2022 saw marked growth in the market for majority of the Security 50 companies in video surveillance and access control. However, the year is ending with the physical security industry dealing with issues that will point to major challenges in the year ahead.

Looking at this year’s Security 50, we can see the Top 10 companies remain somewhat consistent. The top 10 biggest manufacturers in video surveillance and access control (based on 2021 revenue of security product sales) is Hikvision Digital Technology, Dahua Technology, ASSA ABLOY, Axis Communications, Motorola Solutions, Uniview Technologies, Tiandy Technologies, Allegion, Hanwha Techwin and Aiphone. Of note, Hikvision’s 2021 revenue exceeded the US$10 billion mark, standing at $10.1 billion, growing 16.9 percent from 2020’s $8.64 billion.

Security 50 2022: Top 10 manufacturers in video surveillance and access control

“We believe that technological innovation is the key element for successful development of a tech company. Our innovative technologies, products and solutions are creating values for customers, and helping many different people and types of organizations increase safety, operational efficiency and sustainability. We are glad to see that customers demonstrate long-term trust in us in return, which supports growth of the company,” said Frank Zhang, VP of Hikvision Digital Technology. “We have noticed that more external uncertainties emerged last year and this year, as inflation, interest rate hike, and exchange rate changes are affecting growth of different economies. Through optimizing our operations with enhanced flexible manufacturing processes, logistics and localized service, Hikvision has successfully maintained product delivery efficiencies. And we have kept consistent investment in technology research and development, with the R&D spending accounting over 10 percent of our total revenue in 2021. All these efforts ensured continued positive development of the company.”

Six companies are new entrants to Security 50 this year. They are: Dnake (intercom), Jovision (video) and EVETAR (lens), all from China; as well as Evolv, a U.S.-based screening solutions provider; Ava Group, an Australian risk management solutions provider; and Webgate, a Korea-based video surveillance company.

For Chinese companies, a total of 15 are in Security 50 this year. Among them, Hikvision, Dahua, Uniview and Tiandy are within Top 10. Most Chinese companies reported 2021 growth, indicating impacts from U.S.-led trade sanctions on Chinese goods were limited.

It’s interesting to note, however, that a lot of Chinese companies reported year-over-year revenue declines in the first half of this year. Hikvision, meanwhile, posted a total net profit of $848.6 million in the first half of 2022, down 11.14 percent from the first half of 2021, though its 2022 H1 revenue increased 9.9 percent y-o-y.

Yet this has more to do with China’s own domestic COVID and other issues, rather than the trade conflict itself. “Much of this is down to conditions in the Chinese domestic market rather than tariffs and trade restrictions in the US. The first half of 2022 has seen restrictions on movement in several major Chinese cities due to the COVID-19 pandemic. Government spending has therefore been diverted away from other areas and towards battling COVID-19 and supporting its economy during lockdowns,” said Josh Woodhouse, Lead analyst and Founder, and Jon Cropley, Principal Analyst, of Novaira Insights.

Speaking of U.S.-China trade conflict, all eyes are watching whether Taiwan security makers have benefited. Upon an initial look, this is indeed the case as certain Taiwan companies, including Dynacolor, Hi Sharp and GeoVision, reported good growth in 2021. Yet given Taiwan manufacturers’ smaller scale and capacity, whether they can continue to benefit from OEM orders transferred from China remains to be seen. In fact, most Taiwan manufacturers have re-strategized to make niche, value-added solutions in, for example, smart transportation, and that has been one of the contributing factors to their successes.

2021-2022 review: Growth returned to physical security market 

Looking back at 2021 and 2022, indeed growth returned to security due to an easing of the pandemic. “With more availability of vaccines and treatments for COVID-19, many businesses were able to start pivoting their business strategies towards creating a safe environment for employees and customers to return to physical spaces, while also maintaining (and even expanding) the remote solutions implemented during the height of the pandemic,” said Danielle VanZandt, Senior Industry Analyst for Security at Frost & Sullivan. “For many security technology markets, spending and investment opportunities returned back to their pre-pandemic levels, with some technologies witnessing further gains due to ongoing digitalization initiatives—markets like biometrics, access control, video analytics, and digital intelligence all witnessed significant growth this year.”

Across the global markets there is a solid underlying market growth … One driver for that is the overall increasing interest in security and network video solutions. Another driver is that of technology development. The demand for our products increases as we develop new and more innovative products and solutions to address customer demands,” said Ray Mauritsson, CEO at Axis Communications.

2023 forecast: Challenges lie ahead for security industry

Just when we thought the pandemic nightmare was about to be over, a new set of challenges and difficulties have emerged, impacting various industries including security. A post-COVID surge in demand, as well as the aftermath of regional conflicts, have triggered the worst supply chain crisis in a generation. This has also partially contributed to out-of-control, across-the-board inflation in a range of areas, from energy to food to consumer products. To curb inflation, interest rates have been hiked to the highest in years, raising the spectre of recession. Indeed, the world we knew pre-COVID has changed, and, despite a return to growth in security, the above-mentioned challenges bode not so favorably for the industry in the coming year.

