Security 50: a security industry reshuffling in the cards?
In 2022, global security witnessed economic shifts, geopolitical tensions, and a profound impact on the security industry, which is anticipated to continue its growth trajectory
By: asmag.com; E-mail: editorial@asmideast.com
Looking back, security in 2022 operated in a world that saw a slowed recovery from COVID due to various factors, including inflation and geopolitical tensions. Economically speaking, the world had an average GDP growth of 4.1 percent in 2022, dropping from 5.5 percent in 2021, according to the World Bank. Advanced economies such as the U.S. and the Euro area grew 3.8 percent last year, down from 2021’s 5 percent, while emerging markets had a growth of 4.6 percent, down from 2021’s 6.3 percent.
China, meanwhile, registered a 2022 GDP growth of 5.1 percent, down from 9 percent in 2021, due to challenges on several fronts. Domestically, China issued lockdowns in different cities throughout 2022, in response to a rise in COVID cases. Then, there is China’s ongoing real estate crisis–the Chinese government’s effort to regulate the debt limits of major Chinese developers, like the Evergrande Group, had caused the country’s real estate market to tumble. External factors also played a role. Geopolitical tensions between the U.S. and China prompted the U.S. to place severe trade barriers and restrictions against China.
The security market is expected to see growth in 2023 and 2024, with video surveillance equipment predicted to grow by 11.8 percent and 10.2 percent, respectively
Impact on security
So how did these factors play out in security last year? Upon first look, they brought little change to this year’s Security 50. The top 10 global security manufacturers in access control and video surveillance in our 2023 Security 50 ranking are Hikvision Digital Technology, Dahua Technology, ASSA ABLOY, Axis Communications, Motorola Solutions, Allegion, Tiandy, Hanwha Vision (formerly Hanwha Techwin), Uniview Technologies and Aiphone. Hikvision and Dahua remain the world’s largest security companies, with 2022 security product/equipment sales reaching US$9.8 billion and $4.5 billion, respectively (based on the IRS’s 2022 average currency exchange rates). There were two new entrants: China-based smart home solutions provider MEARI and Korean biometric solution provider Union Community.
Yet a surprising part of this year’s Security 50 was the growth list. Of the 17 companies that registered 2022-2021 revenue declines, 12 were Chinese companies. While China companies’ revenue declines were somewhat expected given the environment, the number of companies that inked sales declines, and the magnitude of these declines (by as much as 40.2 percent), still caught us off guard.
Indeed, China’s internal and external challenges mentioned earlier–lockdowns, real estate crisis, and tensions with the U.S.–all played a part. “Chinese government spending was diverted away from other areas, including spending on video surveillance, and towards battling COVID-19 and supporting its economy during these lockdowns. Restrictions lasted much longer than many observers had anticipated, with the Chinese government finally easing its ‘zero Covid’ policy in December 2022,” said Jon Cropley, Principal Analyst, and Josh Woodhouse, Founder of Novaira Insights.
At the same time, U.S.-China tensions, which led to legislation like the National Defense Authorization Act (NDAA) that bans the US government from purchasing video surveillance equipment by Hikvision and Dahua, had caused Western and non-China brands to register a proportional growth in their 2022 revenue. These include VIVOTEK, with a sales increase of 82.48 percent; Hanwha Vision, 47.52 percent; Axis, 36.01 percent; Milestone Systems, 30.43 percent; and IDIS, 22.17 percent. It should be noted that many of the U.S.’s Western allies, for example, the U.K., have also enacted NDAA-like legislation.
“The shift away from Chinese vendors continued at a pace not just in the U.S., but across Northern Europe and countries in Asia including Japan and South Korea. In part, many organizations and systems integrators want to standardize NDAA-compliant equipment to ensure existing and future business in the U.S., while end users are expressing concerns about looming regulations in the EU and Asia, cybersecurity weaknesses, and the potential for reputational damage connected to human rights abuses committed by some of the banned Chinese manufacturers,” said Jamie Barnfield, Senior Sales Director at IDIS Europe.
