Axis Rise And Fall Inside PRC China

By Charles Rollet, Published Oct 18, 2021, 08:44am EDT (Info+)

Today, Axis' PRC China sales are tiny, but for years Axis considered the PRC the "market with the greatest potential" due to its strong growth and supplied many high-profile PRC enterprise projects, including police.

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This all ended in the mid-2010s when the PRC excluded foreign products from government projects while launching massive video surveillance spending campaigns, boosting the rise of Chinese manufacturers like Hikvision and Dahua.

Axis confirmed its PRC struggles to IPVM, stating it is now "practically never invited to bid in government funded projects" and instead is now focused on "international companies that have presence in China."

In this post, IPVM examines Axis PRC's rise and fall.

Axis China Background

In 1996, Axis started in China with a Shanghai office. Axis added a Beijing office/Axis Experience Center in 2008, with CEO Ray Mauritsson in attendance for the opening:

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In 2001 Axis had 8 total China (PRC + Hong Kong) staff which grew to 33 in 2011, 40 in 2012, 56 in 2013, 77 in 2014, and 88 in 2015. After 2015, Axis stopped updating its China headcount in its annual reports. Axis declined to provide its Axis China headcount to IPVM.

Axis China Optimism And "Great Potential"

Axis saw early potential in the PRC, stating in 2002 that while the PRC's IP market was "in its infancy" security demand was "growing rapidly". Axis aimed to capitalize on the shift to IP from analog with Mauritsson saying in 2010 that "approximately 95 per cent of sales in China are of analogue systems. Only a small minority are network video solutions".

In 2011 Axis brought in former Pelco Asia exec Dr Jiang Hongtao as its China director to oversee PRC expansion, with Axis touting the PRC market numerous times over the years:

  • In 2008 Axis said the "growing" China market has "great potential" with the Beijing office "strengthening" Axis' "presence in the country"
  • In 2013, Axis said that "particularly in China" sales are "expected to grow sharply" due to "strong economic growth and major infrastructural investments"
  • In 2014, Axis said its market share in China was "relatively low" but "sales development is strong" and Axis "continues to expand in the country"
  • In 2014, Axis noted that "Asia continued to display strong underlying demand with China as one of the region’s driving markets."
  • In 2014, "Asia showed continued strong underlying demand with China as one of the region's driving markets"

CEO Touts China "Huge Untapped Potential", 40% Annual Growth

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In 2014, Mauritsson bragged to PRC state media that Axis China recorded over 40% growth every year since 2009 and now had 1,500 partners. This growth was in contrast to Axis' actual financial performance in 2014, see IPVM's Axis In Denial, Q3 2014 Financial Report Bad:

Asia only delivered 11% growth in local currency terms, which is especially bad given Axis low market share there and high overall growth rates.

Overall Mauritsson was often bullish on the PRC, calling it "the market with the greatest potential for Axis" in 2010 and traveling there in 2014 "celebrate Axis' 30th birthday with the Chinese team". Mauritsson also called China a "very exciting market for us" with "huge untapped potential" in 2010 and noted "growth is very strong in China" in 2011.

Axis China Market Share

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In its 2014 annual report, Axis touted it was #4 in the "Asia" region (see right) and said Axis "has a relatively low market share in China compared to other markets" but "the sales trend is strong and there is good potential for continued growth and expansion".

Axis never disclosed what portion of its sales were from the PRC. However, its "Asia" region (which excludes the Middle East) peaked at 13% of sales in 2014, with Axis telling IPVM that, currently, APAC sales are 11% of total revenue.

This is despite the fact that the PRC alone is currently about 50% of the total, global, video surveillance market.

Numerous PRC Enterprise Deals: PLA Military Hospital, Airports, Oilfields, Etc

Axis won many PRC enterprise projects, including for Beijing’s No. 306 Hospital of the People’s Liberation Army, the 2008 Guangzhou airport, 2014 Port Dalian, 2011 Xiamen hospital, 2014 Chengdu Airport, 2014 Baiji oilfield, 2014 Anhui TV center. In 2008, Axis celebrated its 1,000,000th camera sold for a radiation research center in Shanghai.