Supply chain issues 

As mentioned, the security industry is now faced with certain challenges, one being the worst supply chain crisis in decades. “As with many other companies, we have been affected by supply chain issues. Lockdowns and other disruptions caused by the pandemic was one factor. The shortage of components, which was worsened by the pandemic, was also a major factor. Product re-designs and spot market component purchases has been two examples to minimize the effect of supply shortages. Longer lead times led to slower growth than expected in 2020 and 2021. As we now are starting to see improvements in our supply chain, we are expecting to return to double-digit growth,” Mauritsson said.

Of all the component shortages, semiconductor shortages were particularly severe. This, then, has produced ramifications for security players. “Restrictions on movement due to the COVID-19 pandemic caused a surge in demand for consumer electronics. People required laptops to work from home and for home-schooling and spent more of their income on home entertainment. All this equipment required semiconductors causing huge growth in demand for them. Video surveillance equipment vendors were just one group competing for supply of semiconductors. Car manufacturers and smartphone producers were among the other groups,” Woodhouse and Cropley said.

“As far as components, one of the hardest hit technologies was in chips for any type of processor for analytics, intelligence functions, or edge capabilities. These were high in-demand solutions from all customers, so securing components in a timely manner became a key differentiator for projects pitched and won over the last year. Security vendors who were able to diversify their supply chains to secure these components and not feel the impact of adjusted logistical routes globally found themselves to be the ultimate winners,” VanZandt said.

Inflation 

Inflation is also now affecting a range of industries including security. “The price of video surveillance equipment is now being impacted by inflationary pressures in the wider economy. With utility prices, labor costs and raw material costs all rising quickly, video surveillance vendors will be forced to pass on cost increases to their customers in the form of equipment price increases. The average price of a network camera is forecast to increase in both 2022 and 2023,” Woodhouse and Cropley said.

Amid the price increase, security players had to re-strategize and think of ways to retain customers. “Inflation has caused costs to raise across the board and security technology components were not an exception to this. Many vendors and integrators did have to increase their prices in order to counter this, but they turned towards offering more flexible payment models for customers, as many projects did have longer timelines than they typically would,” VanZandt said. “Additionally, much of the industry focus has turned towards enhancing the overall customer experience including offering more personalized service models. Not only does this service-based approach fit with the overall trends of the industry, but it also helps vendors to prevent significant levels of customer churn.”

Other challenges

Geopolitical conflicts in certain parts of the world have also taken a toll on security players. “The ongoing geopolitical issues that we see is of course causing concern and uncertainty. For instance, we have, as did many other companies, suspended our business operations in Russia due to the invasion of Ukraine,” Mauritsson said.

The specter of potential new data privacy regulations globally also continues to impact many new analysis and intelligence capabilities across the security industry. “Because of this, vendors must build any new solutions with the inherent privacy features already mandated in other regions or countries or have the inherent flexibility in their solution design that they can make quick changes in order to meet any new requirements that come into play,” VanZandt said.

Growth prospects murky for physical security in 2023?

Indeed the security industry is seeing growth return this year. As for next year, things look more uncertain.

“In the first half of the year, our overseas business still maintained a rapid growth, thanks to the company’s years of deep-rooted overseas efforts. It also continued to promote business localization strategies, and improved the global supply chain and various supporting systems. Business opportunities in Asia-Pacific, Africa, Latin America, and the Middle East are relatively optimistic; but there are also regions with relatively weak growth,” said Fu Liquan, Chairman of Dahua Technology. “Looking forward, overseas businesses will continue to face regional factors, inflation and other objective conditions, but the global market is vast, with opportunities and challenges coexisting, and there is still growth potential in the long run.”

Amid the challenges mentioned earlier, there is likely to be a correction in the market, impacting growth.

“The world market for video surveillance hardware and software is forecast to grow 11.7 percent in 2022. It is forecast that economic problems will impact both public and private spending on video surveillance equipment in 2023. At the same time, inflationary pressures will persist. The world market for video surveillance hardware and software is forecast to grow 6.4 percent in 2023,” Woodhouse and Cropley said.

“While I don’t expect that 2023 will be a total downturn in overall industry growth metrics, I do expect that it will cause a market correction, where growth metrics go from their high double-digit figures, and decrease back to a more sustainable, but significant 8-9 percent year-over-year,” VanZandt said, adding while challenges remain, they also bring opportunities.

“Inflation concerns, supply chain challenges, and instability in global energy markets is all causing businesses to pause many new security investments until they can see what the final impacts could be to their budgets and bottom lines. This does offer opportunities for security vendors to work that much closer with their existing customers in order to identify ways that they can augment existing solutions already in use, giving vendors feedback on potential new features to introduce or to offer testing of new capabilities with these customers before restarting investment discussions,” she said.

As for security trends for next year, AI, edge computing, cloud and cybersecurity will continue to dominate. Meanwhile, multi-dimensional perception will be another development to look for.