As for this year, Chinese companies are expected to fare better, even though they are not completely out of the woods yet. “The Chinese market is forecast to recover slightly in 2023 but remain well below its peak in 2021. Growth in demand will be much lower than in the years before the pandemic. At the same time, a weakening exchange rate between the Chinese yuan and US dollar will also dampen growth (when measured in US dollars),” Cropley and Woodhouse said.
The shift away from Chinese vendors continued at a pace not just in the U.S., but across Northern Europe and countries in Asia including Japan and South Korea
Yearly review and preview
For the security market in general, growth is expected this year and next, with Novaira Insights forecasting the market for video surveillance equipment to grow 11.8 percent and 10.2 percent, respectively, in 2023 and 2024.
Industry experts agree with that notion. “We observed some economic growth and expansion in 2023, although it has been unevenly distributed across different regions and sectors. This has had a mixed impact on the security industry,” said Choong Hoon Ha, Chief Sales and Marketing Officer at Hanwha Vision. “Despite the mixed economic impact, the security demands from society and individuals are still rising with the growing need for advanced network-based systems, such as intelligent surveillance cameras. Businesses are willing to invest in security solutions that protect their employees and assets, and even improve business efficiency and productivity by providing business insight.”
“Long-term, sustainable growth is at the heart of our business planning. We plan for 15 percent growth per year on average. And while the market itself is forecast to grow, Axis is again set to outpace it. We’ll achieve this by continuing to broaden our portfolio into new areas, such as intercoms, access control, audio solutions, and so on,” said Ray Mauritsson, CEO of Axis Communications.
Mobile credentials and digital wallets are emerging trends in 2023, providing greater value to end-users and system operators
Trends: AI, cloud, and mobile access more noticeable
As for predominant trends in security, AI and cloud still rank on top.
“Artificial intelligence will continue to provide opportunities for innovation across the industry. Application of AI to data streams from sensor fusion–combining and interpreting inputs from cameras and other sensory devices–will shift security solutions towards proactive capabilities that drive new value. AI’s influence is still in the transformational stage, for certain, but the applicability to the security industry is strong and clear,” said Vince Wenos, Senior VP and CTO of Allegion.
“This year, we have witnessed a growing demand from customers to maximize the capabilities of their cameras and sensors, with a strong emphasis on analytics. The industry continues to embrace the dominant trend of edge analytics, with an increasing number of camera manufacturers expanding their support for this technology,” said William Hinton, Product Line Manager for Video at Genetec.
According to Hanwha, customers are seeking technologies that can help them improve the accuracy of detection, make their video surveillance systems more scalable and cost-effective, and benefit from video analysis.
“In other words, they’re looking for surveillance technology powered by AI and cloud,” Choong said. “Many customers are still in the early stages of adopting AI and cloud-based video surveillance solutions. However, the adoption of these technologies is expected to accelerate in the coming years, as customers see the benefits that they can offer.”
Mobile credentials, meanwhile, have also emerged as a top trend in 2023. “Electronics continue to fuel significant growth for the industry across both hardware and solutions providers. Increasing adoption of mobile credentials and associated readers is providing a healthy lift,” Wenos said. “Mobile credentials continue to gain interest from customers, as they provide greater value to end users and system operators.”
Digital wallets, an offshoot of mobile access, are also gaining traction. “We’re seeing a lot of interest in digital wallets in large, tech-savvy office buildings. The first European rollout of an employee badge in Apple Wallet was at London’s 22 Bishopsgate, touted as the world’s smartest building. 14,000 mobile users at 22 Bishopsgate can now use just their iPhone or Apple Watch to access their offices, plus all the building’s amenities,” said Prabhu Patel, Commercial Director for Physical Access Control Solutions, ASEAN and India, at HID.
Cybersecurity continues to be a hot topic now that more and more devices are online. “For several years we’ve witnessed a growing focus on the cybersecurity of solutions. Customers are aware the risks are rising, demanding robust processes, vigilance, and transparency. When vulnerabilities do occur, vendor transparency is essential, allowing customers to respond as quickly as possible,” Mauritsson said.
Cybersecurity remains a top priority as more devices become online, with a growing focus on robust processes, vigilance, and transparency
Flexible payment
This year, we’re seeing at least two companies offering flexible payment options. These are i-PRO, who announced their FlexPay Financing, and Eagle Eye Networks, who launched their Eagle Eye Camera Direct Complete. The programs aim to help customers achieve more payment flexibility, reduce initial investment, and become more competitive in general.
