In the latest Research Note from IHS, David Green (senior analyst for video surveillance and security services) provides a detailed and timely appraisal of the overall physical security equipment and services market.
The IHS report entitled ‘Physical Security Equipment and Services: 2014’ combines annual product revenues for the following equipment types: video surveillance, access control, intruder alarms, perimeter security, entrance control (pedestrian and vehicle), consumer video surveillance, thermal cameras and wireless infrastructure as well as service revenues assigned to Video Surveillance as a Service (VSaaS), Access Control as a Service (ACaaS), remote monitoring services and security systems integration.
According to IHS, strong market demand in an increasingly competitive physical security equipment and services industry is still driving overall revenue growth in all global regions.
Key findings of the latest IHS report are as follows:
• The market reached $120 billion in revenue during 2013, representing a 10.8% increase in market size compared to 2012
• The USA remains the largest country for spend with over $6.5 billion allocated solely on equipment, although China is edging closer to the Number One ranking each year
• One in every $5 spent on physical security equipment in Asia is for a Government building, not including other state-led facilities and installations such as airports or infrastructure
• On a global basis, no single company holds a market share greater than 5% for the physical security equipment and services sector
As global economic conditions continue to improve and budgets slowly increase, the physical security industry continues to perform strongly across the world. Growth in the number of projects employing different types of physical security equipment as a single solution is also increasing, often managed through the same platform.
Regional variations to be observed
Service-based offerings are proving popular in the American market as manufacturers and service providers look to bridge the gap between consumer-style business models and professional standard services.
Markets such as VSaaS or ACaaS only account for a small proportion of total revenues right now, but are expected to see some of the highest growth rates over the next five years.
IHS already sees this convergence in the supply market as well, with telecommunications companies now taking a greater interest in the security sector.
The EMEA market is much more evenly spread across all equipment and service types although it shares more similarities with the American market than with Asia. Equipment spending is particularly spread across different technology types. For example, entrance control accounts for almost 25% of all physical security equipment revenue which is higher than for any other region.
Asia remains the fastest-growing market in the world and has very different end user patterns and requirements. The equipment market in particular exhibits a strong focus on video surveillance, wherein 17% of all revenue spent on physical security equipment and services in China during 2013 was on just that (and often originating through larger Government-funded schemes or projects).
Recognising a competitive environment
While global revenues for physical security equipment and services continue to increase, any expectations that the security industry supply market would start to consolidate appear premature.
The Top 15 manufacturers and service providers accounted for only 22% of the global market in 2013 (a decrease of 3% on just 12 months earlier). Furthermore, no single company can boast a market share above 5%, in turn proving the fragmented nature of this growing industry and the high levels of competition.
One developing trend in this competitive environment is the rise of Asian-based manufacturers gaining market share outside of their domestic markets. In 2013, four of the Top 10 equipment manufacturers globally were based in Asia.
Companies that have performed strongly in their domestic market and have improved product quality are now starting to expand into new markets. This is a trend that IHS expects to continue and one which will drive increased price pressure in the American and EMEA markets over the next few years.
However, any price pressures are not currently strong enough to outweigh the increases in general market demand. This means that the overall market for physical security equipment and services is expected to continue with strong growth for the foreseeable future.