I know we've talked about this a lot, but how cheap are these guys really? Aren't customers concerned at all about local warranties and support? System integrators make little profits from these Chinese brands, are they just quoting because they had no other choice when competitors are quoting Hik/Dahua?
"Aren't customers concerned at all about local warranties and support?"
Nic, good question.
As an example, Hikvision has over 200 employees in North America - sales, support, engineering, trainers, marketing people, inventory in local warehouses, etc. It's a lot like Axis but just 30 - 50% lower price.
So, yes, traditionally, those prices came with poor to no local warranty and support but Hikvision has broken this model. How long they continue to do this combo (Western support and Chinese off the boat prices) is a key question. I don't see how this combo is sustainable since the Western expenses (200+ local employees, etc.) are the same for them as they are for any Western incumbent.
I don't see how this combo is sustainable since the Western expenses (200+ local employees, etc.) are the same for them as they are for any Western incumbent.
I suspect the cost structure is not the same given "only" 200+ employees at their current/potential sales volume. Their cost of supply chain/production is very very low so there are some margins, and I believe even with local support their cost of that is driven down by their very high MTBF and the commodization trend that says "it will run until it's obsolete." The cost of sales is driven down somewhat by the lack of friction given the price. Marketing/warehousing is spend but doesn't require corporate employee overhead.
My point is ASUS had/has a business model that was sustainable even at low prices.
Where I think the analogy is different is Dell was/is still able to drop prices to at least be competitive. Whereas Axis apparently isn't as willing/able to do so.
I always suspected ONVIF was going to be suicide for Axis. But convinced myself Axis was trying to increase the entire size of the pie, and was confident they could still own a big piece of that pie. Apparently that wasn't the case if they cannot come down in price. Whether that's their overhead, production costs, need to preserve margins in the channel or what.
I think they have the ability to drop prices (their gross margins are way above 50%), but it will mean their margins will be harmed - and also it's easier to drop price than to raise it again. It's a catch-22 where they will harm existing products' profitability at the expense of winning market share in the low-mid end market. The ultimate outcome is they will be a higher niche player in the future - unless if they launch a cheap product under a different brand name (and hide it really well - like how Hikvision TRIED with Ezyview). They will have to disrupt themselves or be disrupted.
To what extend are our trade agreements to blame is the real for this surprise? We have a client with a location in Brazil, and buying the items in the US, and shipping them to their location resulted in a 60+% tariff, plus taxes on all items based on local MSRP pricing of the items.
The bigger scam is that Asian Distributors are shipping volumes of items to the US, with the participation of the recipient, as evaluation or gift items, avoiding all tariffs.
While I'm not an isolationist. However, I do believe they need to index the tariffs based upon the trade imbalances, and with some adjustments for the economic size of the countries. I also think places like EBAY with these pseudo gift / trial imports is a good place to start investigating... My .02 on that...