Interesting hypothesis, I do hope you are right.
in the great race to the bottom nobody wins in the long run
The race to the bottom in video surveillance is over.
After 3 years of aggressive price cuts and heavy sales and marketing expenditures, the Chinese manufacturer driven race to the bottom is done.
Evidence
IPVM sees this pattern across the board - from integrator surveys (e.g., Top Manufacturers Gaining and Losing 2017, Top 2017 Trends), to Western manufacturer financial results (e.g., Axis, Avigilon) and discussions with management at major Chinese and Western manufacturers. While 2015 and 2016 were clearly the prime of the race to the bottom (recall #1 Threat 2015 - China), the sentiments and results have reversed in 2017, entering into 2018.
Key Factors Driving The End
The key factors behind the race to the bottom ending include:
China Not 'Over'
To be clear, this does not mean that the Chinese manufacturers are 'over' or 'done'.
**** ** **** ** *** ******, held ** ****, **** ******* *** foes ** *** ******* *************, **** Dahua *** ********* ***** ******* ******** the ******.
**** ***** **** *** ******* ************* need ** ****** *** * *** strategy *** ********* ******* ** **** with ***** **********.
What **** ***** *** ********* **?
** ******* **** ***** *** *********, themselves, *** ****** ** ****** *** what ** ** ***** ******* ***************, after * **** ***** ****.
***** ** ** ***** ***** **** Hikvision, ***** *****'* ***** ******* ******* sales ****** *** **** ****-********** **********. They **** ***** **** ********* **** Western ******* ***** *** *** **** harder **** ************* ******** **** *********. Worse,***** *** * *** ***, **** ** *********, *** ******** ******** *** ********.
******** ** *****, ********* ** ***** much ****** *** *** *** *** problems, **** *************, **** ***** ***** and **** *** ****** ******** **** their ******* ********** *********. ** *** plus ****, *** *********, **** **** a **** ******* **** ** **** upmarket,**** *** **********, **** ******-*** ******** *** ***** push **** **** ********. ******, ****, in ******, ** ** ******** *********** that **** **** ** **** **** from *** **** ** *** ******. Whether ** *** ********* *** ******* that ********** ********* ** * **** harder ********, ***** ***** ****** ****** there *** *** ******* ******** **** Enterprise ****** **** ***** ************* *** foreign ********** *********.
*** *** **** ****** ********* ** see ***:
Less ***** **** *** *** ***** *********
** ****** ** *** ***** ***** cuts *** ***** ** **** **** 2017, ** *** ***** ******* ** the **** ** *** ****** ****** their *******. ** *** ***** ****, we ** *** *** ******* *****-***** prices ********** ********** ** ***** **** still ** ******* ***** ****** *** on ******** ********* ** ******* ******.
Easier ** **** ******* ***** *****
*** **** ********* ****** **** ** that ** *** ****** **** ****** for ********* ** **** ******* *****-****** products. ** *** ********* ** *** race ** *** ******, ***** *** a ******** ** *********** *** "***, these *** *** **** ******, *** is **** **** *** ***** ** the ****." **** ** ************ **** as *** *** ****. ***** *** quality ********, ************* ******** *** (*** Hikvision) ********** ********* ********, ** ** much **** *************** ** **** ******* them.
Entering *** ****** ***
** *** ********* **** *** ***** surveillance ******** ** ******** **** * new *** *** *** ** *** race ** *** ******.
**** **** ***** ** ********* ****** by ******* ** ** ****, ** Dahua *** ********* ****** *** ***** adapted ******** ***** ******* ** *** next **** ****.
Interesting hypothesis, I do hope you are right.
in the great race to the bottom nobody wins in the long run
The ones whose cameras say HACKED right now?
Most “race to the bottom” cameras were not actually penetrated.
Of those that were, what were the damages to the end-user on average?
On the other hand, because of the race to the bottom, millions more cameras have been purchased by those who would not have previously.
Was there any benefit to that increased security?
I do think there are short-term winners in the race to the bottom. Lower prices, all things equal, are a benefit to buyers.
They are also a benefit to sellers who jumped on the bandwagon early. Recall 'laughing all the way to the bank' declarations from Hikvision dealers.
The laughing has subsided somewhat given increased quality problems, cybersecurity issues, monthly security firmware upgrades, etc.
But, for sure, some people win in the short-term.
The bigger thing, to me, is the unsustainability of the model. It's like Uber. It's great for average consumers that Uber has temporarily made cab prices so low but it's not sustainable. Uber has the VCS underwriting it. Dahua and Hikvision have the free flowing debt and government backing for theirs.