“From Hikvision’s perspective, multi-dimensional perception will be another big trend that will enable the security industry going to the next level. Beyond visible light imaging, we see more perception capabilities, like radar, thermal imaging, x-ray screening, temperature measuring, humidity sensing, and gas leak detection that are being added to security devices and systems, making them more powerful,” Zhang said. “By better ‘sensing’ the outside environment, identifying events, and providing more detailed information, multi-dimensional perception creates new possibilities for video security systems to be used in ever wider scenarios and applications. We are extending our machine perception technologies to the full electromagnetic spectrum, and have developed innovative products and applications that pick up X-rays, infrared rays, millimeter radar waves, sound waves, and temperature variations.”

Top growth companies share their secrets to success

By: William Pao

Taking a look at this year’s Security 50, we can see clearly that growth has returned to the security industry. In this article we spoke with some of the growth companies to see what their secrets of success were.

In last year’s Security 50, something unprecedented happened, with more companies – 28 – reporting revenue declines than growth in the height of the pandemic. Things are different this year: a large majority of companies reported year-over-year growth in 2021 revenue, reflecting what the industry was like pre-pandemic.

“We have experienced phenomenal growth in EMEA both last year and in 2022. Still, it has been a relief for all of us in the security industry to come out of two years of COVID lockdown. Being able to meet partners and customers face to face has been vital for Milestone and our sales in the first half of the year,” said Jos Beernink, VP for EMEA at Milestone Systems.

“Our growth and profitability are accelerating right into 2022, reflecting our continued leadership in specialty RFID applications for the IoT sector. We’re growing substantially faster than any of our segments which means we’re taking share from other companies,” said Steve Humphreys, CEO of Identiv. “Last quarter our RFID revenue grew 41 percent year-over-year. Our premises business grew 20 percent year-over-year. And our total revenue increase grew 16 percent year-over-year.”

Strategizing for growth

In total, 40 companies in this year’s Security 50 reported growth last year, with 28 growing by double to triple digit. The Top 10 companies in video surveillance and access control that grew the most in 2021 were: Evolv Technologies, CP Plus, DynaColor, Webgate, Intelbras, Dongguan Yutong Optical Technology, Motorola Solutions, Gallagher, Hanwha Techwin and TVT Digital Technology.

Of note, Evolv, a provider of weapons detection security screening solutions, reported a 2021 revenue of US$21.77 million, compared to $3.92 million for 2020 and translating into a y-o-y growth of 455.98 percent, due to the company’s effort to add customers and expand into key verticals and geographic markets.
Indeed, these growth figures demonstrate security companies’ strength and resilience amid various challenges presented by COVID. So how did they do it? We spoke with some of the growth companies to find out.

Staying nimble and responsive

Staying nimble and responsive amid adversity is critical. “All told, it’s been a very interesting past couple of years, first dealing through Phase 1 of the pandemic in 2020, and then phase 2 in 2021. It was our supply chain that got us through these years. We were able to get ahead of the shutdown and pre-order 4x our general monthly orders for our main suppliers once we heard the World Health Organization was in Wuhan, China, knowing how quickly China closes when needed. Two days after our orders were placed, the shutdown happened. So having inventory was certainly a major factor, as much as having production teams willing to be in our headquarters building products for customer orders,” said Jeff Burgess, Founder and CEO of BCDVideo.

Value creation for customers

Another key to growth is value creation for customers who can continue to stick to the supplier.

“With the growth of Dahua’s AI implementation ability and its continuous effort in exploring data value, the company has gradually expanded its business from traditional security to enterprise operation and management. By helping enterprises reduce costs and increase efficiency, the value of each client has been greatly improved. The company’s arduous effort in business has promoted the continuous improvement of each client’s value, which is a significant factor that drives performance growth,” said Fu Liquan, Chairman of Dahua Technology.

According to Humphreys, a commitment to value creation is exactly the reason why the company achieved growth even amid the biggest global supply chain crisis seen in a generation.

“The reality is that supply chain shortages haven’t been this bad since 1972. The RFID industry has predominantly been dominated by companies that just want to get a simple design and then crank them out in the hundreds of millions. From a business perspective that’s never been our position, partly because that’s not where the margins are,” he said. “When we go to market, the entire arc of the whole business platform is going in the direction of higher value add solutions. We are comfortable with long sales cycles. We understand customers aren’t even necessarily going to know what they can accomplish when they start out. We introduce a highly collaborative and educational selling process with customers.”

Commitment to technology innovation

Closely related to value creation is technology innovation, which allows companies to deliver products/solutions required by users. “Identiv is designing and delivering next-generation solutions that are enabling the future of the IoT. We’re a technically deep company, which is helping us to get more market share,” Humphreys said. “Technology touches people every day and it’s at our core and that drives across the premises business and the identity business, especially in RFID. Although finding great talent across all departments is a major challenge in security, we have some of the most innovative and brilliant engineering minds in the industry working in research and development. Those engineers are making the technology more deeply embedded, leveraging it more effectively, and then making it totally pervasive so that security is all-encompassing.”

