Collapsed Growth, Collapsed Pricing, IHS Now Admits

By: John Honovich, Published on Jun 22, 2016

The downturn in global video surveillance growth and camera pricing are the two most important themes for the industry today.

We have been calling this out for years, starting most notably with other 2014 Falling Down guide that declared:

Falling down - the theme of the 2014 video surveillance industry. This is the toughest stretch for the industry overall, since at least the 2008-2009 recession.

Moreover, in January 2015, we called the China the #1 threat to the industry.

And the industry, especially for manufacturers and distributors, has gotten much worse. Now, IHS has admitted their rosy 2015 forecast was wrong and the numbers are quite bad.

IHS Background

IHS video surveillance (formerly IMS Security) primarily sells numbers to large manufacturers, asking manufacturers to share their revenue and then re-selling the aggregated numbers back to manufacturers. In addition, they make financial projections, typically bullish that please their manufacturer customers.

In January 2015, IHS declared:

The global video surveillance industry can defy conventional market logic, resist product commoditization and still grow by more than 10 percent in 2015

Logic was not defied.

*** ******** ** ****** video ************ ****** *** camera ******* *** *** two **** ********* ****** for *** ******** *****.

** **** **** ******* this *** *** *****, starting **** ******* **** other**** ******* **** ********* ********:

******* **** - *** theme ** *** **** video ************ ********. **** is *** ******** ******* for *** ******** *******, since ** ***** *** 2008-2009 *********.

********, ** ******* ****, we ****** ******** *** #* ****** to *** ********.

*** *** ********, ********** for ************* *** ************, has ****** **** *****. Now, *** *** ******** their **** **** ******** was ***** *** *** numbers *** ***** ***.

*************

*** ***** ************ (******** IMS ********) ********* ***** numbers ** ***** *************, asking ************* ** ***** their ******* *** **** re-selling *** ********** ******* back ** *************. ** addition, **** **** ********* projections, ********* ******* **** please ***** ************ *********.

** ******* ****,*** ********:

*** ****** ***** ************ industry *** **** ************ market *****, ****** ******* commoditization *** ***** **** by **** **** ** percent ** ****

***** *** *** ******.

[***************]

Collapse ********

***, ** **** ****,*** ************ ****** *** *** less **** **** *********:

*** ***** ****** *** professional ***** ************ ********* grew ** *.*% ** revenues ** ****.

*** **** ***** **** faster **** *** ****** whole ** *.*%, *** much ****** **** ****'* 26.7% ******.

**********, **** ************ *** severe ***** ***** *********:

*** ******** ** *** market ** ***** ** 2015 *** ******* ******* of ***** *******. **** shipments ** ******** ******* in ***** **** ******* but *** ******* ****** of ******* *** ********* fell *******.

** **** ******** *** price ***** ******** ****:** ****** ******* *** Markups ********** ******* *** *** *** it **** ************ ********** in **** **** ****** like**** / ***** *** Hanwha / ******* ************** Low *** *******.

True ******* ****** ~-**%

** ******** **** *** true ******* ************ ****** rate ** ****** -**%. This ** * ******** of:

  • ******* ***** ************ ******* in ******* ******* *** roughly ****.
  • ******* ************* *** ******* robustly ** *** **** (in *** ***** ** ~50%) *** ****** *********** share **** ******* *************.

**** ********* **** ****, who ******** **** *** products *** ****** **** on ********* **** *** Western ***** ************ ************,**** **** *%**** ****. **** ** 'bad' *** **** ***, relative ** *** *** the ****** **, ********** good.

********** **** *** *** the ****** **** ******* manufacturers *** ***** ******* on *** ***** ** mid *** ** *** market.

Weakening ******* ****** ********

**** ********** ******* ** Chinese ********* ***** **** to ************ *** ****, but *** ****** ******* falling ****** ******** **** sharply ******* ****** ****** of *****, ***** **** Chinese ************* *** ********** to **** **** * much ******* ******** ******. After ***** ** ******* easy ******, ******* ************* are *** ****** ** fight ****** ** *** out ** *****.

**** ******* ******** ***** growth *********, *** ******* target ** ************* *********, underscoring *** **** ********* and ***** *** ********* so ******* ** *** West, **** ** ********* and ** **** *** revenue *******. *** **** so **** **** **** / ******* *********, **** have ** ********* ****** to ****** ** *** short ****.

Good *** ***********?

***********, **** *** **** good *** **** *********** who ******** *** **** products *** **** **** to ****** ***** ******** and **** ****** *** continue ** **** **** Western *************. ******,****, ******** *** ********* Markups *********** *** *********** *********** were ****** ***** ** Hikvision.