It's more about these cheap devices that are always on powered up connected to a network connection and what they can do to the US being built by a Chinese foreign government defense head. Not necessarily that the Chinese foreign government is going to spy on you while you're taking your dog for a walk. Its the untrustworthiness of the back doors that lead people to thinking there's other code in them that does something else like initiate botnet attacks on different entities here locally.
And before you say well I'm behind a firewall guess what they probably made your firewall over there too.
Of those that were, what were the damages to the end-user on average?
The HACKED name change is likely a white hat trying to flag the end user to address their security issues. What if someone with more nefarious intentions made use of these cybersecurity holes? This map is from a post of all of the devices that currently show HACKED as the name on Shodan that Brian Karas posted.
The HACKED name change is likely a white hat trying to flag the end user to address their security issues.
So they say :)
This map is from a post of all of the devices that currently show HACKED as the name on Shodan that Brian Karas posted.
I guess 10,000 was an underestimate on my part.
As a slight point of clarification, I scanned ~100,000 of the ~400,000 IPs that Shodan showed, at the time, for Hikvision devices online. That map should probably be 4x more dense with points, but my guess is they would be roughly clustered in the same areas, and many of those areas are already pretty solid anyway.
the race to the bottom
why has it gone so horribly wrong for dahua and hikvision
part of the picture is the failure of their products mainly dahua
hacking etc.
for hikvsion putting off customers is the fact they are are owned by the chinese government
but their underlying problems are commercial
hikvison promoting hi watch and shortly hi look
which they are promoting online same specification as the installer products but a fraction of the price online
dahua policy of everyone loves pss and wanting to be 20 percent below hik pricing has disintergrated as hi watch has dahua on the back foot
both have inventory problems into their wholeseller in the uk
as one wholeseller moves on to a new product quicker than a competitor
so in the uk dahau and hik are now promoting poc
power over cable at high resolution reducing the need for ip
giving those that havent moved to the newer technology headaches
also it requires a new range of cameras
making it extremely tough to manage the sales channel
as many wholesalers are not clearing inventory fast enough
and hik dahua keep pushing the market to fast
its not just pricing but technology based too
I think this opens up an opportunity for someone else to come in and be a major player or several companies. As a former advocate for using Hikvision cameras, we stopped mostly using them over a year and a half ago. We're looking for an alternative. There's no question that Hikvison manufacturers quality cameras and sell at very low prices. Whether they're losing money or not it's hard to beat them in this price range. I think DW, Hanwha, Axis, Panasonic, and others are on the right track, offering their camera line with an open/semi-open VMS. I am not a huge fan of DW cameras, but they're getting better. I like the idea of purchasing a VMS and Camera from the same company and getting a discount on the VMS but also having the ability to add other manufacturers cameras to the VMS without much difficulty. This presents a lot of opportunities for us and can help reduce the price and help us be competitive. We're currently taking over a large facility and adding about 30 cameras. They have a wide range of cameras, we were easily able to take them over with Spectrum, and we're adding 30 DW cameras to the system at little to no additional cost on licenses for the new cameras.
From a purely business perspective, I think Dahua and Hikvision screwed themselves. They should have continued to expand their OEM opportunities internationally rather than trying to go direct. Had they done this few would have known about their cyber-security issues and Chinese government ownership. Getting front and center like they did put them in the spotlight and allowed others to expose their weaknesses. Greed is a terrible disease and is what may be their downfall. What do they do now? Retreat and try and salvage what OEM opportunities they lost? Keep trying to save their brand? Can it be saved? Will be interesting to watch in the coming years. Lots of lessons to be learned here for young businesses.
They should have continued to expand their OEM opportunities internationally rather than trying to go direct. Had they done this few would have known about their cyber-security issues and Chinese government ownership.
That's a good point. They have ironically damaged their OEM relationships not just by competing with them but by damaging their own brand, and by extension, their partner's one.
I do think Dahua's best move would be to step back to purely being an OEM outside of China and third world countries. They would not only strengthen their OEM partners, they would be a much more effective counter to Hikvision by empowering other companies better at sales, marketing and support instead of copying Hikvision's moves one or two years later
As a former Dahua OEM even if they 'stepped back' as you put it we would not touch them again. They have proven to be untrustworthy liars. Why would any company risk a second very bad experience with them? This is in addition to their other more technical flaws.
As a former Dahua OEM even if they 'stepped back' as you put it we would not touch them again.
Your point is well taken. Dahua has definitely damaged their OEM relationships.
However, I do believe many would consider staying with them simply because there are not a lot of great other alternatives for OEMing. Is Longse, for example, really any better than Dahua? I don't think so, even with all of Dahua's flaws.
