Nomura

China video surveillance: Secure ground in the homeland

  • The global video surveillance market size is currently estimated at around USD36.5bn and expected reach around USD77.2 billion by 2023
  • The China market accounts for 19% of the global video surveillance industry
  • According to market leader Hikvision, emerging markets such as India, Russia and Saudi Arabia generate high revenue due to their continuous yet rapid development while the US, the UK and the EU rank high among developed markets

The global security market is estimated to be around USD276bn in size, and may reach USD353bn by 2022. Within the security products market, around 50% is from video surveillance, and the rest from access control, intruder alarms, physical security and others. The global video surveillance market size is currently estimated at around USD36.5bn and expected to reach around USD77.2 billion by 2023. The China market currently accounts for 19% of the global video surveillance market, growing at a compound annual growth rate (CAGR) of 15.4% over 2018-2023 versus the global CAGR of 16.1% during the same timeframe.

For video surveillance companies in China, we believe there are a few ways to increase sales growth momentum: the first is to expand the market from video surveillance to the more broad-based security product market by providing access control, intruder alarm systems and physical security and other security-related products and services. They can also transform themselves into video-centered intelligent Internet of Things solutions and big data service providers to maintain leadership and premium profitability.

Overseas, according to market leader, Hikvision, after China, emerging markets such as India, Russia and Saudi Arabia generate high revenue due to their continuous yet rapid development and the government willing to invest heavily in infrastructure projects to boost the countries’ economies. Among developed markets, the US, the UK and the EU are among the highest revenue generators. Thus, with healthy growth in EM countries, if no further sanctions are added, the overall overseas business should remain stable.

With the US-China friction underway, this may drive the latter to invest more in infrastructure in order to stimulate domestic demand to support its GDP growth. China’s infrastructure investment in 3Q18 recorded a y-o-y decline for the first time since 4Q11. China’s infrastructure investment is also highly correlated to China’s security projects and demand in commercial premises. However, China security projects has shown some rebound in Q2 this year after a slow first quarter, showing that once China pushes harder on infrastructure investment, the number of security projects will increase as well.

The domestic surveillance industry in China is mainly project-driven, usually divided into government and non-government projects, where we see plenty of room for avenue growth in government projects.

For non-government projects, online internet companies, are expanding to the offline business, relying more on facial recognition to generate business analytics to customize recommendations to customers. Thus, the upgrade to advanced surveillance products such as AI-related video cameras should generate more revenue from commercial businesses.

To learn more about the China and global video surveillance markets, read here.

Contributors

  • Jim McCafferty

    Joint Head of APAC Equity Research

  • Donnie Teng

    Equity Research, Greater China Semiconductors & Technology

  • Anne Lee

    Hardware Research, Greater China Semiconductors & Technology

  • Bruno Cheng

    Research, Greater China Semiconductors & Technology

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