Numerous Deals With PRC Police

Axis wanted to capitalize on the PRC government's push to expand video surveillance, noting "city surveillance is also huge, its growth driven primarily by China’s 'safe city' project which aims to establish video surveillance systems in all major Chinese cities."

Axis was unbothered by human rights concerns, pushing forward with numerous PRC police projects including over 70 cameras for Tiananmen square as IPVM covered in Axis Bragged About Tiananmen Square Camera Sale In 2010, Says Likely Make Different Decision Today.

In 2010, Axis also touted a deal with Xiamen police to build a Command Center including "over 100 HDTV cameras":

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In a 2013 marketing document, Axis quoted a Xiamen police instructor praising the system, calling Axis' Lightfinder technology "a perfect solution [...] significantly helping with our criminal investigation":

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In September 2020, as IPVM covered, Amnesty International called out Axis for various other China police deals including a 2013 Jingjiang City police deal and a 2012 Guilin City police deal.

Police Ministry Praises Axis

In 2009, Wang Jian, the Party Secretary of the Ministry of Public Security's Technology Bureau, held a meeting where he publicly thanked foreign surveillance companies, including Axis (which was present) for helping "bring good ideas and practices to China" in order to build "China's harmonious society" and improve "social management":

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subsequently, Wang Jian, secretary of the party committee of the science and technology information bureau of the ministry of public security, and the science and technology information bureau of the ministry of public security, first of all, affirmed the success of the opening of the current CPSE an expo, welcomed the participation of counterparts from all over the world in the CPSE expo, and thanked everyone for participating in the construction of China's Safe City. He said that China is currently building a harmonious society, building a safe city, the arrival of foreign security enterprises, not only to bring advanced products and technology to China, but also to bring good ideas and practices to China.

in the construction of China's harmonious society, in addition to the construction of a safe city needs a large number of high-tech security products and technology, social management is also developing towards digitalization, in urgent need of advanced technology and products to support. [emphasis added]

In 2009 as now, an important part of PRC police's "social management" was cracking down on any opposition to the Communist Party's official leadership of the country, e.g. the 2008 jailing of Liu Xiaobo for signing a pro-democracy charter and the arrest of over 1,000 Tibetans during unrest in 2008.

PRC Government Cracks Down On Foreign Products

In 2012, PRC state media described "foreign surveillance equipment" as "risks to national security":

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Axis still continued to supply large police and other government deals, but this changed definitively in 2015, when PRC state media announced that "China is set to drop government purchases of foreign technology products as part of the national strategy to ensure information safety":

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China reported that Miao Wei, Minister of Industry and Information Technology, "said Chinese-developed IT products are critical to improving information security." Reuters reported a month later that "in 2012 [Cisco] counted 60 products on the Central Government Procurement Center’s (CGPC) list, but had none left by late 2014". State media said this move was "because of security concerns and to support local IT enterprises".

This came after various moves to restrict foreign products in government IT networks, e.g. its exclusion of foreign antivirus providers in 2014 and a prohibition on Apple phones (also 2014).

Axis Blames China For Asia Sales Decrease

In 2015, CEO Mauritsson stated that China is "a more challenging market being more protected". Also in 2015, Axis blamed China for a 9% Asia region sales decrease "as a result of intense competition from local players", adding "the Chinese market is characterized by intense competition and high price sensitivity":

Asia decreased by 9 percent. The trend in Asia was mainly due to decreased sales in China as a result of intense competition from local players

The Chinese market is continuing to show strong growth and is now the largest global market for network video. Axis is investing to increase its presence through local personnel and a stronger partner network. The Chinese market is characterized by intense competition and high price sensitivity. Axis’ business is currently focused on larger and complex projects, where the overall quality and service offering is of great importance. The local development centre in Shanghai is working on continued releases of products and solutions that meet local norms and standards [emphasis added]

In Q4 2015, Axis noted "A weak development, especially in China, has had a major impact on sales." Government sales are critical for the PRC video surveillance market with CPS estimating in 2018 that about 60% of the market was "government-led".