“In some organizations, an increasing amount of security ops fall under the IT department’s responsibility, and they may have a preference for a greater amount of OPEX compared with the security industry’s typical preference for CAPEX purchases,” Cropley and Woodhouse said. “This type of transition is indicative of a cloud business model transition. However, only the video surveillance vendors themselves know whether the motive behind this is related specifically to products from specific competitors.”
Consolidation vs. smaller start-ups
Meanwhile, two competing forces continue to dominate in security. One is the continued consolidation of the industry. Recent examples include acquisition deals between ACRE and SISCO, Motorola Solutions and Rave Mobile Safety, and IDIS and Costar. Yet on the other hand, we’re also seeing the emergence of smaller companies focusing on cloud and AI. How these forces will play out remains to be seen.
Yet according to Cropley and Woodhouse, there are advantages to the scale of operation. “Each surveillance scenario is unique. Variables include the size of the installation, whether it is indoors or outdoors, and lighting and weather conditions. At the same time, the channel varies considerably by geographic location with a different set of distributors, systems integrators, and installers serving its needs. Large vendors have a range of solutions to meet all scenarios and have the resources to serve different channels in a wide range of geographies,” they said.
The security industry is witnessing both consolidation, as seen in recent acquisition deals, and the emergence of smaller companies focusing on cloud and AI, presenting a dynamic landscape for the future
Prevailing physical security trends in 2023: AI, Mobile Access Control and Integration
While the era of double-digit annual growth appears to be over for video surveillance, factors including AI-related innovations, expanding provision, and demand for more sophisticated analytics, the ongoing shift to IP cameras and improving camera resolution will continue to drive market growth
By: asmag.com; E-mail: editorial@asmideast.com
Memoori’s latest report into The Global Video Surveillance Business explores market prospects for cameras, storage, software & analytics from 2023 to 2028. Our latest estimates, based on a comprehensive analysis of the performance of a total of 322 companies operating in the global market, indicate that it generated revenues totaling $30.4Bn in 2022. We forecast that this market will experience a Compound Annual Growth Rate (CAGR) of 5.7% between 2023 and 2028, with revenues totaling $44.8Bn by 2028.
The AI imperative
The integration of advanced Artificial Intelligence (AI) and Machine Learning into video surveillance is reaching unprecedented levels of maturity. Key drivers of this trend include various factors. First among them are practical Implementations, as earlier discussions on AI in surveillance have moved from theoretical to practical, with more real-world applications coming to the fore. Next, sophisticated analytics offer capabilities that have grown increasingly refined and reliable, reducing false alarms and allowing for more nuanced and actionable insights.
Also, the falling costs of implementing AI and Machine Learning are making these technologies accessible to a broader range of applications. Finally, there’s a widespread rollout of edge-based analytics, based on dedicated AI chip system-on-chip architectures that offers the ability to process data closer to its source, alleviating network bandwidth constraints and helping end-users to minimize the risk of transferring or processing privacy-related data.
We forecast that by 2028, the percentage of network security cameras with onboard AI capabilities is projected to rise from today’s 18% to over 50%. These advancements are fueling new features like object recognition, behavior analysis, and other forms of intelligent monitoring.
As data volumes and the demand for analytics rise, we expect the market for Video Management Software (VMS) & analytics to significantly outpace growth in the wider market, here, we are forecasting growth at an 8.4% CAGR from 2022-2028. Here, the progressive transition to cloud-based analytics driven by requirements to amplify the power of video analytics by leveraging centralized computing resources is set to continue.
By 2028, the percentage of network security cameras with onboard AI capabilities is projected to rise from today’s 18% to over 50%
Access control: Mobile gains traction
Turning to access control, our market forecasts for this year’s analysis are still being finalized, but initial indicators are that Electronic Access Control market growth is set to outpace Video Surveillance market growth for the coming 5 years, reversing the dynamics that have been in play across Physical Security for over a decade. Here, the underlying supply chain and security dynamics are similar, geopolitical uncertainties are having a much more muted impact. Biometrics adoption has been somewhat stalled due to behavioral and attitude changes resulting from COVID, but we see the primary driver for growth is the progressive shift to mobile-based access control.