*******, ** **** ***** in *** **** *** years, **** **** *********** accept ******* ******* *** cost ******* ********, *** advantage *** ***** ******* integrators **** ********* *** integrators **** **** ***** total ******* *** **** competitive ****** **** ****** scale ****** ********** **** stores *** *** ********.

Outlook - ******** ** **** ** ***** ****** *********

******* *** ***** **** Western ********* *** ******* doing ** *** **** an ******** ** ******** / ********* ******* ** the **** *** ***** has ****** ******, ** expect ******* ****** ***** to ****** ****, *** Western ************* ** ******** to ******, ***** *** state ** *** ******* market.

*** ******* ***** ***** surveillance ************ *********, ******, is ********. **** **** far ****** *** ******** and ** * ******** of *** ******* ******* government / ******** ********* (e.g.,*****'* **** ** ***% of *** *** '***** be *****',***** **** **** ******* record **** ** **** to ******* ******, ***.). ** *** when **** ******** / rebalances / ********, *** impact ** ******* ***** surveillance ************* **** ** severe, **** *********** *** domestic ****** **** ******** their ********** *** *** debt ************ **** ******** their ************* *********.

** *** ***** ****, the ******* ********** *** strong ******** **** *** country *** *** *******, so ** ***** ** many ***** *** ******* to *****.

**********, ******, *** ***** to ****, *** ****** and ********* ******* ** the ****** ***** ************ market **** ** ********* driven ** *** ******* government.

Comments (7)

On the bright(er) side, IHS also reporting more IP cameras shipped than non-ip cameras in 2015. Which may be the first year ever.

Yay!

It also may be the last year for some time.

Also, related, each unit that goes HD analog further drives down average pricing.

This is the flip side of 5 - 10 years ago, when each unit that went from SD analog to IP drove up average pricing and total revenue.

I heard it said, from an industry great, "IHS typically hires impressionable recent college grads with no industry experience. They always estimate awesome growth at the beginning of the year, and sharply revise down mid year. Why would anyone buy their research?"

This seems to validate that statement.

John's post may have been anticipated by this one.

The IHS / IMS no industry experience element is strange. You would think if you were selling a high priced product ($5,000+ per report), you would want and benefit from people with relevant domain knowledge.

In terms of why anyone would buy it, there does not seem to be many buying it (most common cases: large incumbent manufacturer, tech company looking to expand into video surveillance or outside investors).

The reasons being:

  • Mega company wants numbers on their competitors and partners. IHS numbers are regularly off (since impossible to verify most) but at least you get something, so if you want to have a number for what Agent VI or Arecont or Exacq or Axxon, etc. did, IHS will list it.
  • Investor or company needs to have a quantified number to justify a deal or investment. We hear this from time to time (what is the market size and 5 year CAGR projected for encoders with audio support in Europe? and give it to me to nearest fraction of a percent). My philosophy is that it's impossible to do this reliably / accurately but the demand is there.
  • Publicity. IHS allows it. When manufacturers say they are #1, it's often an explicit or implicit reference to their IHS category. IHS does a great job of creating dozens of categories that help various vendors be #1 in something.

Finally, the awesome growth / sharp revision cycle is a turn off to seasoned veterans but there are many optimistic or naive or new people coming into the industry that want to hear positive things, even if wrong. And, in defense of IHS, they tend to be far more conservative than the various fly by night research services with even more outlandish forecasts, like the one that fooled ADI earlier this year.

"at some point in the next few years, when most integrators accept selling similar low cost Chinese products, the advantage for early adopter integrators will disappear and integrators will face lower total margins and more competitive stress from larger scale direct purchasing from stores and the Internet."

To carry the argument to the extreme, let's try to imagine what might happen if hardware costs were close to zero. If China's economy experiences a truly dramatic shock, product might be available for little more than the cost of shipping, possibly as long as there's inventory to liquidate -- perhaps a year or so?

Even under such circumstances, the big boys will always have work. Customers with a pressing need but not much market awareness will expect that you can't go wrong using ADT, for example, to install your marked-up free hardware.

Experienced customers may have learned that an expert local installer can deliver better value. I'd like to imagine that top-notch installers will always be in demand, regardless of hardware commodity pricing.

On the low end, installers who work for peanuts will always attract a certain clientele.

Until the market rights itself, there should be a blossoming of work, when you consider that the price of entry will never be better.

As for bulk discounts, as hardware becomes an increasingly small fraction of the installation price, hardware discounts should become less relevant than brand name, local reputation, or price of labor.

Unfortunately, under such circumstances, it would seem as if manufacturers would have to be capable of treading water for a while in order to survive.

Experienced customers may have learned that an expert local installer can deliver better value. I'd like to imagine that top-notch installers will always be in demand, regardless of hardware commodity pricing.

