Hikvision Trumpets Global Dominance

The surveillance industry is defined by its deep fragmentation, with hundreds, if not thousands of manufacturers, but no single dominant force. But now, Chinese mega-manufacturer Hikvision is trumpeting its 'continual dominance', listing its position in 10 categories. In this note, we break down these and explain what is driving Hikvision and what it means to the rest of the industry.

The $11 Billion Company

Hikvision IPO'ed in 2010 at a valuation of ~$6 billion USD. Today, it has risen to ~$11 billion USD, fueled by a 400% increase in revenue from 2009 to 2012 (~$300 Million USD to ~$1.2 Billion USD annual revenue). Moreover, the company trades at a staggering 9x revenue (by comparison, Avigilon 'only' trades at ~6x revenue despite its recent run-up).

Moreovoer, Hikvision is immensely profitable, generating net income of ~$350 million on its ~$1.2 billion in sales, for an incredible 29% net margin. For comparison, Axis, a quite profitable company by world standards, has a net margin percentage of roughly half that.

Market Rankings

In a promotional mailer, Hikvision lists its IMS/IHS rankings:

Hikvision also emphasized how its share of the global surveillance market jumped from 5.9% to 8% from 2011 to 2012. This is because Hikvision increased revenue by ~27% ($300+ million USD) while the rest of the industry overall was relatively flat.

And who knew Hikvision even had a VMS? ;) Evidently, though, they are now in the top 5 globally. Given that IMS estimates that segment at ~$600 million, it implies Hikvision sold over $22 million in VMS software in 2012.

Plus Hikvision, a company best known for analog, is evidently generating more MP camera sales than anyone but Axis now.

The China Impact

These numbers are less amazing when adjusted for the China market impact. Hikvision is one of a few Chinese domestic companies dominating mega city surveillance projects costing hundreds of millions each (e.g., Hikvision's $800 million city deal). Indeed, Hikvision acknowledges that over 80% of their revenue comes from within China, even in 2012.

There's no equivalent to China city surveillance projects, both in their overall size and preferential treatment for domestic companies. No other surveillance manufacturer in any other country can replicate it. 

Indeed, Hikvision is a perfect example of the Chinese Surveillance Statistics Skew we recently examined.

Hikvision Products - Good or Bad?

Hikvision's products are certainly solid but they are not, in any way, groundbreaking. For instance, see our tests of Hikvision's DVR as well as their WDR MP camera. Both are competitive, both in terms of features and pricing. However, they are average to above average. There's no critical 'Intellectual property' advantage or unique technology. And they are below average at marketing internationally (compared to international / non Chinese companies).

What Hikvision has done in China, against thousands of other Chinese surveillance companies, is outstanding. However, the company will only go as far as the domestic China market takes them (which could continue to be massive) but it is hard to see how they could come anywhere close to replicating that in the rest of the world (even if they buy Pelco).