After years of development and accumulation, a group of leading companies in China’s security industry have completed their initial capital accumulation and entered the path toward public listing. According to relevant statistics, there are currently more than twenty listed security companies in China, and the number of listed companies related to the security industry is even larger.
However, we can also see that most of these listed companies are product R&D and manufacturing enterprises. In China’s security industry, there are not many companies that started from system integration, continued to invest in R&D, achieved complementary development between security system integration and product research, and made meaningful progress. The fundamental reason is simple: this path is not easy.
China’s security industry is moving forward, but it is also facing growing pains.
China’s Security Industry in Motion
In previous years, China’s security market had long been in a mixed and disorderly state. The construction of Safe City projects brought a period of collective prosperity to both Chinese and foreign security companies operating in China.
However, with the large-scale entry of established foreign security companies, as well as traditional enterprises from the Internet, communications, home appliance, and telecom operator sectors, combined with continuous technological upgrades, the technical threshold of the security industry has been significantly raised.
While this has improved the technological content of the industry, it has also raised the barrier to entry. How can traditional security companies gain a voice in this new competitive landscape? How can they continue to make themselves heard in the new security market?
China’s Developing Security Industry Faces Growing Pains
The hype around the Internet of Things and cloud computing almost changed the direction of Chinese security companies overnight. At the same time, the gradual maturity of networking and other supporting technologies, together with the rise of the civilian market, has pushed user demand to a higher level.
At this point, traditional analog security products found themselves struggling in the face of this emerging technological wave. Some traditional security companies took the lead by cooperating with research institutions such as the Chinese Academy of Sciences, establishing joint laboratories and seeking bold breakthroughs. They became the first to “eat the crab.”
After a long period of dormancy and disorder, Chinese security companies urgently needed a breakthrough. The industry began to see a comprehensive wave of development. Led by several leading companies, security enterprises started their journey toward technological advancement early on.
Hikvision launched cloud computing projects, Dahua upgraded its analog products, and many emerging security companies also began cooperating with universities and research institutions in order to seek breakthroughs at a higher technical level.
For security companies, this was not a glamorous transformation. Rather, it was a process of self-improvement after collective setbacks and the risk of product reshuffling. It represented a determined effort to wash away superficiality and impatience.
Because of these changes, China’s security market has gained new vitality. Compared with the earlier chaotic situation, Chinese security companies now show more confidence and self-reflection while moving forward through disorder.
Growing Pains
Rapid economic development has made the security industry one of the fast-growing sectors. However, alongside the rapid growth of the total output value of the security industry, Chinese security companies are also facing serious growing pains.
For most domestic security companies, these problems are like thorns in their backs. The lack of innovation in core technologies, or even the absence of true core technologies, chaotic product structures, unclear positioning, weak awareness of independent intellectual property rights, and severe product homogenization have become some of the heaviest weaknesses of Chinese security companies. These issues seriously restrict their development and growth.
Many embarrassing incidents occurred during the development of China’s security industry.
In 2002, Hikvision’s independently developed DS series audio and video compression boards, which had fully independent intellectual property rights, were widely copied. Since then, Hikvision began its legal rights protection journey. The company hired seven lawyers and spent millions of yuan on lawsuits in Beijing, Shanghai, Shenzhen, and other places. The case was eventually settled through mediation, with the infringing manufacturers compensating Hikvision and promising not to copy the products again.
In 2007, *** filed a lawsuit against Guangzhou VEV, claiming that the company’s VEV3188 two-way intercom system infringed upon its design patent.
In 2007, Shanxi patent inventor Liang Jianping sued seven security companies for patent infringement. This case was referred to by the industry as “the first intellectual property case in China’s security industry in 2007.”
In 2009, Cameray released a solemn rights protection statement regarding “CAMERAY” brand products. Other incidents included the imitation of Aleph products, the “Seiko disorder,” and the fact that major brands including Sony were unable to escape the shadow of counterfeiting.
