M&A Activity Not Behind Increasing Concentration of Video Surveillance Supply, IHS Says
Instead, it’s believed that manufacturers seizing market share from competing vendors is fueling the increased supply concentration.
In a new research note, Niall Jenkins, consulting manager for IHS Markit’s building technologies unit, submits that industry consolidation does not explain why the supply of video surveillance equipment has become increasingly more concentrated.
Rather, Jenkins attributes the supply concentration to companies seizing market share from competitors, not through mergers and acquisitions.
Jenkins points to 2013 as a pivotal year for the video surveillance industry when predictions of market concentration started to become a reality. It was also when the estimated market share of the top 15 video surveillance equipment suppliers jumped 10 percentage points over the previous year’s share, he writes. Notably, 2013 was when the video surveillance market finally started to mature.
Take, for example, the significant deals that Canon consummated for Axis Communications in 2015 and Milestone Systems in 2014.
“Canon had little effect on the combined revenue share of leading vendors. In fact, the organic revenue growth of Chinese supplier, Hikvision, had more of an effect on making supply more concentrated in 2015,” Jenkins writes.
The established realities of the market are also changing, he says, as best-of-breed product suppliers are being challenged by solution providers offering pre-integrated products. Integrators are increasingly leveraging single-vendor solutions to reduce installation costs and focus on the more profitable service and maintenance contracts.
“Security camera shipments are booming, forecast to exceed 100 million units in 2016, but annual revenue growth has slowed to low single-digit rates. A war of attrition is being waged over the more price-sensitive markets,” he writes.
In spite of the price pressure and hyper-competitive landscape of the last few years, the competitive landscape has not changed as much as one might expect. According to the latest annual market share analysis from IHS Markit, 11 of the same companies have remained in the top 15 ranking of video-surveillance equipment suppliers from 2010 to 2015. The companies gaining market share are no longer the new kids on the block, they are incumbents and leaders in the market.
In price-sensitive markets, such as the retail and commercial sectors, price is king and margins are low. Western vendors are exiting these markets, Jenkins suggests, unsure of how to make the margins necessary to sustain their businesses.
“The high-end value-added markets, where functionality, reliability and performance are critical, are getting crowded,” Jenkins writes. “This is the battleground where the majority of video surveillance equipment vendors will either triumph or exit the market altogether.”
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