Respecting local laws and policies

For multinationals, respecting local laws and policies is key to ensuring growth in overseas business. “In the face of the current complex and changeable global political and economic environment, Dahua respects the laws, policies and customs of various countries and adopts the approach of ‘one country, one policy’ to meet the requirements of globalization compliance,” Fu said. “The company continues to strengthen the strategy for the localization of overseas employees by building an international marketing and management team as well as localized marketing and service centers to further explore the global market. Globalization and the continuous growth in overseas market will also contribute to future business growth of the company.”
Growth expected to continue
Looking into 2023, most companies expressed optimism growth will continue. “We are very bullish about the security market because AI and Machine Learning open a whole new scale of possibilities, solutions, and integrations in and beyond security,” Beernink said. “At, for example transportation clients like airports, we see that our clients are enormously challenged to keep their operations running whilst challenged on employees and being confronted with much higher passenger quantity. This as an example drives a demand for clever VMS security solutions. Security managers in our markets are challenged to do more with less resources. We at Milestone Systems have great solutions to fulfil that market trend.”

“Over the past twenty years, we have been through tsunamis, memory factory fires in Japan, recessions, and presidential elections. We have basically seen it all, so we always feel like we are ready for anything. As we continue to challenge ourselves to deliver more platforms to the market, such as the Q4 2022 release of our All-in-One NVR and Deepstor high-availability external storage, it will allow us to widen our brand globally. This is also why we are forecasting twenty-percent year-over-year growth in 2023,” Burgess said.

Memoori Research Senior IoT and Security Analyst Owen Kell shares his insights on the trends that will shape the physical security industry in the year ahead.

By: Owen Kell, Senior IoT & Security Analyst, Memoori Research

Ongoing geopolitical & trade tensions threaten to put the brakes on Chinese expansion

China’s leading video surveillance giants have become increasingly dependent on foreign markets. In terms of global revenues, giants Hikvision and Dahua Technology have retained their dominance through 2022, reporting strong overseas sales growth in H1 2022, and generating revenues of over $16.7 billion in 2021.

Their future growth is, however, threatened by a combination of weak domestic demand (largely due to the knock-on effects of the Chinese government’s increasingly controversial zero-Covid approach and resultant regular lockdowns of major cities), ongoing trade tensions between China and the West, and a weakening global economic outlook.

Tensions over alleged human rights violations and the ongoing trade war between China and the U.S. has seen continued legislative moves, new sanctions, and tit-for-tat trade barriers erected that have hugely disrupted the flow of both physical security products and key product components critical to ongoing innovation between the two nations, as well as the ability of their respective manufacturers to trade in their respective markets.

Furthermore, the recently announced US government export restrictions imposed on leading chip designers NVIDIA and AMD will stymie China’s ability to cost-effectively carry out the kind of advanced computing required to remain competitive in the fields of computer vision and natural language processing AI.

Restrictions on Chinese physical products sales to particular market verticals (or indeed a total bar on sales of all of a particular company’s technology) continue to increase not only in the U.S., but also in other Western nations, and it seems that the geopolitical and trade tensions are set to get worse before they get better.

Chinese chipmakers are not yet capable of replicating the performance of these advanced NVIDIA and AMD chips, so as a result, Chinese AI researchers may be forced to revert to using multiple lower-end chips to replicate the processing power.

AI adoption goes mainstream

After several years of false dawns and over-hype, through a series of incremental steps, AI-enabled solutions have become increasingly commercially viable in the physical security space. The pace of change over the past 12 months has been particularly remarkable, with new research papers that push the boundaries of what is possible being released on virtually a weekly basis.

We have observed significant improvements in terms of the speed, accuracy and cost of machine-learning solutions for practical applications in security-related fields including complex facial recognition, cutting-edge video surveillance scene processing, audio analytics and robotics/drones, to the extent that leading AI algorithms in several areas now far exceed human capabilities for several use cases.

While the most advanced AI relies on significant computational power and processing capability, a combination of improved edge processing capabilities at the device level and flexible access to increasingly affordable cloud-based computing resources now make accessing these innovations a viable option for many firms.

The race is now on between vendors to integrate next generation AI-enabled security functionality into end-user focused applications in a way that facilitates accessibility, practicality and ease of use for everyday security scenarios. AI is increasingly replacing the manual effort required for some roles, with data interpretation that formerly required human input now being handled algorithmically, automating processes or steps to make managing security that much easier.

For security staff, this will lead to a reduction in the amount of time spent monitoring screens or watching out for alarm notifications, and more time spent conducting higher-value work. AI will be leveraged to help analyze, evaluate and prioritize data feeds, and then provide real-time prioritization and recommendations on security issues requiring the attention of the security staff.

Making this kind of AI functionality accessible to security professionals will also require integration of AI/ML tools into existing software and platforms in a way that minimizes the need for coding or technical expertise to operate, as well as providing accessibility through multiple media including handheld devices.

While concerns over the ethical usage of AI and algorithm biases will persist, the increasing levels of integration of AI tech into all manner of everyday services and solutions (particularly into digital media generation) will lead to increasingly widespread acceptance of the technology in society as a whole.