Chinese security companies have been moving forward amid disorder and growing through imitation. Their products have never truly escaped the shadow of homogenization. Driven by the temptation of high profits, counterfeit products have infiltrated every corner of China’s security industry and have become a major constraint on its development.
Industry insiders have stated that manufacturers and sellers of counterfeit products do not need to pay R&D costs, advertising costs, or even taxes. In addition, the cost of counterfeit products is extremely low, while the profits can be enormous compared with legitimate security brands.
This kind of “getting something for nothing” behavior by counterfeiters causes great harm to brand companies that have invested large amounts of money and effort to build their reputation. At the same time, when their products are copied, their R&D funding chain may also be disrupted. This is no longer just a problem that restricts industry development.
For Chinese security companies that lack core technologies, finding a breakthrough between “quantity and quality” will clearly require a relatively long transition period.
Industry Segmentation Is an Inevitable Trend
Video surveillance products account for a large proportion of the security industry, exceeding 50%. Taking video surveillance system products as an example, their main technological development trends are digitalization, networking, integration, and intelligence.
However, one phenomenon cannot be ignored: industry segmentation is influencing the market structure.
For example, cameras used to monitor roads and cameras used inside buildings can be completely differentiated in terms of product form. Different industry requirements place different functional priorities on products.
During the wave of Safe City construction in China, projects based on the GB/T28181-2011 standard, “Technical Requirements for Information Transmission, Switching and Control in Security Video Surveillance Networking Systems,” not only reflected the requirements of the public security field for security system standards, but also demonstrated the segmentation characteristics of the public security industry.
In the power industry, network cameras, digital video and environmental monitoring hosts such as RPU and NVR, and platform software systems developed based on the “Technical Specification for Video and Environmental Monitoring Systems in Substations of Guangdong Power Grid” have undergone complete cross-testing and field applications.
These systems have already achieved interconnection, interoperability, and product interchangeability among multiple manufacturers. This reflects the development trend of product standardization and industry segmentation in the power sector.
Development of the Security Industry in 2013
How would China’s economy operate in 2013?
Some views pointed out that 2008 was the most unexpected year because of the international financial crisis. 2009 was the most difficult year, as economic growth bottomed out for the first time. Others believed that 2010 was the most complex year, 2011 was the most contradictory year, and 2012 was the most tense year.
So, under the economic conditions at that time, where would the security industry go in 2013? Let us analyze it.
The security industry has long been considered a sunrise industry. Although the solar energy industry was also once regarded as an emerging green and environmentally friendly industry, it was directly hit in recent years by the European debt crisis and anti-dumping measures, suffering an unprecedented winter.
By contrast, when the broader economic environment is not ideal, social security may be affected. Governments may increase investment in public security prevention and control systems, while some consumer groups may also pay more attention to security work.
This is the special nature of the security industry, and it undoubtedly creates better development opportunities for the sector.
The security industry includes product manufacturing, engineering construction, security services, and other related areas. Product manufacturing has moved from “Made in China” to “Created in China.” The rapid development of the industry has produced various types of advanced security products and systems, many of which have already entered overseas markets.
Although export performance has declined under the influence of the international economic environment, from a macro perspective, as China’s security industry continues to develop, imports of security products are decreasing significantly.
Both agents and engineering contractors can feel this change: the number of purely imported security products they handle is becoming smaller and smaller.
Second, security engineering is also undergoing rapid transformation. It is no longer simply about installation and commissioning, but is moving toward integration, digitalization, and networking.
As a result, many high-tech professionals from computer, network, and communications technology fields have entered the security industry. This has raised the technical level of the industry and made security systems an indispensable part of intelligence and the Internet of Things.
In addition, with the implementation of the Security Service Regulations, the security service sector is accelerating its development. It is no longer limited to traditional alarm service centers.
Remote networking, image-sharing service platforms, centralized cloud storage, GPS call service centers, important object tracking systems, and training institutions for various security personnel will all become development opportunities for service-oriented security companies.