From a user standpoint, the allure of mobile access control lies in its convenience, enhanced security features, and the flexibility it offers for system administration. Customers, too, are taking note. According to a recent survey on access control trends, 42% of respondents worldwide now have plans in place to upgrade to mobile-ready systems. Our preliminary data aligns with this sentiment, projecting that by the end of 2023, mobile-based systems could constitute around 20% of all newly issued access control credentials for non-residential buildings.
While the transition to mobile-based systems is underway, it isn’t without its own challenges. Privacy and cybersecurity remain key concerns amongst many end users, particularly in cases where personal devices are proposed as the primary means of access control. For this reason, some organizations remain reticent to back the shift, still preferring the use of physical cards to mitigate the risks associated with personal data exposure on mobile devices.
By the end of 2023, mobile-based systems could constitute around 20% of all newly issued access control credentials for non-residential buildings
Tying it all together
As the physical security industry evolves, integration continues to move to the forefront as a business imperative. Rather than maintaining each individual security component (video surveillance, access control, or intruder detection) in individual silos, companies are now looking for new cross-functional efficiencies and value add opportunities across the BIoT. There’s a burgeoning demand from both users and vendors for unified platforms that not only streamline workflows but also enrich data insights by correlating information across domains. Deeper forms of interoperability that span data structures, analytics, identity management, and automation capabilities are emerging, fostered by expanded cross-domain partnering networks and improving API functionality.
One of the key enablers in this transformation is improving the standardization of security data and its metadata. Providing more contextually rich data is needed to inform more intelligent decision-making across these previously siloed systems, and can be invaluable when integrated into a broader security or building management system, enabling more nuanced and responsive actions like selective door locking or lighting adjustments based on occupancy, or scheduling elevator movements to match patterns of people movement within a building, saving energy and enhancing building user experiences.
Legacy systems, proprietary protocols, and the absence of standardized data formats will also continue to act as common roadblocks to integration until such systems are progressively phased out. As the industry moves toward more standardized solutions, and cross-functional expertise grows, we can expect deeper, more seamless integrations to become the norm rather than the exception.
Electronic Access Control market growth is set to outpace Video Surveillance market growth for the coming 5 years, reversing the dynamics that have been in play across Physical Security for over a decade
Looking forward
The physical security market clearly remains in a state of flux, influenced by technological advancements, geopolitical shifts, and an increasing focus on integration and ethics. Companies that can adapt to these changes, innovate, and offer intelligent, integrated solutions are likely to thrive. But this is not a market for the complacent; staying ahead will require constant innovation, ethical considerations, and perhaps most crucially, the ability to adapt to ever-changing conditions.
As the physical security industry evolves, integration continues to move to the forefront as a business imperative
Interview: Swift Wu, General Manager of the International Department at ZKTeco
Swift Wu, General Manager of the International Department at ZKTeco, discusses how the company effectively addressed industry challenges in 2023 and shares key insights on how regions like the Middle East are emerging as hubs that hold great potential for economic growth
By: asmag.com; E-mail: editorial@asmideast.com
Founded in 2007, ZKTeco has long established itself as a leading global provider of hybrid biometric identification technology. In August 2022, the company marked a momentous occasion when ZKTeco successfully became a publicly listed company on the Shenzhen Stock Exchange.
asmag.com: What was 2023 like for ZKTeco? What were the challenges and how was ZKTeco able to respond?