An increasingly cyber-conscious customer base

Smart buildings are experiencing an explosion in the volume of IoT devices being deployed, as well as ever-increasing levels of convergence between IT and OT networks. These factors, combined with the growing sophistication of malicious actors and increased reliance on cloud services mean that smart buildings are becoming increasingly vulnerable to cyberattacks.

The last 18 months have seen a huge rise in ransomware attacks, as well as rising costs per incident of cyberattacks on businesses around the world[1]. All too often, IoT-enabled building automation or physical security systems have acted as the “soft underbelly” of organizational cyber defense, with multiple high-profile cases of security breaches serving to highlight the risk and vulnerabilities posed.

At the customer level, awareness of cyber risk, cost implications and even the adverse effect of cyber risks on building owners/operators’ ability to effectively insure their buildings, is steadily increasing. We have observed increasingly strict cyber policies adoption among more sophisticated clients over the past year to mitigate these growing threats, with many companies adopting a “Zero Trust” approach to network architectures, as well as continuous verification as well as investments into systems hardening.

Here again, AI will also play an increasing role – both in cyberattacks and cyber defense.

Memoori’s recent report into AI & Machine Learning in Smart Buildings found that AI tools and building blocks for launching an offensive AI-driven cyberattack have already been developed by bad actors, with several incidents identified by researchers indicating that AI had been used to execute attacks faster or to gain deeper access into a system. In terms of protecting against the threat, AI is increasingly being deployed to provide cyber-risk analytics for improving organizational resilience and understanding cyber risk by improving threat intelligence, prediction, and protection as well as enabling faster attack detection and reducing the need for human cybersecurity experts.

As demonstrable cybersecurity capability moves from being a “nice to have” to a “must have” in the eyes of an increasingly cyber-conscious customer base, security solution vendors seeking to differentiate themselves will need to invest in areas including security by design, gaining cyber certification, demonstrating cyber standards compliance, and independent testing and validation of their products to help differentiate their offerings.

Other trends to watch out for in 2023

Other trends we’re actively monitoring that we believe will continue to significantly impact the market for Physical Security include:

• Ongoing global supply chain woes, which look set to continue well into 2023, impacting stock levels, price inflation and component availability.
• Continued blurring of the lines between cloud and on-prem physical deployments as increasing numbers of end users embrace hybrid deployment models for at least part of their security solution.
• Rising demand for security systems integration and interoperability for better reporting and control of other building/business functions for applications including occupancy analytics, energy efficiency and improving the employees or tenant experience.

The ideas presented in this article draw on the findings of several recent Memoori’s research reports into cybersecurity for smart buildings, IoT in smart buildings, and AI applications for smart buildings, and will form part of Memoori’s forthcoming annual research into the Physical Security market, due for publication in December 2022.

[1] https://www.ibm.com/security/data-breach

Novaira Insights: Video surveillance market growth continues; price has increased, too.

Video surveillance is a key element in security. So how has the video surveillance market fared recently, and how is it expected to perform in the years to come? asmag.com spoke with Josh Woodhouse, Lead analyst and Founder, and Jon Cropley, Principal analyst, of Novaira Insights, which recently released a video surveillance market report.

By: William Pao, Senior Reporter

According to the report, “The world market for video surveillance hardware and software,” the global video surveillance market grew 16.4 percent in 2021. An easing of restrictions on movement and efforts to meet pent-up demand post-COVID were cited as some of the key growth drivers. Indeed, amid project resumptions and construction booms in various parts of the world, a continuation of growth in the video surveillance market is all but expected.

Price hikes resulting from supply shortages

However, the report cited the global average price of a network camera increased by over 7 percent last year, making 2021 the first year in which the global average price of a network camera increased rather than decreased. A main reason cited by the report was a shortage of components used for production of video surveillance equipment, resulting in higher prices for those components; this then forced video surveillance equipment vendors who were unable to absorb such cost increases to raise the prices of their own equipment.

Especially, vendors were faced with a shortage in semiconductors, which are the basis for image signal processors and SoCs that are key components in IP cameras.

CHIP Act may help somewhat, but not in short term

“A shortage of semiconductors was particularly problematic. However, there was also shortages of resistors and materials such as some plastics and metals,” Woodhouse and Cropley said, adding that the CHIP Act recently signed into law in the United States may improve the chip shortage situation somewhat, but not anytime soon.

“It is likely that the CHIP Act will lead to greater production of semiconductors in the U.S. in the longer term. However, it will take years for new production facilities to be built and for volumes to ramp up. The impact of the CHIP Act is therefore likely to only start being felt towards the end of the forecasts in our report (our forecasts run to 2026),” Woodhouse and Cropley said.

According to both, general inflationary pressures will force vendors to increase prices yet further in 2022 and 2023. This, then, is expected to produce an impact in the video surveillance market. “SIs and end users will purchase fewer surveillance cameras than they would do if prices weren’t rising. This will mean that camera unit shipment growth will be lower in 2022 than it was in 2021. Growth will then be even lower in 2023 than it was in 2022,” Woodhouse and Cropley said. “The global average price of a network camera and an analog camera is forecast to fall again in 2024. However, a more prolonged period of high inflation presents a serious risk to this forecast.”

