It's a good question and there is a range of approaches.
Let's start from least sophisticated to most.
Relabeling: A lot of big companies simply find already made Asian cameras and relabel them. They'd argue that they 'choose' the right camera but there's little innovation there. It's basically brand / support / sales. See: Beware Phony Manufacturers
Basic Design: Some big companies will 'design' cameras mostly by picking what components and bells/whistles to include. A lot of time the 'design' is simplistic and is little more than what a consumer would do at Dell.com when picking a computer.
Advanced Design: A smaller number will do advanced mechanical design for specific high end features or niche form factors. They typically still have someone else actually build/assemble.
Software / firmware: Real manufacturers typically develop their own software / firmware in how to control the camera, how to control streaming, how to access the camera, etc. If someone is truly a 'manufacturer' this is expected.
Core components: Rarely, even true big manufacturers, design/make their own imagers and encoder chips. There are exceptions - Sony, Panasonic, Axis to name a few - but generally imagers come from Micron, Omnvision, Sony and encoder chips come from TI, Ambarella, hisilicon...
As for owning their own factories, most do not, but to me, owning a factory is not critical to being a 'real' manufacturer. That said, I do wonder how much owning a factory contributes to overall price advantage.
Really good break-down of the differencies between manufacturer "types". Thanks John!
Too bad I had completely missed that article ("Beware Phony Manufacturers").
Would it then in your opinion seem reasonable to think that a company producing its own chips, instead of buying e.g. from TI, will have to spend more on R&D than the manufacturers that outsource these components?
Sure, the R&D expenses of making ones one chips is very high and that's why 99% of IP camera manufacturers get them from others.
It makes a lot of sense that outsourcing such components is more cost-efficient. Cost-efficiency probably is not the most concerning problem in the high-end market or has it been that big of a factor historically for those companies who produce their chips in-house (assuming Axis) instead. But when the customer is more price sensitive (as for small installations and emerging markets) then in-house chip production can probably make for a cost disadvantage.
It's primarily an issue of economies of scale.
A moderately big IP camera manufacturer might ship a few hundred thousand cameras each year. It's hard to amortize the high costs of imager or encoder chip development over that relatively small amount of cameras. This, of course, presumes the company has the specific engineering resources to do so, another barrier.
Great point John!
But do you think that this makes for a competitive advantage or a cost disadvantage for the camera manufacturer with in-house production of imager or encoder chips. Should (or are) companies such as Samsung, Hikvision (and Avigilon in a few years), who are big enough to produce their own chips?
Samsung is producing their own chips (Wisenet). Hikvision and Avigilon are Ambarella customers (though I suspect they may use different encoder chips for various cameras).
I don't know if it's worth it. Axis does nearly a billion in revenue and they still don't make their own imagers which seems to be a signal that it is not worth it, especially since surveillance can benefit from the R&D dollars put into consumer / prosumer cameras.
Thanks for dropping some deep knowledge again!
Yes there is probably a better use of those dollars elsewhere.
*Avigilon seems to have found a use. Their ads keep popping up on every site site a go to nowadays. No wonder they are growing so fast...
Btw, the Avigilon ads popping up on every site is actually a clever marketing technique. It's called retargeting and what happens is that you visit their website, a cookie is installed on your PC and then this info is shared with an ad network that checks when you go to other websites (youtube, news sites, etc.) and then runs an Avigilon ad. Lots of savvy marketers do this and it's a clever tactic.
Ok, that's why! Smart tactics indeed. Inhibiting/controlling the sell of their cameras in online stores to defend their margins and then attacking with aggressive and creative online marketing techniques. Impressive compared with the other brands.