A niche for everyone: Chinese giants dominate the market, swarmed by local brands [Part I]

Is there a reason I should buy a more expensive security camera from a prestigious brand even though a cheaper one can do the same? There is no way to answer this question once and for all, but one of Europe’s foremost security shows offered some food for thought.
 
SICUREZZA drew a record number of exhibitors and visitors this year, giving testament to an upswing in the European security market. The organizers counted 1,369 exhibitors and 85,000 visitors from 110 countries at Italy’s longest-running security show and its three sister events held concurrently from Nov. 19 to 21—MADE expo, SMART BUILDING EXPO and GEE: Global Elevator Exhibition. The numbers were up 5% from the previous edition in 2023.
 
Among the most attention received the two booths of the “Chinese giants” Hikvision and Dahua, while the bulk of exhibitors—Italian and other European brands, often specializing in certain subsectors of the market where they are highly competitive—also voiced great satisfaction about the reactions they received from visitors to their booths. This, too, reflected a reality in the market: Continuing consolidation towards top Chinese brands on the one hand, while many others are finding success in niches they carved out for themselves on the other.
 
The consolidation trend is clearest when looking at the revenues of global players: Our Security 50 ranking of the largest companies in the industry this year showed that an ever-larger share of revenue among the top 50 went to China—a staggering 90 percent overall. This was up from 85% a year earlier. Even though some large Western companies were not included in the ranking as they do not disclose revenue data—Honeywell, Bosch (Keenfinity), Verkada and others—it shows that many Western and other non-Chinese brands have opted for “strategic differentiation” instead of head-on competition with Hikvision, Dahua and their likes.
 
One might say that the rest of the world competes over the 10% that do not go to China—but at least, it does so quite successfully. And looking ahead, local and smaller international players hope for additional headwinds in their core markets.
 
“The global video surveillance market is forecast to grow 1.7 percent. However, this growth will be characterized by a decline of 5.2 percent in the Chinese market, while the rest of the world (excluding China) is forecast to grow by 6.1 percent,” Josh Woodhouse, Lead Analyst and Founder of Novaira Insights, told asmag.com in an exclusive interview published as part of Security 50.  
 

Where does the success of Chinese companies come from?

Chinese companies first entered the top 10 ranks of Security 50 in 2011—Hikvision in fifth and Dahua in 10^th position, both boasting annual revenue growth of over 70% at the time. The only other Chinese company in the top 50 was Dali Technology, in 40^th.
 
Today, Hikvision and Dahua are unquestionably the top two in the world, joined by 10 other Chinese companies in the top 50.
 
China as a whole has further developed into a tech powerhouse, generating export volumes that dwarf the rest of the world’s output. In the security sector, Chinese companies can also rely on an especially robust domestic market, with unmatched unit sales volumes, regardless of short-term economic fluctuations. 
 
The sheer size and special characteristics of the Chinese market are not just a driver of the growth of domestic brands, but the foundation upon which their international prowess is built. Chinese customers, including the largest public sector market in the world, deploy security hardware at large scale, with dynamic replacement cycles, while domestic players provide the technology with relatively little regulatory friction. This gives Chinese companies the opportunity to perfect their technology through real-life testing at unmatched volume, including the arguably most advanced general-purpose AI models in the security sector today.
 
In short, unrivalled economies of scale result in rapid R&D cycles and, on top of that, give Chinese companies a great unit cost advantage.
 

Openings in the US and Europe

Western security hardware markets are much more tightly regulated, disadvantaging Chinese players. While some directives, such as the Coveted List by the FCC in the US, bluntly target specific Chinese brands, deeming them a national security risk, most Western regulations are largely brand and country-of-origin-neutral. This includes many EU directives, such as NIS2, CER, CRA, GDPR and the, as of now likely postponed, AI Act.
 
At SICUREZZA, many Italian companies, as well as other European, Korean and Japanese brands, highlighted that they develop their solutions in environments where strict rules are in place. They are “built in” to their solutions by default. The products of more price-competitive brands, which develop them in largely unrestricted regulatory environments, might progress faster, but have it harder to achieve compliance retroactively.
 
This increasingly guides the go-to-market strategies of European manufacturers.
 
“Regulatory regimes guide our expansion plans,” said Stefano Griggio, Technical Supervisor at Italian home security company EL.MO.
 

‘Parallel markets’

Owen Kell, Senior Research Associate at Memoori Research, put the “regulation factor” into a larger context in an exclusive piece he wrote as part of Security 50.
 
“Regulations by the US government … have effectively created parallel markets: one where Chinese manufacturers dominate through scale and aggressive pricing, and another (primarily in North America and parts of Europe) where compliance, supply chain transparency, and cybersecurity posture are the primary differentiators,” Kell wrote.
 
Reality is probably a bit fuzzier. In many places the “two markets” coexist, with Chinese brands dominating certain price categories and verticals, while barely having a foot in the door in others. These include premium segments of the home and corporate security markets in the West, as well as tightly regulated verticals such as financial institutions or critical infrastructure.
 
The picture might be clearer when it comes to components, though. Or even fuzzier, depending on how you look at it: Few brands aside from the “Chinese giants” have the capabilities to produce image sensors and chipsets in-house—notable exceptions are Axis Communications and Hanwha Vision, which both use proprietary SOCs in their upmarket security cameras.
 
When looked upon closely, nearly all circuit boards exhibited by smaller brands at SICUREZZA showed “Made-in-China” signage on their chipsets. Others bore signage such as “Designed in Korea, manufactured in China.”
 
“We only work with select partners, for example in Korea or Taiwan,” said Nicola Di Crosta, International Sales Director at Ksenia, which showcased, among many other products, the proprietary main board of its lares 4.0 control panel for home automation infrastructures, bearing the “Korea/China” signage on some components.
 
“We seek to build stable long-term relationships with all our partners,” Di Crosta said. “We source components from many sides. We certify them and test them, and we assemble everything in-house in Italy to retain as much control as possible.”
 
Another company representative said it more bluntly.
 
“Nowadays it’s impossible to produce everything in-house,” said Marcelo Cotignola, Managing Director for Iberia and Latin America at Inim. “We manufacture all our products in Italy. We have our partners, but we control what goes into them.”
 

Component sourcing bottlenecks

An extreme example for the global dependence on Chinese components is India, which early this year created one of the most ambitious regulatory regimes for security cameras worldwide, with the Standardization Testing and Quality Certification (STQC) mandate, effectively banning the big Chinese brands from large swaths of the market.
 
However, India is highly dependent on China when it comes to key components, such as image sensors and chipsets, for which it has virtually no domestic manufacturing. Import data from last year show that nearly all camera chipsets that entered the country came from China.
 
The STQC mandate seeks to close this R&D gap, but it remains to be seen how fast, and whether at all, this will be achieved.
 
So, does it really matter whether a device is “Made-in-Country XYZ”?
 
Continue reading here to find out.