In this Research Note, we examine the Chinese video surveillance giant, Hikvision (Hangzhou Hikvision Digital Technology Co., Ltd) focusing on 2021 financial results and the group strategy to broaden its remit beyond its video surveillance business, based on their 2021 Annual Report and Memoori analysis. 

Hikvision is the world’s largest manufacturer of video surveillance equipment. Established in 2001, the Company was listed on the Shenzhen Stock Exchange in May 2010. Hikvision has more than 52,700 employees. The company has established 66 sales branches and service offices, as well as 3 manufacturing plants and 11 logistics centers in the overseas market, operating business in 155 countries and regions.

In 2021, Hikvision generated a total operating income of RMB 81.42 billion (over USD 12.3 billion), having achieved a year-over-year (YoY) financial growth of 28.21%. Net profit attributable to shareholders of the company was RMB 16.80 billion (USD 2.5 billion), reflecting a YoY growth of 25.51%.  

China’s domestic market accounted for 73% of Hikvision’s operating income, compared to only 27% overseas. Our 2021 Physical Security Business report concludes that this demonstrates how the domestic market, with favorable treatment on government contracts, remains key to the company’s growth momentum. 

Although video is its core competency, Hikvision is now positioning its field of business as the Artificial Intelligence of Things (AIoT), as it broadens its remit to non-video surveillance activities.

Hikvision has established “innovative businesses”, units which operate independently of their surveillance operations via a co-investment scheme.  These business units are all based on video intelligence technology to explore new channels for sustaining long-term development. Currently, the innovative businesses are EZVIZ Network, HikRobot, HikMicro, HikAuto, HikSemi, HikFire, Rayin and HikImaging.

Innovative businesses accounted for RMB 12.27 billion (USD 1.85 billion) or 15% of overall 2021 revenue. In 2021, five of these businesses achieved revenue exceeding USD 150 million, realizing a positive net profit. 

EZVIZ (Hangzhou EZVIZ Network Co., Ltd.): The smart-home products, services and IoT cloud platform are powered by the EZVIZ consumer brand.  Major products include smart home cameras, smart home entry, smart control, and smart service robots. The company also provides value-added services such as cloud storage, phone reminders, screen abnormal detection, intelligent recognition, and crying detection.  As of December 2021, 159 million IoT devices were connected to the EZVIZ IoT Cloud Platform, with the number of connected video IoT devices taking the leading position in China. 2021 full-year revenue for the smart home business was RMB 3.948 billion (around USD 600 million), a year-on-year increase of 35%.

Memoori reported in January 2022 that Hikvision will spin-off their smart home. Their IPO prospectus published in December 2021 states that they aim to raise RMB 3.739 billion (USD 588.3 million) by listing Ezviz on the Science and Technology Innovation Board of the Shanghai Stock Exchange.

HikRobot (Hangzhou Hikrobot Technology Co., Ltd.): The spin-off of HikRobot for an independent listing has also been disclosed with relevant preparatory work currently underway. Centered on technologies such as visual perception, AI and navigation control, HikRobot focuses on intelligent manufacturing, and continuously invests in the fields of mobile robots and machine vision to promote the digitization and intelligence of production and logistics. 2021 full-year revenue for the robotics business was RMB 2.761 billion (USD 420.9 million), a year-on-year increase of 103%.

HikMicro (Hangzhou Hikmicro Sensing Technology Co., Ltd.): Centered on infrared thermal imaging technology and with MEMS-based technology, HikMicro provides core devices, detectors, modules, infrared thermal imaging products and overall solutions. 2021 full-year revenue for the thermal imaging business was RMB 2.214 billion (USD 337.6 million).

HikAuto (Hangzhou Hikauto Technology Co., Ltd.): HikAuto focuses on the field of intelligent driving. Centered on video sensors, and in combination with technologies such as radar, AI, and perceptual data analysis and processing, HikAuto is committed to becoming the industry’s leading supplier of vehicle safety and intelligent products powered by video technology. 2021 full-year revenue for the automotive electronics business was RMB 1.432 billion (USD 218.3 million), a year-on-year increase of 119%.

HikSemi (Wuhan Hikstorage Technology Co., Ltd.): HikSemi has four professional storage product lines: solid-state hard disk SSD, front-end storage, embedded storage and flash memory application. 2021 full-year revenue for the storage business was RMB 1.384 billion (USD 218.3 million), a year-on-year increase of 75%.

The other three innovative businesses, Hikimaging, HikFire and Rayin accounted for a combined 2021 revenue of around USD 80 million. 

Hikimaging (Hangzhou Hikimaging Technology Co., Ltd.) supplies equipment, such as endoscopes, remote diagnosis, ward monitoring and image processing systems to the healthcare sector. 

HikFire (Hangzhou Hikfire Technology Co., Ltd.): Focused on the application of emerging technologies in the fire protection sector, such as multi-dimensional perception, IoT, Internet of Vision, cloud computing, big data, AI and professional image processing technologies.

Rayin (Hangzhou Rayin Technology Co., Ltd.): Rayin focuses on X-ray detection technologies, dedicated to be a leading technology R&D, manufacturing, equipment sales and leasing services provider of invisible light detection equipment.

A recent Morningstar analyst note, 18 April 2022 forecasted the growth of the new business areas:

We are convinced of Hikvision’s ability to execute, and estimate innovative businesses to grow at 30% CAGR for the next five years, contributing 27% of revenue by 2026 from 15% in 2021.

This article was written by Daphne Tomlinson, Senior Research Associate at Memoori.