Published: Q4 2018

The Physical Security Business 2018 to 2023Access Control, Intruder Alarm & Video Surveillance

PhysicalSecurityBusiness2018to2023

Synopsis

Thisreportaimstoassistallstakeholdersandinvestorsinthephysicalsecurityindustryinidentifyingbusinessopportunitiesingrowthsectorsofthemarket;andforecastsdemandto2023

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Introduction

ThisReportistheNew2018DefinitiveResourceforAccessControl,IntruderAlarms&

VideoSurveillanceMarketResearch.

ThetotalvalueofworldproductionofPhysicalSecurityproductsatfactorygatepricesin2018was$31.55Bn,anincreaseof8%on2017.Thisisanincreaseof1%overtheCAGRof6.87%duringthelast4years.

Overthelast10yearsthemarkethasgrownbyacompoundannualgrowthrateof5.92%,howeverdifferentratesofgrowthapplyineachofthe3businesses(AccessControl,IntruderAlarms&VideoSurveillance).Weforecastthemarketwillreach$51.38Bnby2023.

ThedevelopedmarketsofNorthAmericaandEuropearelosingglobalmarketsharetoAsiaandparticularlyChina.ThisisexpectedtocontinuetoatleasttheendofthedecadewhichisbadnewsforwesternmanufacturersofVideosurveillanceproductsbecausetheyhavefailedtoestablishasolidbusinessbaseandsignificantshareinChina;whilst2Chinesemanufacturershavesalesofmorethan$5billionbetweenthemandnowhavethekindofscalethatallowsthemtoreducepricestothelevelsthatmostwesternmanufacturerscan’tcompeteagainst.

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Why Do You Need This Report?

Thereare4regionsintheworldthatmakeupover80%oftheworld’sphysicalsecuritybusiness.OftheseweestimatethatChinaaccountsforapproximately31%.WeestimateChinaisnowthebiggestsinglecountrymarketforphysicalsecurityproductshavingincreaseditssharebyalmost50%inthelast7years.Videosurveillanceequipmenthasbeenthemajorcontributorhere.TheChinesemarkethasgrownrapidlythroughaboominnewconstructionandSafeCityprojectsinthepublicsector.Howeververylittleofthisvastexpandingmarkethasbeenofbenefittowesternmanufacturers.

Weidentify14companies(GroupACompanies,whohaverevenueover$1Bn)accountingforsome$17.95billioninproductrevenuesin2018.TheinclusionofHikvisionandDahuaandthisyearAxisCommunicationshasgivennewimpetustothisgroupandthemergerbetweenThalesandGemaltohasproducedanewmegaIdentityManagement/AccessControlbiometricscompany.Theneteffectofthisisthatthisgrouphassignificantlyincreaseditscontributionandtheaveragesalesrevenueis$1,282mgivingthem57%shareofthephysicalsecuritymarket.

Inthereport,wecomparetheperformanceof16differentverticalmarketsin2006with2018andthisshowstherehavebeensomesignificantchangesduringthelast10years.Thetransportsectorhasalmostdoubleditsshareandat16%isnowthelargestvertical.

Manynewopportunitieshaveopenedup,particularlyforvideosurveillance,drivenbythethreatofterrorismandtheneedtoimprovesafetyandefficiencyoftrafficmovements.Retailisthenextlargestsectorwithan11.5%share.Thisverticalhasshownhowconvergencewiththebusinessenterprisecanimprovethebottomlineandisnowregardedasaprofitcenterinmostoftheworld’smajorretailcompanies.

WearepredictingthattheworldmarketforVideoSurveillanceproductswillgrowataCAGRof13.43%to2023.Thisgrowthrateisapproximatelydoublethatof2017andthereasonforthisisthedemandforAIVideoAnalyticsthatwillgraduallybetakenupoverthenext5yearshavingthepotentialtoaddafurther$2.3Bntothevideosurveillancemarketin2023.AIVideoAnalyticswillbethenumberonegamechangeroverthenext10yearsinthevideosurveillancebusiness,influencingthegrowthofmostproductsthatmakeupthisbusiness.

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VSaaS(VideoSurveillanceasaService)hasatlastbrokenthroughthe$1Bnbarrierandisforecasttoreachthe$1.2Bnsalesbytheendofthisyear.Stronggrowthoverthelast12monthshaspushedhardwaresalesupbyatleast50%andmostforecastspredictdemandwillgrowataGAGRof20%to2023.Thereareanumberofreasonsforthis.ThefirstisthatthesupplysidehasputmoreeffortandinvestmentintoprovidingVSaaSandACaaS(AccessControlasaService)servicesandtechnologyhasovercomemanylimitationsandreducedservicecosts.Atthesametimetheyarewinningoversystemintegratorstoadoptcloudservicesandthishasalsoprovidedasignificantboosttogrowth.

