IP Camera Market Size and Growth Examined

By John Honovich, Published Jul 04, 2011, 08:00pm EDT

One of the most hotly debated topics is the size and growth of IP cameras - both because of future potential and the corresponding fear of analog's death. In this note, we examine various growth projections and provide recommendations on how to best make use of these forecasts.

Let's start with a review of key data points:

  • Approximately 2 Million network cameras shipped globally in 2010 (Yano Research)
  • Approximately $1 Billion USD global network camera sales in 2010, growing to $2.8 Billion USD in 2014 (IMS [link no longer available])
  • By contrast, analog projected for 4.6% CAGR globally and -2.6% CAGR in America from 2010-2014 (IMS [link no longer available])
  • We estimate that IP camera revenue is approximately 30% of the total camera revenue, implying that analog revenue is $2 - $2.5 Billion for 2010
  • In 2009, we projected a 200% increase in IP camera sales between 2010 and 2012 (for a CAGR of 44.2%).
  • Pure play IP camera companies including publicly traded Axis and Mobotix as well as privately held Arecont, Avigilon and Vivotek growing at 30%+ rates (IPVM financial updates)

Currently, we are in the middle of a major shift to IP cameras with sales and market share moving from a niche status (i.e., 2008-2009) to mainstream status - today.

One other important point in analyzing the market is the impact of China which heavily skews the overall sizing and recommendations. For instance, the Wall Street Journal, citing IMS, reports China surveillance market size as $1.7 Billion in 2010 and growing at 23%, far ahead of the single digit growth in the US and Europe. The $1.7 Billion figure is for overall surveillance, not just cameras. However, that is still approximately 20% of the global market that is deploying a far greater percentage of analog than the rest of the world.

Factors to Consider

Projections on IP camera growth are difficult because they embed important and, often, controversial assumptions. Here are the key ones to consider:

  • How successful are IP cameras in replacing analog?
  • How much is the overall demand for cameras growing?
  • What is the general economic outlook?
  • What region of the world are you considering?

Here's our advice on navigating them:

  • Regions: Since most of our members are in (or sell primarily to) the US or Europe, we will focus here.
  • Replacement Success: We view this as high. The clear majority of new projects in both Europe and the US are choosing IP cameras and almost always including megapixel in those deployments.
  • Overall Camera Demand: We see this as weak, slightly better than the overall economy's growth but likely to remain in the single digits. Cameras are relatively saturated in most of the US and Europe. Plus, anti-terrorism initiatives and support are generally declining.
  • General Economic Outlook: We see this as weak with high votality. Ultimately, this will depend on one's own view. However, it is very likely that a new recession would trigger a major drop in camera sales (10-20%) and disproporitonately so for IP cameras.

IP Growth Rate Must Fall

In the next few years, it is essentially inevitable that IP camera's growth rate will fall. More precisely, it will converge with the overall camera market growth rate as IP becomes the dominant camera type sold.

Unless the global market for surveillance camera starts growing at 20%+ rates, IP camera growth rates will start declining under 20% by the middle of the decade. This is inherent due to saturation. When IP camera sales were a small portion of the market, it was easy to grow 40-50% annually. Now that IP camera sales are approaching 50% of all camera sales (in the US for instance), it will not be able to grow that fast by simply replacing analog. There's only so much left to replace even if you could replace all of it (which is not feasible).

Outlook

As long as the global economy holds up, we believe IP camera sales will remain solid (20%) for the next few years. However, the 2010-2011 will likely be the peak growth years with IP camera growth rates steadily declining as market saturation and replacement occurs.

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