Video Surveillance is a fast moving global business requiring high levels of R&D expenditure to stay competitive.
Our latest report discusses how the global business has become unbalanced because of China. And how this is not a problem of technology or performance but at its core a geopolitical challenge.
The main reason seems to be that Chinese public sector business such as Safe City and Sharp Eyes projects today account for around 50% of the Chinese’s video surveillance market, and are basically not open to overseas manufacturers.
Not being able to fully trade in China’s Video surveillance market, which we estimate currently accounts for around 40% of world sales, is difficult enough but this has also been compounded by the 2 largest Chinese manufacturers, HIKvision and Dahua, adopting aggressive pricing strategies in western markets.
Western manufacturers have no control over this and have to find other ways in which to compete with cheaper Chinese products. A number of Western manufacturers have shown this year, particularly in the enterprise market, that they can win market share through developing their reliability, especially around cyber security, and delivering better total cost of ownership products.
The Chinese market for Video Surveillance equipment will continue to increase its share of the world market over the next 5 years. This market and its local manufacturers have changed the global competitive landscape which is more unbalanced as a result.
In October, the US Trump administration sanctioned 8 companies, including Hikvision and Dahua for human rights violations, which means they are prohibited from doing business with American companies without being granted a US government license. Whilst this may benefit Western manufacturers it will not solve the problem of levelling out the global playing field and building up scale.
For the last 2 years, We had expected that Merger & Acquisition by Western companies would have delivered some help in building up scale but nothing of any great consequence has happened. Working on their brand and strengths, such as cyber security, has improved performance and at the same time price pressure has abated to some extent.
Unfortunately, the market in China for video surveillance equipment will not open up for some time as these geopolitical challenges will not be solved easily. Western manufactures will therefore have to except operating on a different scale to their larger Chinese competitors in a business that is becoming increasingly commoditized.