AccessControlisstillamuchsmallerbusinessthanVideoSurveillanceandtodayisfarlesscompetitive,butconsolidationiscreatingamorecompetitiveenvironmentandwithitcomestheconfidencetomoveforwardandtakeupthechallengeofembracingnewtechnologiesthatwilldeliverbetterperformingproductsnecessarytocontinuecrankingupdemand.Ifmanufacturesprefertocontinuetobeinsularandproprietary,itwillnotbegoodnewsforcontinuedgrowth,fortraditionalproprietarysystemsmeanlimitedoptionsforthecustomerandrestrictedpossibilitiesforintegrationandscalability.

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Withinits329Pagesand34ChartsandTables,TheReportPresentsAlltheKeyFactsandDrawsConclusions,soyoucanunderstandwhatisShapingthe

FutureofthePhysicalSecurityIndustry.

2018istheyearthatallthestakeholdersinthePhysicalSecurityIndustryfinallygotthemessagethattheCyberSecuritythreatwascapableofcausinguntoldharmtotheirbusiness.Nowoneofthecriticalbuyingpropositionsofphysicalsecurityis“Whathaveyou

donetomakethisequipmentlessvulnerabletocyberattack”?Theownersandoperatorsofbuildings,particularlythosehavinglargebuildingestatesneedtoknowthatmanufacturersandinstallersfullyunderstandwhatneedstobedonetoreducevulnerabilityandmakesureitisappliedtotheirequipmentandsystems.

ThisreportshowsthefullhistoryofM&Aactivitysince2000.In2018mergersandacquisitionactivityinPhysicalSecuritytotaled$7.33Bn(16%upon2017),whichlookslikethestartofanewwaveofgrowth.Thestructureoftheindustryisstillveryfragmentedwithhundredsofsmallcompaniesfindingitincreasinglydifficulttocompeteanditlooksinevitablethatthegeneraltrendlineofvalueandvolumeofmergersandacquisitionswillcontinueupwardsoverthenext5years,butatamodestgrowthrate.

Theaveragevalueofadealhasincreasedfrom$100min2010to$150millionin2015andin2017theaveragedealwas$168million.Thisyear(2018)adjustingforthenon-PhysicalSecuritybusinessoftheGemaltoacquisitiontheaveragedealwasaround$160million.Thenumberofdealsintherangeof$50mto$150hasincreasedandtherehasbeenmorediversityacrossthedifferentproducttypes.

Crossborderacquisitionaccountedfor24%ofthedealscarriedoutthisyear.Forthemostpartoverthepast5yearperiodthemaindriverhasbeentheneedtoextendgeographiccoveragebutthisyearacquisitionoftechnologyhasbeenthemainobjective.Some62%ofthedealsinvolvedtheacquisitionofUScompanieswiththevastmajoritybeingdomesticaffairs.

StartingatonlyUSD$1,750foraSingleUserLicense,thisreportprovidesvaluableinformationintohowPhysicalSecuritycompaniescandeveloptheir

businessstrategythroughMerger,AcquisitionandAlliance.

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Table of Contents Preface

ExecutiveSummary

1.Introduction

2.Structure,Size&ShapeofthePhysicalSecurityBusiness

2.1StructureoftheBusiness

2.2TrendsinMarketSharebyGroup2012-2018

2.3SizingthePhysicalSecurityBusiness2018&Forecastto2022

2.4WorldDistributionofSecurityProductsbyMajorRegions

2.4.1TheStatusin2018

2.4.2MarketSize&TrendsbyVerticalSectors

2.4.3MarketSizebyRegion&Penetration

2.4.4China&theRestofAsiaOffertheBestProspectForGrowth

2.5Comparing&Sizing,Access-Intruder–Video2018

3.TheVideoSurveillanceMarket2018-2023

3.1MarketSize2018&Forecastto2024

3.2MarketSizeofCameras

3.3MarketSizeVideoManagementSoftwareSystems

3.4Identifying&MeasuringthePerformanceofLeadingCameraSuppliers

3.5Identifying&MeasuringthePerformanceofLeadingVMSSuppliers

3.6ChannelsofDistribution&Trends

3.7BusinessStrategiesforEnsuringSuccessintheVideoCameraMarket

3.7.1Scale/EconomicsVsTechnology/Performance

3.7.2Technology/PerformanceProvidesaSolutionforNon-ChineseCameraManufacturers

3.8TechnologythatDrivesDemandforVideoSurveillance

3.8.1AttheEdgeTechnology&Cloud

3.8.2Compression

3.8.3VideoAnalytics–DeepLearning

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3.8.4IntegrationwithinPhysicalSecurity&otherBIoTSensors&Services

