China Accounts for Nearly 1/3 of all Physical Security Equipment Sold in 2016

The recently published IHS Markit Physical Security Equipment & Services Report estimates that the global market for physical security equipment totaled US$29.2 billion in 2016.

This represents a $1.6 billion (5.8 percent) increase from 2015. Included in this estimate are the following equipment types: video surveillance, access control, intruder alarms, entrance control (pedestrian and vehicle), consumer video surveillance, mobile video and body worn cameras, and enterprise storage.

Looking forward, IHS Markit forecasts that the world market for physical security equipment will grow at a compound annual growth rate (CAGR) of 7 percent from 2016 to 2021. By 2021, the physical security equipment market is expected to total US$41.7 billion annually.

Regional breakdown — China dominates
Geographically, there are significant differences in terms of where future growth is expected to come from. China, the largest single market for physical security equipment in terms of revenue, accounted for 29 percent of the global market in 2016.

IHS Markit expects that by 2021 China will account for 38 percent of the global market, and will be larger than the North American and Western European markets combined. The majority of this grow is being driven by significant investment in video surveillance equipment. In 2016, China accounted for 42 percent of the global video surveillance market.

However, significant investment by the Chinese government in safe cities projects, particularly focusing on traffic monitoring and city surveillance, will drive further growth in this market.

Vertical analysis of the global physical security market highlights several regional differences. As a result of the significant investment by the Chinese government, the Asian government vertical was estimated to be slightly less than twice the size of the Americas government vertical in 2016 — and nearly three times the size of the EMEA (Europe, Middle East, Africa) government vertical.

It is estimated that the Asian market for banking and finance is roughly three times the size of the equivalent Americas and EMEA regions. However, as a proportion of their overall spend, the Americas and EMEA regions spend significantly more on privately funded business verticals such as the commercial, retail and sports and leisure markets.

The Americas region, where the United States accounts for 79 percent of all physical security equipment revenue, is by far the largest residential market in the world. The US leads the world in many aspects important to the residential market such as video penetration and smart home adoption.

Key trends driving this market include resolution quality improvements, advanced video content analytics and the growing adoption of cloud storage. A variety of new analytics continue to be developed and applied to video surveillance, the majority of which focus on refining what should and should not be recorded in order to save bandwidth and storage space.

Motion detection, event recording, facial recognition and object awareness are just a few of the technologies being applied in this regard. Facial recognition potentially provides the owner of the surveillance system with a great deal of expanded functionality, as the cameras can be programmed to send specific alerts when a particular person is first spotted.

Top vendors
Analysis of the leading companies involved in the physical security market shows that the top 10 equipment vendors in 2016 are the same as in 2015, and these companies are gaining market share over the rest of the market.

In 2015*, the top 10 equipment manufacturers accounted for 35 percent market share, and in 2016, this increased to 37.7 percent. However, growth within the top 10 is being driven mainly by Chinese vendors Hikvision and Dahua Technology, which are ranked first and second.

IHS Markit expects that if current technology trends continue, and the growth of the Chinese market persists, Hikvision and Dahua Technology will continue to gain market share in the future.  

* In the 2015 market share analysis, Tyco International and Johnson Controls were counted as separate companies. In 2016, both companies were counted under the Johnson Controls name.

Oliver Philippou, senior analyst, video surveillance, IHS Markit