Back in 2010 or so this industry was in a prime situation after weathering the financial crisis storm. There were a limited number of importer/distributors throughout the US that dealt with the manufacturers. They in turn sold to regional distributors that stocked equipment and dealt to installers/end-users. EVERYONE made money in this scenario, prices were managed so that everybody could dip from the well without the one guy draining it completely. And then, the manufacturers decided that they could take the money from everyone and sell directly to the end-user themselves and they would rule the world. I have been in meetings with a major manufacturer who explicitly stated that this was their goal. They have driven this market into becoming the swamp that it now is. Garbage products fighting to see who can be the cheapest just to sell more than the next guy or compete with Alibaba or Amazon and screw everyone that it impacts negatively. If the race to the bottom is truly over, then halelujah, maybe we can actually start pushing to have better, more secure and reliable products made that we can all go back to profiting from.
Even if Hikua is winded, the race continues, no?
Oh boy...
I don't think Longse has the resources or wherewithall to fund the sales and marketing expenses to join that.
But, who knows, if Longse offers unlimited drinks at Tao at ISCW18, they will prove me wrong. However, I think the best case scenario for Longse is that they become stronger with smaller dealers / very price sensitive buyers, etc., but not an overall market force.
I don't think Longse has the resources or wherewithall to fund the sales and marketing expenses to join that.
Well I don’t mean to limit it necessarily to Longse.
Just mean that as long as someone can make a $5 camera in China there will be someone thinking they can sell it here for $10.
And even though they might not succeed in making money, they will try.
Was Dahua “successful” in their N.A. strategy? Not asking rhetorically.
Was Dahua “successful” in their N.A. strategy? Not asking rhetorically.
No. In fairness to Chinese companies, Dahua did so many things wrong, it is legitimately worth questioning whether the strategy was fundamentally flawed or just terribly executed.
However, the bigger challenge is the sheer cost of executing a NA rollout. A company attempting a Dahua / Hikvision styles expansion would need to be able to fund $20+ million in losses over 3 years trying to build up (local sales, support, marketing teams, etc). And none of the other Chinese manufacturers have the wherewithal to make that bet.
And none of the other Chinese manufacturers have the wherewithal to make that bet.
Maybe Huawei?
I don't think Huawei is going to be doing much in the US anytime soon. I do think they will expand in other Western countries (recall China Huawei Gives France Free City Surveillance) but it seems their play is more in large-scale projects than in mass market distribution.
As far as i am aware Huawei has no interest in moving into hardware manufacturing for the surveillance market. They are much more focused on the VMS platforms.
$20 Million is nothing to alot of Chinese companies. If the boss of a company wants to do something the money will be found.
There are also many rich princelings who would be more than willing to invest in a business in order to prove that they are capable of creating their own wealth and not just relying on mummy and daddy.
$20 Million is nothing to alot of Chinese companies.
Which ones in particular? Do you mean video surveillance manufacturers? If so, I disagree. Look at Longse, Milesight and Uniview to name a few who have been pushing international expansion. All of them are doing it on a relatively tiny budget.
I think what you are saying is that there is enough money in China to do so such things. That, of course, I agree.
My counter is that, in terms of actual video surveillance players, outside of Dahua and Hikvision, none of the others have shown any capacity to make such an investment.
Longse already have started to advise customer about price increasing coz of raw materials price rising...componts and labor cost. in fact, most of real factories already says about price rising...for me main question- is it really the race finish or just few months issue but to components shortage etc
Dahua brand sales don’t make sense
they have in the U.K. a requirement to disclose sales by customer and region with a fixed trade price to ensure their distribritors only support customers Dahua ask them too
dahua is very conflicted for sure
Not true Mick, sure they want to know sales numbers, but not customer inforation.
Seriously we spoke to them monday
you should discuss this with lillia
they want to know where product is being sold
Mick i dont wish to argue with you, but we are a brand distributor unlike yourself.
Take it from me they dont ask for customer informtion.
We were discussing branded distribution
mans this was their requirement
not arguing we had 3 people in the meeting so did dahua
we feel this is too strictive for us too
entrrtain
regional sales and fixed pricing
no wonder they are struggling
They also said pricing to the trade is fixed
not
negotiable
is that not true either
Fixing trade prices is illeal in the UK.
Having a recommended trade price and negotiating round it is not and makes good business sense.
Some will offer lower prices with reduced service.
Others well offer higher prices with better service.
Mick, please, that is enough on this. It's off topic to the post and there's been enough back and forth.
