The China Surveillance SkewBy: John Honovich, Published on Jun 12, 2013
Many like to make decisions based on market statistics. It gives (misleading) comfort about what the right move is. For instance, if the market is X billion or growing at Y percent, then our plan for Z is right. Unfortunately, statistics are routinely misunderstood or misapplied. In the surveillance industry, perhaps the most critical distractor is the impact of the Chinese market. In this note, we examine statistics and projections, showing how decisions can be badly skewed based on global numbers.
China is obviously big and growing faster than the world average. The challenge is when those numbers are mixed with the entire world, it skews the perception of the market.
For instance, many talk about the growth rate of the surveillance market being 10% or higher. However, almost every analyst's projection is based on 20%+ growth for China. When you remove China, or just focus on America or Western Europe, the growth rate is significantly, often alarmingly, lower.
These slides from a recent IHS/IMS presentation show this in action. For the last decade, Asia/China has grown far faster than the rest of the world and, by their estimation is more than half the global market. Equally importantly, projections are for Asia/China to continue to outpace the rest of the world:
Below, the chart breaks down surveillance revenue by country, with the biggest by far being China:
One obvious huge driver is the Chinese government deploying numerous multi hundred thousand camera deployments, orders of magnitude bigger than even 'huge' American systems.
IP uptake is also skewed by China's size. In that same presentation, IHS/IMS estimated that, on a unit basis, IP cameras were only 16% of all surveillance cameras last year (though close to 50% based on revenue). However, these numbers belie how much stronger IP is in the USA and Western Europe because of how big China / Asia is.
What This Means
Most people reading this, in English, are unlikely to benefit from China's growth. If you can, that is great, but realistically integrators in London or Los Angeles have no shot at sales in China. Even manufacturers in Europe and America are unlikely to do well inside China (e.g., Axis generates 50%+ of its revenue from the Americas with only 12% from Asia at a modest growth rate).
The bottom line is that any global pronouncements for the surveillance market need to be downshifted for those outside of China (specifically USA and Western Europe) or potential will be greatly overstated.
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