301.519.9237 exdirector@nesaus.org

2.3.23 – SIW

Memoori estimates that between 2022 and 2027 the market will rise from $42.3 billion to reach $57.8 billion at a compound annual growth rate (CAGR) of 6.45%.

With the doldrums and uncertainty caused by the COVID-19 pandemic likely over, the physical security market is showing continued signs of growth, according to independent analyst company Memoori’s most recent industry report covering access control, video surveillance, alarm and perimeter protection.

Memoori’s analysis of world sales of physical security products at factory-gate prices show the market, over the course of the pandemic, remained resilient — especially when compared to other industries. World sales in 2021 rebounded strongly to $38.9 billion, a substantial increase of 13.2% vs. 2020, the report says.

This follows from a modest decline of about 0.2% from 2019-2020, as the worst effects of the pandemic were being felt.

Based on Memoori’s analysis of available data from the first 8 months of 2022, the firm projects annual revenues from the market will increase another 9.1% in 2022, rising to $42.3 billion, before growth declines somewhat between 2023 and 2027, averaging around 6.5% per annum.

‘Broadly Positive’

Growth in the physical security market over the past two years has been driven by retrofits and upgrade of security systems requirements as businesses have reopened following 2020 lockdowns, Memoori says. Other factors are government stimulus programs, increased demand for systems integrations that can provide business improvements beyond typical security concerns, remote operations capabilities, and improved AI-enabled security data analytics.

Memoori says industry sentiment amongst manufacturers, integrators, installers and resellers is broadly positive. Clients are proving willing to invest capital expenditure in modernizing their security equipment, and more companies are open to using higher-end technology to solve operational problems, with 56% of respondents to a recent Genetec survey indicating that they expect their OPEX budgets to rise versus only 22% indicating a decline.

But the market faces some significant headwinds, Memoori’s report points out — the most obvious being the global economy. Global economic activity is experiencing a broad-based and sharper-than-expected slowdown, with inflation higher than seen in several decades.

Memoori estimates that between 2022 and 2027 the market will rise from $42.3 billion to reach $57.8 billion at a compound annual growth rate (CAGR) of 6.45%.

Fast-Rising Market

Video surveillance remains the largest and fastest-growing segment in Memoori’s analysis, rising from 53% of the overall market in 2016 to nearly 58% in 2022.

The firm expects that sector to gradually increase its share of the overall business over the next 5 years. Access control has shrunk slightly from 24% of the overall market in 2016 to just under 23% in 2022, while IA/PP revenues have fallen from 23% to around 19% of the market over the same period, the report says.

Memoori’s managing director, James McHale, believes much of the current and future growth in the video surveillance market is driven by the technology’s  potential usefulness not just in security, but governments and commercial companies.

“I think one of the big hopes for the video industry is that it moves from what is generally perceived as a cost center, or grudge purchase, to one that drives the bottom line — to drive optimization of the business and compliance,” McHale says. “There’s a lot of buzz around artificial intelligence videos, and with the cloud actually producing a shift to a new model and a new way of working.”

China’s Dominance

The Chinese market has clear leadership in terms of overall sales volumes, but it still only ranks third globally in terms of market penetration when expressed in terms of sales per capita, Memoori’s report notes.

There is still enormous potential for sales growth in Latin America, Asia, the Middle East and Africa. “If we assume that similar market forces exist in all nations, then these regions with low penetration should experience a higher rate of growth over time,” the report explains.

In terms of security sales, the report notes that the Chinese market is characterized by intense competition and high price sensitivity. The Chinese market is also distorted, the report notes, by the huge sums of government funding that are plowed into both innovation programs focused on developing domestic expertise in areas such as AI and silicon chip technologies, as well as funding for widespread video surveillance projects in cities.

The intensive levels of investment by the Chinese state into developing its overall security apparatus over recent years has seen it develop into the largest single market for physical security.

Hikvision and Dahua remain the key recipients of this funding and support within the video surveillance market.

The government is also not a neutral player in the market, holding a 42% stake in Hikvision and providing the company with favorable lending terms and debt facilities. Given that China is the world’s largest single market, the two major Chinese suppliers have almost solely benefitted from Chinese government policy.

This level of support and a burgeoning domestic market demand has enabled them to scale their operations extremely rapidly, swamping overseas markets and taking market share from international competitors with low-cost cameras that drive down prices to unprofitable levels for most of non-Chinese suppliers.

China’s Sharp Eyes project mandated 100% surveillance coverage for public areas and key industries by the end of 2020. While the program technically came to an end in 2020, delays in project rollout due to the pandemic mean some investments continued into 2021.

The winding down of the Sharp Eyes program may indicate a decline in future government investment in the domain, “so I think there’s some question mark about whether that sort of high-level of growth will be maintained in China,” McHale says.

Apple Wallet: Disruption or Opportunity?

Apple recently opened its wallet feature for third-party app developers and it now supports various types of access from Apple Wallet, such as hospitality, corporate badges, student IDs, home keys and car keys.

Memoori predicts this will have big implications for mobile access credentials. The move has triggered a range of new smartphone and smartwatch applications for mobile access control in buildings, campuses and even vehicles, the report says. This trend is set to grow this year as the wider market begins to seize new opportunities, the report predicts.

The Apple Wallet had a partnership with residential ACaaS solution provider Latch, as well as Assa Abloy, to allow integration with their access control products and services.

“Most analysts don’t expect mobile-based access control to entirely replace the use of traditional card-based systems in the medium term, as concerns over cybersecurity and app performance may prevent some facility owners from fully migrating away from traditional systems,” Memoori’s report says. “In time, mobile clearly has the potential to replace cards as the predominant form of access control credentials, but whether this will take a few years or a decade remains to be seen.”

McHale believes the development is mostly an opportunity for the security industry. “As an industry, I think it’s a way of becoming more consumer-focused in that you can have an application on these phones and people can see the value of that,” he says. “And integrating with these wallet-based functions, I think, will certainly improve the user and customer experience, all of which I think are really good things.” 

John Dobberstein is managing editor of SecurityInfoWatch.com and oversees all content creation for the website. Dobberstein continues a 34-year decorated journalism career that has included stops at a variety of newspapers and B2B magazines. He most recently served as senior editor for the Endeavor Business Media magazine Utility Products.