Axis Reliant On Partners But Hikvision And Dahua Bid Direct

Both Hikvision and Dahua often bid direct for PRC government projects (e.g. over $1 billion for Xinjiang police alone), booking large margins, while Axis used local partners. In 2014, Axis' China director Jiang Hongtao was interviewed and stated Axis needed to "take the initiative" to sell direct to SIs and end users, "otherwise we will be eliminated":

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compared with before 2010, the channel has changed a lot, before the international brand in brand awareness and technology leadership than local manufacturers have a great advantage, so basically rely on agents to open up the market, but now completely different. for Axis, we cannot only support and rely on agents to open up the market, but also take the initiative to go to system integrators and end customers. otherwise we will be eliminated. for security vendors, how to build and maintain channel construction in the future is critical. [emphasis added]

Of course, starting in 2015, Axis going direct to SIs and end users was impossible due to the government crackdown, and Jiang's prediction became reality.

Those direct PRC government projects have become immensely profitable for domestic manufacturers, e.g., see Hikvision Wins $46 Million Provincial Capital Project Direct, Hikvision Wins $33 Million Smart City Project Beating 3 Integrators, Dahua Direct $9 Million Jiexiu Small City, Big Deal, etc.

PRC Players Protected As Video Surveillance Spending Surges

Also in 2015, the PRC government launched its massive "Sharp Eyes" projects to achieve "100%" video surveillance coverage with "no blind spots" by 2020. Thanks to the foreign procurement ban, Hikvision, Dahua, and others were well-positioned to benefit. In 2018, a Dahua executive estimated Sharp Eyes would bring over $15 billion USD worth of investments to the PRC China surveillance industry.

Axis PRC Diminished Presence, "Practically Never" Invited On Public Projects

Today, Axis told IPVM its PRC branch is "practically never invited to bid in publicly funded projects" and is instead focusing on "international, private companies":

Axis is nowadays practically never invited to bid in publicly funded projects. As a consequence, our sales efforts concerning China instead have focus on international, private companies.

Indeed, Axis has not touted any China case studies since 2015. Axis China's website currently is under maintenance and its Chinese WeChat (social media) presence is limited to translated marketing material rather than anything China-specific.

Axis did hold a 2020 Axis China Solution conference, however, Dr. Jiang Hongtao was unmentioned, making it possible he has left. Axis declined to comment on personnel changes but said it currently has a "North Asia" director but no China director.

1 report cite this report:

How the PRC Blocked Out Foreign Tech Products Claiming Security Risks on Oct 27, 2021
Today, PRC manufacturers like Hikvision and Huawei regularly denounce Western...

Comments (2)

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Charles, good work!

To give context about how massive the PRC market has become, Axis's annual revenue is ~$1.5 billion, which is quite high for this market relative to the non-PRC world. However, Hikvision's revenue, just inside China, is 4 times Axis global revenue at $6+ billion annually.

Charles has one more upcoming report in this series, investigating in more detail how the PRC market blocked out foreign video surveillance firms in the past decade. While people largely assume (correctly) this happened, Charles is putting together extensive citations from the PRC government directly to show how it was done and what reasons they gave.

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PRC Government Cracks Down On Foreign Products

In 2012, PRC state media described "foreign surveillance equipment" as "risks to national security":

It is interesting that as early as 2012 China believed that their using products from foreign manufacturers was a security risk, while following that decision the marketing and use of PRC funded manufacturers expanded in public projects in countries around the world has continued and is still expanding today.

Would their reasons or caution about foreign product being used in their country be any less valid for any other country in the world?

Consider the expansion of PRC network chipset sales and the growing increase of their use and application in video, security, medical, communication, and IOT products by manufacturers throughout the world.

When combined with PRC subsidization allowing a potentially lower than cost market sales price, they have captured a huge market share over the last 7 years.

The utilization if those chipsets in all network products, as well as network based security related products should be of great concern to all governments, manufacturers and consumers globally.

In fact, the PRC have advised against such use in their own country for over 11 years.

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