Security Industry Returned to Growth Has

n Source: asmag.com

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.

The same sentiment is shared at Identiv. “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.”

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.

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.

Hikvision’s revenue in 2021 has crossed the ten billion US dollar mark, an increase of 16.9 percent compared to 2020’s US$8.64 billion.

“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.

He points out that some external uncertainties emerged over the past two years since inflation, interest rate hike, and exchange rate changes are now affecting growth of different economies. “Yet, Hikvision has successfully maintained product delivery efficiencies. And we have kept consistent investment in technology research and development, with the R&D spending accounting for over 10 percent of our total revenue in 2021. All these efforts ensured continued positive development of the company”, says Zhang.

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-overyear 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 the 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.

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 witne- ssing 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.

In total, 40 companies in this year’s Security 50 reported growth last year, with 28 growing by double to triple digits. 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.

It should be noted that Evolv, a provider of security solutions for weapons detection, reported revenue of US$21.77 million in 2021, compared to US$3.92 million in 2020. That’s a 455.98 percent year-overyear increase, primarily due to their efforts to add new customers and expand into key verticals and geographies.

These figures show the growth, strength and resilience of security companies during the various challenges brought by the pandemic. How did they achieve this?

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.

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,” says CEO of Identivo.

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. 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,” says Humphreys.

Looking into 2023, most companies expressed optimism growth will continue. “We are very bullish about the security market

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. 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,” says Fu Liquan.