As for next year, the report said the global video surveillance market for hardware and software is forecast to grow at 11.7 percent in 2022 and will be worth an estimated US$28.2 billion. “We are forecasting much lower growth in 2023 followed by gradual recovery with growth increasing from 2024 onwards,” Woodhouse and Cropley said.

Cloud adoption increases, especially in U.S.

Technology-wise, a gradual trend to using the cloud for video surveillance also continued in 2021, particularly in the Americas region where the market for cloud video management software exceeded $150 million, the report said. It forecasts the number of cloud-connected surveillance cameras in the Americas will grow on average over twice as quickly as new network camera shipments between 2021 and 2026.
Especially, the report found the United States has been quicker to adopt cloud for video surveillance than most other countries in the world. Woodhouse and Cropley explains why this might be.
“It is down to a mixture of factors. A major factor is that it has many organizations with distributed sites, each with a small number of cameras. Furthermore, these organizations operate in a large country using a common language and a common set of rules on data residency, privacy etc. Bandwidth availability and cost have been more favorable than in some other countries too,” they said.

OSSA: Orchestrating the Digital Data Flow

Open Security & Safety Alliance (OSSA), a collaborative initiative focused on creating a framework for standards and specifications in the security, safety and building automation space, shares their thoughts on the unfolding trend that will change the security industry in the year to come.

By: Gijs van den Heuvel, Chair of Marketing at the Open Security & Safety Alliance (OSSA) and Manager Strategy and Partner Collaboration at Bosch Security Systems

As an industry alliance, we have a good idea of what’s in the works by our members when it comes to innovating across important areas within security, safety and beyond. OSSA representatives hail from some of the most influential companies in this space – such as Bosch, Hanwha Techwin, Milestone Systems and VIVOTEK – and together are determined to continue bringing forth an open, data-driven ecosystem.

The IoT is all about connecting things to make life easier, more intelligent, more intuitive and more productive. OSSA workgroups have projects underway that are primed to unify and elevate the market as a whole, so that there will be headspace to grow for all participants.

Already, OSSA organizations specified hardware and software conditions to make it possible to run third-party (AI) analytics applications securely on existing, brand-agnostic computer vision devices (starting with cameras). Working together spurred a handful of specifications for building common components (e.g., for core system requirements, cyber security directions and application interface APIs) that can be utilized jointly.

Now, a notable future trend our members are funneling expertise into is bringing about new levels of data and information sharing to all we do when it comes to smart cameras and related IoT devices. How can we achieve next-level dissemination of extremely valuable data flows sensed by products that collect data in their brand-specific siloes? How do we establish open but secure pathways to easily share and uniformly interpret data to connect the dots when it comes to surveillance and activities being captured and contained on edge-computing devices?

Millions of “things” generate, accumulate and house heaps of factual insights that – unfortunately all too often – remain untapped and stagnant once recorded. If corralled, connected and optionally given an artificial intelligence/ML scrub, this information brings a bigger picture of what transpired across, for example, surveillance systems. Taking frames or moments from various devices and drawing relationships between them to form a cohesive “data flow” opens up a massive new corridor of IoT-based possibilities. According to our group, there resides tremendous value in making data from one source consistently interpretable for another.

Imagine harnessing content from a camera that captures a car and applies its license plate app to read the details. This car crosses in front of the building, and minutes later another camera across the facility records an individual scaling a fence in the vicinity where the car was last detected. Finally, a third camera on the opposite side of the building records an individual onsite in an unauthorized area, and an open platform app detects a gun in hand. The system immediately then alerts security personnel about a potential threat. Tying this crucial information together seamlessly across a natural path of data flowing from security and safety devices takes us to a new frontier delivering not only what’s “seen” but more importantly what’s “sensed.” This is the future if device manufacturers and other stakeholders participate in an industry-driven ecosystem.

OSSA members are working on a set of generic, vendor-neutral data Application Programming Interfaces (APIs) to enable this type of uniform consumption and data interpretation across cameras or computer vision gateways in adherence with OSSA standards. It is also designed to apply across other device types within the IoT security and safety domain to provide a loose coupling between any pair of send/receive applications that collect, digest and interpret data. Enabling content from various brands and device types to be interpreted in an open forum brings newfound levels of storytelling and safety to our security situations.

Coupled with progress that continues around allowing for easy integration of third-party AI analytics applications on “Driven by OSSA” video cameras and gateways in an agnostic fashion, OSSA facilitates cooperation on many levels. There’s a front-row seat for anyone interesting in expanding this collaboration framework to together lift our industry to new levels of openness, innovation, interoperability and success.

US President Joe Biden has signed the Secure Equipment Act which will have a major impact on the security and telecommunications industries. Under it, the US Federal Communications Commission (FCC) will no longer consider applications for licenses submitted by companies marked as “security threats”. This primarily applies to Chinese producers.