3.9TheMarketforVideoSurveillanceasaService(VSaaS)2018

3.9.1Drivers&RoadBlockstoVSaaS

3.9.2Suppliers&OperatorsofMVaaS&VSaaS

3.9.3AcquisitionsinMVaaS-VSaaS-ACaaS

3.10VideoTechnology-IPCameras–HDAnalogCCTV–ThermalCameras

3.10.1IPNetworkCameras

3.10.2TheFuture-IPNetwork-HDCCTV–Analogue

3.10.3VideoCompressionTechnologiesH264VsH265

3.10.4ThermalCameras

3.11BodyWornCameras

3.12VideoSurveillanceStorageRecorders

3.13VideoManagementSoftware(VMS)

3.14AIVideoAnalytics

3.14.1ThePanoramaofAI–IoT&Blockchain

3.14.2AIChipTechnologiesDiversify&OpenupNewApplications

3.14.3TheDevelopmentofAIChipTechnology-MachineLearning&DeepLearning

3.14.4TheAdvantagesofDeepLearninganditsAlgorithms

3.14.5ThereisaGrowingDemandforAIVideoAnalytics

3.14.6TheWorldMarketforAIVideoAnalytics

3.15SpecialistCameras&NewApplications

3.15.1NewVideoCameraDesigns

3.15.2NovelApplicationsforVideoCameras

4.TheAccessControlMarket2018to2023

4.1MarketSize2018&Forecastto2023

4.2IdentifyingMeasuringthePerformanceofLeadingAccessControlSuppliers

4.3ChannelsofDistributionforAccessControlSystems

4.4MajorDemandDriversforAccessControl

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4.4.1IPNetworkSystems

4.4.2IntegrationwithinPhysicalSecurityandotherBASServices

4.4.3ConnectingPACS-IAM&LogicalSecurity

4.4.4PersonalIdentityVerificationCard(PIVCard)

4.4.5MechanicalLocksLiveOn&Prosper

4.4.6SystemsIntegratorsPreferencetopushAccessControl

4.4.7PACS–StrategicAcquisitions

4.5TheImpactofTechnologiesfromOutsidetheAccessControlBusiness

4.5.1DemandforBiometricReaders

4.5.2NearFieldCommunications(NFC)forAccessControlMobileApps

4.6GrowththroughACaaS–Cloud&ManagedAccessControl

4.6.1GrowthThroughACaaS&CloudBasedSystems

5.IntruderAlarms/PerimeterProtection(IA/PP)Market2018to2023

5.1MarketSize2018&Forecastto2023

5.2DemandDrivers&TechnologyTrends

5.2.1DemandDrivers

5.2.2TechnologyTrends

5.3Identifying&MeasuringthePerformanceofLeadingSuppliers

6.WirelessTechnology

6.1WirelessintheVideoSurveillanceMarket

6.2WirelessintheAccessControlMarket

6.3WirelessintheIntruderAlarmMarket

6.4WirelessWillbeDrivenbyIoT

7.Standards&CyberSecurity

7.1ONVIFforVideoSurveillance

7.2ONVIFforAccessControl

7.3PSIA

7.4CyberSecurity

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7.4.1TheMostSeriousThreattoPhysicalSecurityStakeholders&EmergingBIoT

7.4.2TheCyberRiskThreatLandscape

7.4.3IsPhysicalSecurityIndustryistheWeakestLinkintheBIoTChain?

7.5GDPR–Privacy&Ethics

8.SoftwareMarketsinthePhysicalSecurityBusiness

8.1PhysicalSecurity&InformationManagement(PSIM)

8.2PhysicalIdentityandAccessManagement(PIAM)

8.3SituationalAwareness

8.4VirtualAssistantsMigratetoPhysicalSecurity

8.5BlockchainRefinesPhysicalSecurity

9.BusinessDevelopmentOpportunitiesThroughIntegration,ITConvergence&BIoTRequireNewBusinessModels

9.1GrowthThroughIntegrationofBASServices&ITConvergence

9.2ForIntegrationtoDeliveritsFullPotentialitNeeds“OpenSystems”

9.3RealEstatePlatformsManageBuildings

9.4GrowthThroughIntegration,ITConvergencewithinBASServices

9.5GrowthThroughIoT&theBuildingInternetofThings(BIoT)

9.5.1TheImpactofBIoTonPhysicalSecurity

10.BusinessOpportunitiesthatOfferGrowthToday

10.1NewIndustryVerticals&MarketSegments

10.2SharedServices,Smart/SafeCities

10.3SharedIntelligenceinthePrivateSector

10.4TotalSolutionsversusProductManufacture

10.5BusinessModelsFocusedonProductSpecialization,Brand&Commoditization

10.5.1ProductSpecialization

10.5.2Commoditization

10.5.3Brand

10.6MaintainingaViableBusinessintheIPCameraMarket

10.7BigTech&BusinessOpportunitiesBuiltAroundSecurityasaService

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10.8DoChineseManufacturersDominatetheVideoSurveillanceBusiness?

