The pandemic recovery strategies of major economies around the world present huge opportunities for the physical security industry. Recent stimulus packages and investment programs provide a huge boom in infrastructure spending under a common approach of “Build Back Better”. A variety of major infrastructure projects launched by prominent governments, in the wake of the COVID-19 to stimulate post-pandemic have direct impacts on the physical security sector, stimulating growth and reshaping the sector in unprecedented and unforeseen ways.
“The global COVID-19 pandemic has created a significant change to the distribution of demand by vertical over the last two years, some of which will be largely short-term. Lockdowns, their economic impacts, and public concerns related to virus transmission have adversely affected sales in several markets including retail, leisure, and hotel verticals, and to a lesser extent offices. Conversely, investment in healthcare and logistics related sectors has risen sharply,” reads our latest security market research. “Our revised analysis sees transport take the highest share at 13.9%, this vertical is heavily biased toward video surveillance, safety, and traffic management applications as well as making a vital contribution to global smart city initiatives.”
Perhaps unsurprisingly, the Chinese domestic market is dominating in terms of overall sales and has grown rapidly in recent years to represent over one third of the global market. Strong growth trends in the Chinese physical security sector began before COVID-19, largely due to the nationwide ‘Sharp Eyes’ video surveillance project, but the market then rose steeply in response to the pandemic. Continued state investment into smart city initiatives as well as initiatives such as Safe China and ‘Build Back Better’ policies, will drive a continued influx of investment and sales opportunities for the Chinese physical security industry.
“The penetration of physical security equipment in China measured by sales/capita indicates that there is still considerable headroom available for continued future growth. This market has forged ahead at the highest rates of growth recorded in the industry’s history,” reads our new security report. “We estimate that the Chinese video surveillance market grew 5% in 2020 compared to a decline in global average sales of 1%, due to higher urbanization and the scale of government investment via the Safe City and Sharp Eyes projects. The IDC estimates that government investment in video surveillance accounted for 47.6% of total spending in 2019.”
North America takes a 25% share of the security products market, with the US holding the lion’s share at approximately 85% of total sales. The market held steady in terms of overall share in recent years and the broad economic outlook remains broadly positive with 6% growth in 2021. In the security industry, Biden’s $2 trillion infrastructure bill is set to provide huge growth through massive investments in roads, schools, hospitals, climate resilience initiatives, and other public sector projects – many of which will have a physical security component to them. This once-in-a- generation infrastructure package will impact myriad business sectors for decades, and physical security is well positioned to seize that opportunity.
“The Biden Administration’s proposed American Jobs Plan Act could potentially be a significant boost for the industry. The greater range of sectors included in any final bill that involves major renovation or construction of buildings, or incorporates key technologies developed by our industry – so infrastructure beyond roads and bridges – the greater the benefit,” says Jake Parker, Senior director of government relations for the Security Industry Association. “Particularly important will be schools, housing, transit and other transportation infrastructure, where there is an incredible need for modernized structures, which necessarily include modern security and life safety systems”
The European share of global security product sales fell to 20.4% in 2021, and moderately high levels of security systems penetration limit future growth prospects somewhat. Europe was one of the hardest hit regions in the first wave of COVID-19, while recent variants and a sharp rise in business bankruptcies continue to pose barriers to economic recovery. Despite these challenges and helped by some of the world’s highest rates of vaccination, most of Europe’s major economies are now showing positive signs of economic recovery with a strong focus on infrastructure spending that would drive growth in video surveillance, if not for the privacy issue.
“In much of Europe, the opportunities for video surveillance sales have been curtailed by concerns over civil liberties and privacy protection, notably in regard to facial recognition systems. By contrast terrorist attacks in the region over recent years have helped to convince both governments and a large proportion of the public that privacy protection should not hold back protective measures,” explains the in-depth security report. “The forthcoming facial recognition legislation combined with the stringent privacy rules laid out in GDPR may serve to further limit sales potential, as European end-users remain cautious of adopting any facial recognition or other technologies that may capture personal data.”
Around the world, the pandemic has triggered infrastructure spending that will act as a major driver for the global physical security market. Regional trends will then shape growth in each market, be it government spending supporting growth in China or public opinion limiting growth in Europe. Overall global growth increases the pressure on all markets, as Chinese growth drives down the cost of video surveillance, for example, this will drive adoption rates in Europe. Untapped developing markets in the rest of the world will then be seized by a more mature and low-cost physical security market that has saturated its more developed economies.
“The Chinese market has established a clear leadership in terms of overall sales volumes, it only ranks 3rd in terms of market penetration when expressed in terms of sales per capita, although we do expect the Chinese markets continued growth to see it at least matching European sales per capita,” states the comprehensive report. “This analysis also helps to demonstrate the huge potential for sales growth in the emerging markets of Latin America, Asia, the Middle East, and Africa, where sales per capita lag far behind China and developed Western markets. If we assume that similar market drivers exist across all countries, then those regions that currently have a low penetration should over time have a higher rate of growth.”