Wu: Looking back at 2023, it was a pivotal year for ZKTeco and the industry as a whole. The world was showing signs of economic recovery. However, global economic performance did not meet expectations. While there were improvements, some sectors like retail lagged behind others in recovery. Some regions continued to grapple with lingering economic deficits, resulting in postponed or canceled government projects. In more extreme cases, rapid currency depreciation led to economic instability. Despite these challenges, certain economies outperformed others, with significant changes seen in lifestyles and business operations. The shift towards remote work and online shopping had a considerable impact on our business, particularly in areas like time attendance systems and other B2B security solutions. While many companies have begun asking their employees to return to the office, we anticipate that some changes in working practices may be permanent. Compounding these difficulties were escalating geopolitical tensions, with some nations in conflict or facing economic sanctions. These global issues led to an influx of vendors branching out into overseas markets to compensate for domestic economic downturns. Many employed a skimming strategy, offering low prices to penetrate new markets. This approach not only disrupted local markets but also threatened the sustainability of local suppliers due to the extremely low-profit margins. ZKTeco, with its longstanding presence in international business, was well-equipped to navigate these challenges.
We anticipate a return to economic stability, particularly in regions like Southeast Asia and the Middle East. These regions are becoming hubs for manufacturing and IT jobs, and we foresee considerable economic growth there
Asmag.com: Can you share some noteworthy accomplishments from the past year?
Wu: In the past year, we at ZKTeco have made strides in expanding our business along both horizontal and vertical dimensions. We consider horizontal expansion as into new business sectors or lines, and vertical expansion as penetrating higher or lower market sectors. In 2023, we focused on establishing a solid foundation for future growth. One of our notable achievements was the investment and development of our next-generation access control systems. These systems, built on universal industrial standards, are fortified with intelligent and flexible functions. To accomplish this, we incorporated multiple advanced technologies, including artificial intelligence (AI), cloud computing, and big data. This integration solidifies our position at the forefront of the industry and offers our clients the most sophisticated solutions. Simultaneously, we’ve made significant progress in our vertical expansion. We are on the verge of launching a new product line that provides real-time managed advertisements, professional digital displays, digital signage, and digital posters. This system is fully enhanced by computer vision technology, addressing the limitations of conventional advertisement placement tools that cannot push correlated advertisements to audiences on demand. In our system, front-end cameras utilize computer vision technology to provide active video analytics. This includes text recognition, pattern recognition, and behavior analysis. Our edge devices then push correlated advertisements to the audience based on these analytics. This technology greatly enhances the accuracy of advertisement placement and provides reliable statistical information to advertisers.
Notable achievements included the investment and development of our next-generation access control systems, fortified with intelligent functions and incorporating advanced technologies like AI, cloud computing, and big data
Asmag.com: How is ZKTeco strategizing for 2024? Where do you see new business opportunities in the market?
Wu: While the world continues to face conflicts and unstable situations, we remain optimistic for 2024. We anticipate a return to economic stability, particularly in regions like Southeast Asia and the Middle East. These regions are becoming hubs for manufacturing and IT jobs, and we foresee considerable economic growth there.
Our strategy for expansion has always centered around localization. We adhere to a management philosophy of decentralization — we believe that providing our branches and departments with autonomy allows them to deliver optimal results, spurred by an effective motivational system. In response to the tense political situations among global superpowers, we’ve invested resources to ensure dual supply chains. This strategy will enable ZKTeco to maintain the production and delivery of our solutions to partners and clients, regardless of external circumstances. As of 2023, our biometric technology is among the top in the industry according to the NIST competition results. We firmly believe that biometrics is the future of human identity authentication and are committed to providing top-notch biometric technology across various solutions and applications. Alongside biometric technology, we believe that cloud-based and SaaS platforms are becoming mainstream. Soon, ZKTeco will launch several SaaS platforms for access control, visitor management, and time-attendance services. This is just the beginning of our journey to provide cloud-based services, with more to come in the next few years. Indeed, 2023 marked an exciting time for advancements in AI technology, with ChatGPT (GPT-4), in particular, garnering global attention. As a technology-based company, we at ZKTeco have embraced these advancements, incorporating AI to enhance our solutions in numerous ways. We are optimistic that the integration of GPT-4 with our existing solutions will result in improved user experiences and more efficient system operations. However, it’s crucial to remember that ChatGPT is just one facet of AI. AI technology as a whole offers a broad range of opportunities to enhance our solutions, and we’ve been keen to leverage these opportunities. For instance, we use AI in our biometric algorithms, where machine learning techniques allow our systems to improve accuracy and performance over time.
The shift towards remote work and online shopping had a considerable impact on our business, particularly in areas like time attendance systems and other B2B security solutions