Written by: Mirza Bahić, Journalist, a&s Adria; E-mail: redakcija@asadria.com

The consequences will be certainly game-changing, both in the telecommunications and security industries, and the reason for it is rather simple. The blacklist of companies includes five Chinese technology giants, with at least two major security players: Hangzhou Hikvision Digital Technology and Zhejiang Dahua Technology, alongside Huawei, ZTE, and Hytera Communications. Yes, Hikvision and Dahua are no longer welcome in the government-funded projects in the States. This, along with a ban on Huawei which gets more media spotlight is a first-rate technological turnaround that could have global implications.

How Was the Act Passed?

The Secure Equipment Act was passed almost unanimously in the US Senate in October 2021. The House of Representatives supported it with 420 votes in favor and only four against as an indicator of unity in the views of the two largest American political groups (Democrats and Republicans) at least when it comes to the status of Chinese technology companies. In March 2021, the FCC announced that five Chinese companies that supposedly pose a threat to US national security had been singled out. It was explained that this was in line with the 2019 National Defense Authorization Act whose important segment involved the protection of the telecommunications network in the States. However, at that time there was no legal obligation to reject the applications of these companies for the inclusion of their technologies in the operation of telecommunications networks. The situation is somewhat different today because by declaring the equipment of Chinese companies “suspicious” in terms of their security, it will no longer be possible for them to be used in the network systems in the United States.

“The Secure Equipment Act is now the law of the land and will ensure that insecure equipment from Huawei, ZTE, and other untrustworthy entities can no longer be inserted into our communications networks. This gear poses an unacceptable risk to our national security”, said Federal Communications Commission Commissioner Brendan Carr. And that’s not all – the FCC is already looking for ways to revoke previously approved licenses for Chinese companies. As expected, official reactions from China came soon afterward, saying that the United States was accusing Chinese companies without evidence in order to prevent their expansion.

Will Hikvision and Dahua be able to do business in the US?

Despite global difficulties and disruptions in the supply chain caused by the pandemic crisis, Chinese manufacturers are, in fact, weathering the ongoing global economic storm. After a slow recovery during the first coronavirus wave in the first quarter of 2020, the banned Chinese companies have actually achieved good results and even growth in the last 18 months. Their margins were slightly lower in 2021 than the maximum reached in late 2020, but the only unknown in the future forecast of their growth is the potential impact of Biden’s Secure Equipment Act. What are its possible implications? To begin with, these regulations would not only have a huge impact on the operations of Chinese security companies in the U.S. but could also significantly impact suppliers who use the OEM products of these companies.

In October, US retail giants Home Depot and Best Buy withdrew video surveillance systems from Chinese manufacturers Lorex and Ezviz. Lorex is a subsidiary of Dahua Technology, while Ezviz is a brand of video surveillance cameras owned by Hikvision. Following this act, Lorex removed the logos of five U.S. retail partners from its website. Representatives of the Home Depot platform stated that they immediately stopped selling Lorex products as soon as this issue was brought to their attention. Although the new regulations do not lay down the dynamics according to which the disputed technology should be removed, organizations using banned technologies are likely to be granted a transition period to remove the equipment and start using only video surveillance devices and technology compliant with the National Defense Authorization Act (NDAA) and FCC’s decisions.

Numerous challenges for end-users

The enactment of the NDAA alone represented a major event in the U.S. security sector as the American vendors had to quickly reorient themselves and start looking for replacement components to ensure compliance with applicable regulations. System integrators, planners, and end-users have faced the challenge of having to find compatible cameras that do not use banned components. In addition to the existing factors of price, quality, deadlines, and industry standards, suppliers and system integrators in the US must now address an additional source of concern – compliance of their products with new regulations on the so-called secure equipment.

The situation in the US security market is further aggravated by the ubiquity of Chinese components in video surveillance equipment. This could force many organizations and schools to immediately start planning to replace their existing camera systems and related security equipment. This also means that manufacturers now have to procure new chipsets and other legally compliant components, while integrators and end-users will have to modify their existing camera systems and the entire supply chain they rely on.

According to the American media, many companies are already forced to look for new suppliers, which requires additional efforts to strike a balance between physical availability and regulatory compatibility of security systems. An additional problem is the need to organize the training of entire teams in order to ensure proper configuration of the systems and their installation. For system integrators who already have to balance the price and quality of the products they use, this will be a new and, for some, insurmountable challenge in maintaining their competitiveness in the U.S. market.

Early implementation marked by scandals

Shortly after the signing of the Secure Equipment Act, a curious security scandal erupted in the States, showing that its implementation on the ground will not go smoothly, at least initially. At least three American federal agencies, including the military, procured video surveillance equipment from Chinese manufacturers which the federal government had blacklisted earlier.

According to the TechCrunch portal, various agencies spent thousands of dollars on the purchase of video surveillance equipment manufactured by Lorex, a subsidiary of the Chinese company Dahua Technology. Dahua was previously added to the list of companies covered by economic sanctions against China. According to the US authorities, Dahua was supposedly linked with activities aimed at helping the Chinese government exert pressure on the Uighur ethnic minority in Xinjiang. However, after the ban took effect, evidence emerged that the federal agencies had procured Lorex equipment through their contractors. According to available information, the Drug Enforcement Administration (DEA) purchased nine Lorex hard drives for surveillance systems in May 2021. The Drug Enforcement Agency (DEA) spokeswoman Katherine Pfaff said that the purchase was made through the state procurement portal operated by the General Services Administration – GSA Advantage. For now, there is no information on whether Lorex equipment has been withdrawn from use.