John if you think a 4 hour meeting with dahua is off topic fine
this is information directly from dahua not second hand information
if you don’t think dahua has
a confusing strategy then I think your wrong
part of dahuas underlying issues are inconsistent strategies
which will cause more loss of business than anything else
I don’t understand your confusion
they are under new leadership
after they sacked the moron denny
they wanted to talk to us
so we talked to
them this was their criteria
regional sales so they can marginalise their partners
price fixing
they openly admit their sales in U.K. are poor
lookimg at your web site you have old inventory which will
cost
money to fix
And just wait until you happen to mention the name of a customer with a major project. They will be on their doorstep with days offering to sell direct, at stupidly low prices. This is what happened to us not once, but twice. 800 + cameras involved, including a high % of PTZ
Fortunately for us by informing the owner of
thier U.K. distributor online at ipvm we proved yet again how inconsistent dahua is
with several inconsistencies
so they lack the fundamentals of any partnership
TRUST
i think it is a little unfair to group Dahua with Hikvision. Dahua maybe inept in its pursuit of North America and they do have cyber issues, as do a myriad of manufactures, but they do not have the record of intentional deception that Hikvision does.
they do not have the record of intentional deception that Hikvision does.
I agree with that.
In terms of grouping them, the grouping is companies most responsible for driving the race to the bottom. I think Hikvision is clearly #1 here, given their unparalleled resources and determination to maximize market share / top line revenue growth. But Dahua is definitely #2 there, given their own size compared to anyone else selling at low prices.
Put another way, there are only 2 manufacturers in this industry willing to sell $80 cameras with a sales person driving to a 5 man integrator's office and taking them out for steaks - Hikvision and Dahua. That's the heart of the race to the bottom and what I see ending.
It will be interesting to see if the non-bottom feeders being to innovate more. It seems like they spent the past few years concentrating on how to get cheaper and survive. Hopefully they will point those big engineering guns at big engineering ideas again.
#MakeISC-WestGreatAgain
#9, that is a good point about innovation. I do think many (but not all) manufacturers have reduced their innovation / R&D investment as they saw the damage and difficulty of competing in the race to the bottom.
Likewise, I think some manufacturers, as they see the race subside, will rededicate R&D resources as they see a better opportunity to compete. I don't though think we will see many public results at ISC West 2018, since it takes time to develop and release products but I would think by ISC West 2019, that should be more visible.
Ironically, He was right, at least about the bloodletting. However, He probably did not expect the bloodletting to be so heavy on his side as well...
I'd be interested to know what your estimations are as to what combined market share Dahua and Hikvision have in the North American market?
In the Oceania region I would estimate that Hikvision and ourselves (Dahua) combined would have probably 50% of the total CCTV spend, maybe more. You are right that in the enterprise space we would not have that much but we are growing in that space too as our products improve and the integrations and interaction with major VMS's also grow.
Dahua's branded North America market share is ~1%. When it comes to actual sales, Dahua is nearly irrelevant. When it comes to big mistakes and poor sales and marketing spend, they are at the top.
Hikvision's branded market share in North America is in the 10 - 15% range. Hikvision is way, way bigger than Dahua in North America, not even close.
Hikvision feels much bigger than their revenue (1) because their unit sales are disproportionately high (that is since their pricing is disproportionately low) and (2) no one comes close to their sales promotions, number of marketing events, etc.
I cannot comment on the competitive state within Australia, but in North America, there are still plenty of sizeable companies quietly doing significant revenue. Look at just Axis and Avigilon. Almost none of the ADI trunkslammers will touch them but combined Axis and Avigilon will do a half a billion in North American revenue this year, far, far outpacing Dahua and Hikvision combined in the region.
So...IPVM may one day eat their words? IPVM can only observe and bench test what is available but they do not have a foot hold in the entire process of what it takes to be a company. Is/are IPVM only a small out let of opinion, fair indeed but blanketed by the opportunity of greatest thinker? Did you miss? I think so, however your defense of vulnerabilities should be recognized. Grats to IPVM in that stage, in that regard and in that participation of knowledge, updates and overlooked nuances of the industry!!
I suspect the price reductions are far from over especially with IP cameras.
Thermal cameras will also come down as volume increases
price reductions are far from over especially with IP cameras.
Larry, how low do you think IP camera prices will get?
Thermal cameras will also come down as volume increases
Given Hikvision's thermal camera prices are generally at or above Axis, I would think they would need to to be competitive.
there isnt any difference between analogue high definition camera and ip one
in fact i think hikvison use the same box just different part code
all they do is add a hisilicon dsp to support their firmware
so in real terms 5 mp analogue and 5 mp ip sould be between 5 and 10 dollars more than analogue
there isnt any difference between analogue high definition camera and ip one
What about the POE electronics Mick?