I agree with that.

On the other hand, quite a lot of integrators are benefiting from a Chinese / Sweden 'arbitrage play' right now. The integrators who went to Hikvision early are cleaning up matching against more reluctant / conservative integrators who are sticking with Axis. Hik integrator goes in at 1/3 to 1/2 the total price of Axis integrator and wins most deals in the small to mid market. Related: Is It Time For Me To Start Selling Hikvision?

I am saying that opportunity will go away as many / most integrators switch to Hikvision / Dahua etc., and multiple Hikvision leading integrators compete head to head for these deals, driving total prices down lower.

Read this IPVM report for free.

This article is part of IPVM's 6,367 reports, 855 tests and is only available to members. To get a one-time preview of our work, enter your work email to access the full article.

Already a member? Login here | Join now

Related Reports

Coronavirus Hits Manufacturers, Standing Now, Worse To Come on Apr 06, 2020
Coronavirus is hitting security manufacturers, though overall modestly for now, with worse expected to come, new IPVM survey results...
Top Manufacturers Gaining and Losing 2019 on Nov 18, 2019
2019 has been an explosive year for video surveillance, with the world's two largest manufacturers, Dahua and Hikvision, being sanctioned for human...
UTC Really Screwed Up The Interlogix Shut Down on Sep 27, 2019
UTC has made many mistakes in security over the years, however, the shutting down of Interlogix is one of the biggest screwups in industry history....
Hikvision Growth Declines Q3 2018 on Oct 22, 2018
Hikvision's growth continues to decline in 2018 going from: Q1 - 33% Q2 - 22% Q3 - 14.6% In this note, we examine Hikvision's newest Q3...
Ambarella on Computer Vision and US Hikua Ban on Sep 10, 2018
Ambarella, a widely-used video surveillance component supplier, is betting on the rise of computer vision and is already seeing a sales impact from...
Favorite Camera Manufacturers 2018 on Mar 12, 2018
A number of major moves in integrator's favorite camera rankings for 2018: Two manufacturers make major moves up One major manufacturer moves...
The Race To The Bottom Is Over on Nov 28, 2017
The race to the bottom in video surveillance is over. After 3 years of aggressive price cuts and heavy sales and marketing expenditures, the...
Anixter - Falling Video Prices on Jul 26, 2017
Falling video prices are such a concern that it has become a notable topic for Anixter's financial results and Anixter's executives. In this...
NRF 2017 Exhibits Traffic Weak on Jun 28, 2017
The 'retail apocalypse' is not sparing the security industry. The National Retail Federation's Protect 2017's exhibit traffic is weak, notably...
Hikvision Stock Down 50%+ From 2015 Peak on Jan 26, 2016
While Hikvision is busy preparing for world domination, it faces increasing challenges at home in China. Last week, Hikvision announced weakened...

Most Recent Industry Reports

Verkada: "IPVM Should Never Be Your Source of News" on Jul 02, 2020
Verkada was unhappy with IPVM's recent coverage declaring that reading IPVM is 'not a good look' and that 'IPVM should never be your source of...
Vintra Presents FulcrumAI Face Recognition on Jul 02, 2020
Vintra presented its FulcrumAI face recognition and mask detection offering at the May 2020 IPVM Startups show. Inside this report: A...
Uniview Wrist Temperature Reader Tested on Jul 02, 2020
Uniview is promoting measuring wrist temperatures whereas most others are just offering forehead or inner canthus measurements. But how well does...
Dahua USA Admits Thermal Solutions "Qualify As Medical Devices" on Jul 02, 2020
Dahua USA has issued a press release admitting a controversial point in the industry but an obvious one to the US FDA, that the thermal temperature...
Access Control Online Show - July 2020 - With 40+ Manufacturers - Register Now on Jul 01, 2020
IPVM is excited to announce our July 2020 Access Control Show. With 40+ companies presenting across 4 days, this is a unique opportunity to hear...
Hanwha Face Mask Detection Tested on Jul 01, 2020
Face mask detection or, more specifically lack-of-face-mask detection, is an expanding offering in the midst of coronavirus. Hanwha in partnership...
UK Government Says Fever Cameras "Unsuitable" on Jul 01, 2020
The UK government's medical device regulator, MHRA, told IPVM that fever-seeking thermal cameras are "unsuitable for this purpose" and recommends...
Camera Course Summer 2020 on Jun 30, 2020
This is the only independent surveillance camera course, based on in-depth product and technology testing. Lots of manufacturer training...
Worst Over But Integrators Still Dealing With Coronavirus Problems (June Statistics) on Jun 30, 2020
While numbers of integrators very impacted by Coronavirus continue to drop, most are still moderately dealing with the pandemic's problems, June...