A&s proudly presents its Security 50 Ranking and Reports for 2017, in which the a&s Editorial Team ranks publicly-listed companies with strong global presence in the security industry based on their physical security product sales revenue for 2016. The Security 50 list this year pinpoints several trends, but none tops the growing influence of China in the global security industry.
Hikvision Digital Technology again took the No. 1 position with a breathtakingly huge 2016 revenue of US$4.6 billion. The figure represents a growth of 29.2 percent from $3.6 billion last year. Dahua Technology, meanwhile, saw a jump in ranking from No. 4 to No. 3 this year with 2016 revenue of $2 billion, a rise of 32.3 percent from $1.5 billion for 2015. It is all but expected that Dahua will soon rank No. 2 on Security 50, ushering in an age where two Chinese companies will lead the rest of the global security players.
Besides these two, it’s worth noting that Security 50 this year sees the addition of a handful of Chinese companies that are also trying to get a piece of the market. These include Tiandy Technologies (No. 11), Kedacom (No. 22), TVT Digital Technology (No. 27), Wanjiaan Interconnected Technology (No. 29) and Videopark Technology (No. 36).
As for the rest of the top companies, Bosch took the No. 2 spot, a rise from No. 3 last year. The No. 4 to No. 10 spots were taken by, respectively, ASSA ABLOY, Axis Communications, FLIR Systems, Johnson Controls/Tyco Security Products, Hanwha Techwin, Allegion and Aiphone. Of note, Hanwha Techwin is making a comeback to Security 50 this year with 2016 revenue of $600.2 million, a growth of 2.4 percent from 2015. Meanwhile, two long-time participants of Security 50 are missing this year. One is Honeywell. The other is Safran Identity & Security (Morpho), which has been sold to Oberthur Technologies. The subsequent OT-Morpho group has become IDEMIA, a private company.
Examining revenue growth
Compared to last year’s high-growth list, this year’s shows a stark contrast. In last year’s list, which ranked companies by their revenue growth between 2014 and 2015, we saw all but Hikvision and Dahua, in the top 15. This year, on the other hand, there are six, five of which took the top five spots. The sixth one, Kedacom, ranked No. 15. It is worth noting that among these companies, Hikvision, Dahua and Kedacom are all traded on main boards. Wanjiaan and Videopark, meanwhile, are traded on China’s National Equities Exchange And Quotations Co., an over-the-counter system also known as the “New Third Board” which lists mostly start-up or high-growth companies whose financial performance can be volatile.
Among the traditional, established Western and Asian companies that managed to register double-digit growth between 2015 and 2016 were: Avigilon, Suprema, Milestone Systems, VIVOTEK, Fermax and Axis Communications. This is impressive, given Chinese companies’ aggressive push to increase global market shares.
VIVOTEKAccording to these companies, regions where growth was made varied according to where they did business. “We had great growth in the Middle East market. As the construction market in the Middle East expands, the demand for our products has grown. In 2017, the Middle East will again show the biggest growth rate,” said Sun Woo Yoon of the Marketing Division at COMMAX.
“Over the years, Suprema established and flourished global operations in multiple regions, namely Germany, UAE, U.K. and Brazil,” said Hanchul Kim, Director of Global Business at Suprema. “In the coming years, Suprema’s global operation will act as a bridgehead to larger local systems integrators as well as mainstream security solution providers in each region.”
“We are growing globally, and we have a very prominent position in the U.S., EMEA and APAC. And we see all regions having great potential,” said Kenneth Hune Petersen, Chief Sales and Marketing Officer at Milestone Systems. “We see the market reacting to our open platform allowing the Milestone community to bring innovation and solutions that makes the Milestone product suite of software, hardware and services relevant worldwide.”
A lot of these companies saw growth in their domestic markets as well. “In 2016, we achieved a double-digit increase in our consolidated turnover compared to the previous year. This result was possible thanks to the growth of our sales in areas such as Asia Pacific, Europe, America, Middle East or Africa. On the other hand, it is important to mention our two-digit growth on the domestic market as well. Our sales in Spain reached a 12-percent increase in 2016 and remained steady year after year,” said Jeremy Palacio, General Managing Director of Fermax.
