.
However, challenges remain in the EMEA market, where supply chain issues, rising costs in everything and the war in Ukraine continue to influence security and user habits.
Supply shortages have been a serious challenge affecting security players. “COVID-related restrictions reduced factory output and led to port closures in China, and this has made life difficult for vendors who rely on Chinese-made components,” said James Min, MD of IDIS Europe. “The most serious shortages have been in micro-controller units (MCUs), which squeezed the supply of recorders and products requiring CPUs. Product flow was also disrupted by the rising cost of raw materials and components, and increased energy costs, as well as labor shortages in manufacturing and logistics.”
“Some major camera and access control manufacturers have had lead times of 6-12 months, which is unprecedented. In some cases, these products can be substituted – but not all. The big supply chain impacts of COVID for the most part have resolved themselves over the summer, but some significant delays still exist - mainly among the industry leaders,” Enser said.
“In general, the shortage of chips affected every product in our portfolio. The market took time to rebound from the COVID situation, plenty of factories in China were affected by repeated lockdowns last year, shipments were delayed and the conflict in Ukraine hit the recovering global market hard,” said Tomáš Vystavěl, Chief Product Officer at 2N. “Thankfully, the situation is getting better. It’s not only thanks to component suppliers. Manufacturers like us invested considerable R&D resources in re-designing products in their portfolios. We did this to use components that were available on the market instead of those that were not available and ensure reasonable lead times.”
At the same time, inflation, in the forms of rising costs in gas, rents, mortgages, food and energy, is affecting EMEA as it does the rest of the world, and security may be affected.
“Across all industries, there are inflationary pressures impacting raw materials and energy costs. Some of the larger manufacturers can absorb some of this cost so there isn’t a huge price increase for their products. Being agile, buying materials in bulk, and having the ability to redesign if a raw material rises significantly in price will also help to address this,” Guterman said.
Preview for next year
As for next year, growth is expected to continue. “We anticipate that growth will be at least the same as before the COVID era,” Vystavěl said. “The growth will be driven especially by mobile access. But not everybody is ready for the change from RFID. The answer might be multi-technology readers that combine two or even three access control technologies in one device (Bluetooth, RFID, keypad).”
“We expect to see growth in the EMEA region in 2023, but less than this year due to the economic impacts of the cost of living increase and rising energy prices. TDSi is predicting 15 percent growth which reflects a continued increase in the market,” Davies said. “In the UK and EU growth is likely to be driven by the continued modernization of older buildings and infrastructure which need updating with modernized security solutions.”
Middle East is expected to fare well, too. “Europe is looking at an impending recession that could also impact tourism and business travel across the region. Yet the opposite is true in Turkey, with the weak Lira boosting tourism with visitors flocking to its beaches and cultural landmarks, eating world-famous cuisine, and going on shopping sprees in its bustling retail areas and historic bazaars, resulting in demand for improved surveillance in the retail and hospitality sectors. Choi said. “The Kingdom of Saudi Arabia is planning some of the most exciting and ambitious infrastructure projects in the world, while heavily investing in smaller programs across hospitality, retail, banking, and government sectors. The same is true in the UAE as we continue to see new landmark multi-use developments, while adoption of AI is starting to reach maturity.”
Yet it’s still a bit premature to assume that everything will be smooth-sailing, considering the aforementioned negative influences will continue to dim growth prospects in EMEA security.
“We have seen price increases of around 10 percent easily, across the board. Some manufacturers have increased prices by over 15 percent. Chip shortages, increased labor costs, pent-up demand exceeding supply, energy inflation and cost increases on raw materials are all factors. We do not expect these to continue in the long term, but they are a current and very real threat,” Enser said.
“European markets are adaptable and resilient – as we saw, despite the initial serious impact of the pandemic – but we should not underestimate the economic risks ahead. There is potential for a very serious recession as economies struggle with higher energy prices, supply chain disruptions, inflationary pressures, and reduced consumer spending power. Much will depend on the outcome of the war in Ukraine, and whether governments and central banks can maintain an effective, unified response to the many stresses it is causing,” Min said.