The GSA did not state why the banned security products were made available for purchase after the ban took effect. It has just been said that the process of improving the system has started, including the launching of a new portal with verified commercial products in line with the 2019 bans.

The Defense Finance and Accounting Service (DFAS), which operates as an agency within the U.S. Department of Defense, also purchased Lorex video surveillance cameras through its New York vendor in July 2021. The same thing was done by the U.S. military which procured video surveillance systems and recording equipment between 2019 and 2021.

What now?

What will be the consequence of the newly passed regulations? First, it is highly likely that the contractors that supply banned equipment to state institutions will lose their contracts. On the other hand, representatives of the security industry argue that contractors and subcontractors working with the state were given too little time to allow the full implementation of the current ban on the use of Chinese technology before the law actually came into force. The Information Technology Council published a statement in which they claim that due to the extended time required to introduce rules for such far-reaching requirements, contractors may not be able to consistently meet all the objectives of the enacted law. On the other hand, Lorex, which found itself in the media spotlight, states that its products are intended exclusively for consumer and business use, and neither for the federal government agencies nor for the projects funded by the state. The same applies to contractors who are covered by the regulations of the National Defense Authorization Act. They add that they guarantee that they do not and will not sell their equipment to any person or organization covered by the current bans.

The Future

Regardless of the scandals, the current events are an excellent illustration of the complexity of implementing these bans in the field, especially if we know that they represent a precedent of sorts in the security industry. An additional burden around the neck of American integrators, distributors, manufacturers, and, finally, end-users is the fact that companies whose products are covered by the new regulations are among the strongest security and technology players in the world. The time ahead will show if this will lead to major disruptions in the security market, although it can already be said that, regardless of the outcomes, the industry will remain permanently changed by these events.

Dahua operates in accordance with applicable regulations

In response to the recently passed Secure Equipment Act, Dahua Technology called on all parties to check its credibility when it comes to its commitment to cyber security. Its statement reads as follows:

“As we have stated publicly and consistently, Dahua Technology does not and never has represented any type of threat to the U.S. We respect the right of the U.S. government to regulate the market as it sees fit. However, we are a publicly traded corporation that exists to serve our fiduciary duty to our shareholders, and our corporate responsibility to our customers, employees, and other stakeholders. We are neither owned nor controlled by any government. Our company does not and has not acted in ways that are contrary to the foreign policy interests of any countries in which we operate. We keep practicing what we preach that enables a safer society and more intelligent life and conduct our business operations being compliant with all applicable laws and rules.

We understand that in today’s security industry, cybersecurity is the biggest challenge. We have provided remedies to correct those issues with our customers. Dahua takes cybersecurity very seriously by implementing a 7-module cybersecurity baseline into our product design. We have created Dahua Cybersecurity Center (DHCC) to solve cybersecurity issues and aims to provide more robust and secure products/solutions for customers. At the same time, we have established a Cyber Security Institute to ensure the security technology research, product security R&D and delivery, and the establishment of a security emergency response team and procedures.

Dahua Technology also attaches great importance to personal data and privacy protection. Complying with applicable laws and regulations, such as GDPR, EDPB’s guidelines, and ETSI EN 303645’s Cyber Security for Consumer Internet of Things, Dahua Technology has received Protected Privacy IoT Product Certification and ETSI Certification from TÜV Rheinland, as well as ISO 27018 and ISO 27701 Certification from the BSI, which help in demonstrating its capability in managing personal information and compliance with privacy regulations around the world”.

Hikvision opts for a legal fight

Hikvision has decided to fight the latest moves by the US government in a legal arena. The company has filed a complaint to the US Federal Communications Commission stating that the Commission does not have the legal authority to exclude Hikvision technology from the equipment approval process. The reason for this is the fact that Hikvision does not offer network equipment for broadband internet. At the same time, the Secure Equipment Act itself did not expand the list of types of equipment that are prohibited under the Secure and Trusted Communications Networks Act of 2019. As the focus of the new regulations is exclusively put on communication networks, and not on peripheral devices such as those offered by Hikvision, the Chinese company states that its video surveillance cameras and network video recorders are not connected with the function of providing broadband Internet access service. Since Hikvision’s technology does not constitute “communication equipment or service”, it was requested for it to be removed from the blacklist.

At the same time, the company hired American FTI Consulting to do a quality assessment of cyber security technology used for cameras and network video recorders of this manufacturer. The results of the assessment showed that these devices did not pose a risk to the end-user in any environment and application. FTI Consulting has established that the communication between the devices and Hikvision’s servers takes place in accordance with the normal mode of operation. In addition, testing and analysis did not reveal any standard forms of the Common Vulnerabilities and Exposures (CVE) with any device, and the same goes for the possibility of an unauthorized party to get access to the video signal.