Global Video Surveillance Growth Rates Declining Sharply

By John Honovich, Published Jun 06, 2014, 12:00am EDT

Just a few months ago, recall the hype for the video surveillance market growing 80% over the next few years. Well, not so fast.

IMS / IHS's new numbers quietly but clearly show significant declines in estimates for 2013 market size, 2013 growth rate and estimates for 2014.

In this note, we break down these declines and show the 3 key factors pressuring down growth for the surveillance market.

Declining Estimates / Projections

In a June 2014 announcement, IHS is projecting revenue for the global video surveillance equipment market to be $15 billion USD. Though that might sound large, it is a drop of nearly a billion dollars from their January 2014 projection of $15.9 billion USD, just 5 months prior.

Even more troubling, IHS is estimating 2013's global growth rate was 'nearly 7%', compared to their projection of 2013 growth last year at more than 11%.

Of course, the numbers for Europe and North America are likely even lower, as the global market continues to be pulled up by sales in developing countries, most notably China.

Nonetheless, IHS is still projecting 2014 global growth of 11.1% (from $13.5 to $15 billion USD), though down slightly from their previous 12%+ estimate.

However, if 2013 growth was not even 7%, why would anyone expect the 2014 growth rate to be 50%+ higher than 2013? It's unreasonable, since it was obvious that Q1 2014 was poor and the drivers are moving against the market.

3 Key Factors Pressuring Down Growth

First, IP is saturating the market. Now that IP accounts for 60%+ of overall surveillance revenue, there is simply less analog to replace. A few years ago, when IP was only 20% or 30%, it was easier to expand / migrate existing systems. Increasily, sales of IP are replacing existing earlier generation IP offerings, which reduce growth opportunities.

Secondly, innovation is down. As our 7 key trends and Spring 2014 new products directory demonstrated, there is just not that many new products or emerging technologies to drive buyers to purchase more or replace sooner. Megapixel was a big boom to industry growth over the past 5 years but everyone offers megapixel now. We all still continue to wait for video analytics...

Finally, low cost entrants are booming. To the extent that there is a big 'innovation' trend, it is Chinese manufacturers driving down the cost of megapixel. It is happening on the IP side (e.g., HikvisionDahua) and now on the non-IP/analog HD side (e.g., Dahua HDCVI). This is definitely good news for consumers, but steep price drops are certainly bad news for incumbents, typically will pull down overall revenue growth (trading $400 sales for $150 ones, etc.), and can be challenging for integrators as they further depress total margins.

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