Strategic Product Management Team,
Yogesh Dutta, COO of India-based CP PLUS, said: “India is definitely a key contributor to our group. India has a huge population of 1.3 billion people, and given the infrastructure, our social economical structure and the large area of land that we have, all those require high-end, professional security and surveillance solutions. We are putting lot of emphasis into customer awareness by initiating awareness campaigns. We also widened our reach to different security segments and key decision makers. That also helped drive our growth.”
Declines in revenue growth
A lot of the more traditional, established security companies, meanwhile, saw their revenue growth decline. Bosch, for example, saw revenue growth decline from 10.9 percent between 2014 and 2015 to 6.1 percent between 2015 and 2016. Other examples include ASSA ABLOY, from 26.3 percent to 6.6 percent; Axis Communications, from 21.7 percent to 11.3 percent; and Tyco, from 2 to -1.9 percent. In fact, there were quite a few established companies such as IDIS, OPTEX and Vicon Industries, whose revenue growth fell to the negative territory.
Various factors have contributed to this. “Sales of intrusion detectors for outdoor for residential dwellings for security companies struggled and slipped lower. Sales of intrusion detectors for Asia and Oceania were soft and declines,” said OPTEX in its financial report. As for the Americas and EMEA, “overall sales decline from the impact of exchange rates,” it said.
Despite that, competition and price pressures have definitely played a role in this. In a report, Memoori cited that “there are major technical and commercial challenges ahead that will stress the supply side, and the shape and structure of the business will change significantly over the next five years. The one that currently preoccupies most companies is how can we operate profitably during the ‘race to the bottom’ and survive.”
This is especially the case for video. According to Memoori, in 2017 the market for video surveillance products was $15.9 billion, a growth of 5.9 percent on 2016, which the research company said looked “disappointing” considering growth over the previous five years averaged around 9.7 percent.
To win out amid this competition, companies focus on diversifying products and offering end-to-end solutions in certain government-related and niche sectors. These include FLIR in thermal, Bosch in building automation and video conferencing, and Johnson Controls in building automation.
“Product diversification is another trend we observed in 2017. For example traditional camera-only suppliers are expanding into the recording ecosystem, and there are more hardware offerings from traditional software vendors. This is a sign of the times as vendors look for ways to grow their revenue streams,” said Josh Woodhouse, Senior Analyst for Video Surveillance at IHS Markit. “Also as the market becomes increasingly competitive integrators want an optimized solution which has been certified and tested for purpose. This is one reason they opt for a hardware/software management platform from a single vendor.”
“To compete in the market and stay successful, we need to have price strategy besides good product range, best quality and trustworthy cybersecurity. Hanwha Techwin provides great value with affordable price so that customers can enjoy the best quality of security equipment,” said Jimmy Park, Senior Director for Strategic Product Management Team at Hanwha Techwin. “The Wisenet X series, which is featured with our own developed SoC, is successfully presented in the market. Its excellence is well recognized worldwide, and we won global security awards as proof. We are very proud of our achievement because it is also proof of our good product quality.”
Kenneth Hune Petersen,
Chief Sales and Marketing Officer,
VIVOTEK, meanwhile, has taken the strategy of converging security with IoT. According to Owen Chen, Chairman of VIVOTEK, the company’s strategy is to be “the eye in IoT” to stay focused on “video” technologies. Relying on the strong partnerships it has built with global strategy partners, the company intends to form the most complete and ideal solutions for end users. According to him, the ecosystem partners in VIVOTEK’s Solution Integration Alliance (SIA) program can utilize each other’s expertise and resources to create comprehensive solutions for their customers, in both security and IoT-related projects.
For certain medium-sized companies, their cost-down strategies have also been effective. “Close control of the cost base, together with revenue and margin growth, have contributed to the Group’s continued profitable recovery,” said Mike Stilwell, Finance Director with Synectics. Some companies, meanwhile, even managed to maintain pretty good net profit margins despite a decline in revenue from 2015 to 2016. These include Dynacolor, GeoVision and Hitron Systems.
In conclusion, the market is still growing amid renewed terrorist threats. Hikvision and Dahua continue to take top spots on Security 50, only to see their revenues growing larger than ever. At the same time, the industry is seeing the emergence of a new group of medium-sized Chinese companies who are also seeking to take a share of the market. This has caused Western brands to shift their focus to certain government projects and niche sectors to ensure continued revenue streams. Overall, it can be said that the age of Chinese dominance in security is coming, and this trend is irreversible in the near term.