11.M&APerformancebySector-ValuationandOutlook2000to2023

11.1M&APerformance2000–2018

11.2M&APerformancein2018

11.3M&AOutlook2018-2023

11.4M&AAnalyzedbyBusinessSegment2018

11.5M&AValuation–ExitMultipleBenchmarks

11.6M&AActivitybyCountry

11.7StrategicBuysDominateM&AActivitybutPrivateEquityAbstains

12.IdentifyingPotentialAcquisitionTargets&HighGrowthSectors

12.1PotentialAcquisitionTargets

12.2IdentifyingAcquisitionProspectsinHighGrowthSectors

12.2.1TheIPVideoSurveillanceIndustry

12.2.2SecurityManagementSoftware

12.2.3VideoSurveillanceasaService(VSaaS)

12.2.4AccessControlasaService(ACaaS)

13.Investment&itsImpactontheSecurityIndustry

13.1TheStateofVentureCapitalintheUSA

13.2InvestmentsinthePhysicalSecurityIndustry2018

14.StrategicAlliance-Partnerships-InvestmentsinStartups

14.1StrategicAlliances

14.2Partnerships&InvestmentsinStartupsGainMomentum

List of Figures

Fig2.1–DistributionofSalesbyMajorGroupingbyValue2018($m)

Fig2.2–DistributionofSalesbyMajorGroupingbyAverageValue2018($m)

Fig2.3–AverageRevenueforGroupA,B,C,&DCompanies2012-2018($bn)

Fig2.4–WorldSalesofSecurityProducts2008-2023

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Fig2.5–WorldDistributionofSecurityProductsbyMajorRegions2018

Fig2.6–DistributionofSecuritySystemsbyBuildingType,2006comparedwith2018

Fig2.7–ComparisonofPhysicalSecurityPenetrationbyMajorRegion2018

Fig2.8–WorldSalesofSecurityProductsbyType2018($bn)

Fig3.1–WorldSalesofVideoSurveillanceProducts2016to2023($bn)

Fig3.2–WorldSalesofVideoSurveillanceCameras2017to2023($bn)

Fig3.3–WorldVMSMarketforVideoSurveillance2013to2023($m)

Fig3.4–PerformanceofEstablishedPlayers/NewVentures/Challengers/LeadersintheVideoSurveillanceCameraMarket2018

Fig3.5–PerformanceofEstablishedPlayers/NewVentures/Challengers/LeadersintheVMSMarket2018

Fig3.6–DistributionChannelsofVideoSurveillance2018

Fig3.7–MachineLearning&DeepLearningCapability

Fig3.8–TheWorldMarketforAIVideoAnalyticsMarket2017-2022($m)

Fig4.1–WorldSalesofAccessControlProducts2013to2023($bn)

Fig4.2–PerformanceofEstablishedPlayers/NewVentures/Challengers/LeadersintheAccessControlMarket2018

Fig4.3–ModelofRoutestoMarketforAccessControlSystems2018

Fig5.1–WorldSalesofIntruderAlarmProducts2013to2023($bn)

Fig5.2–PerformanceofEstablishedPlayers/NewVentures/Challengers/LeadersintheIntruderAlarmMarket2018

Fig7.1–TheCyberAttackLifeCycle

Fig7.2–CyberSecurityThreatVectorsforSmartBuildings

Fig7.3–BuildingElementsPerceivedtobeatHighRisk

Fig8.1–PSIMSoftwareLandscape

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Fig11.1–SecurityDealsCompletedfrom2000to2018

Fig11.2–ForecastofDeals2018to2023

Fig11.3–Merger&AcquisitionbyBusinessSegment2018

Fig11.4–AcquisitionValuationBenchmarks2005to2018

Fig13.1–StrategicAlliances2008to2018

List of Tables

A1–TheWorld’sMajorPhysicalSecurityCompanies2018

A2–AcquisitionsAnnouncementsin2017to2018

A3–PotentialAcquisitionTargets2018&2019

A4–DirectoryofAIVideoAnalyticSuppliers

How to Order Thereportispricedat$1,995USD(EnterpriseLicense)/$1,750USD(SingleUserLicense).ItisdeliveredasanelectronicPDFdownload,viaemail.

Toorder,orifyourequirefurtherinformationpleasecontact;

JimMcHale-jim@memoori.com/+46850164177AlternativelyyoucanorderdirectthroughourWebsite-https://www.memoori.com/portfolio/the-physical-security-business-2018-to-2023