Low margins, decreased demand slow video technology market growth

In their most recent published estimates related to the world professional video surveillance equipment market, IHS Markit’s Video Surveillance Intelligence Service reports that global video sales grew by only 3.9 percent in 2016. While this was a higher rate than the dismal 1.9 percent seen in 2015, last year’s sales reflect a trend of historical low growth.
According to Jon Cropley, principal analyst for video surveillance at IHS, these figures reflect the combined hardware and software growth percentages. “Our definition of the professional video surveillance equipment market includes the following product types: security cameras, hardware recorders, video encoders, video management software, CS mount lenses, housings, positioning mounts, and CCTV controllers/keyboards. The global market for video management software is estimated to have grown by 10.3 percent in 2016. This means that the global market for other products is estimated to have grown 3.4 percent.”

The research further shows that the world market excluding China grew by just 1.6 percent in 2016. Demand for security cameras grew rapidly but prices fell considerably, affecting revenues. In fact, revenues declined in a number of countries. The Chinese market is now the world’s most dynamic accounting for over 40 percent of global revenues measured in U.S. dollars, propelling a 7.2 percent growth rate in China. This begs the question of why the market is seeing stagnation in percentage video surveillance growth numbers.

One disturbing trend in the video market is the continued deterioration of vendor margins due to low pricing of technology coming out of the Chinese sector. In 2016, a number of Chinese vendors continued to gain market share rapidly in regions outside China. They tend to offer products with low prices and this has been a major factor in average price erosion in those regions. Cropley sees some potential side effects coming in the near future if current pricing trends continue.

IHS Markit has just added new global and regional market statistics, forecasts and market share estimates to its Video Surveillance Intelligence Service. In addition to the above, other key findings include:
• Slightly higher growth in the global market is forecast for 2017, at 5.5 percent. As a result, the world market will be worth $16.2 billion in 2017.
• The supply base for professional video surveillance equipment is gradually becoming more concentrated (although it remains highly fragmented compared with supply to many other markets). The top fifteen vendors accounted 58 percent of revenues in 2016.
• 59 percent of all security cameras shipped in 2016 were network cameras.
• Shipments of HD CCTV cameras more than doubled.
• Less than 1 percent of network cameras shipped were 4K-compliant.