26,127 visitors from 91 different countries and over 500 exhititors punched the clock at secutech 2014, held in Taipei, Taiwan from March 19th to March 21st. The tradeshow continues to highlight Asia's reputation as a lead manufacturers and producer. As we delve into the future, we try to decipher whether or not the rest of the Asian manufacturers can keep pace with fast-growing China; especially in regards to the ever-growing debate of quality control vs. sheer volume.
One of the premiere security tradeshows in Asia, secutech 2014 was another successful exhibition with many countries and regions participating. In its 16th year, the tradeshow continues to attract visitors from all over the world to explore the latest innovations and technological advancements of Taiwan's exhibitors, and even the rest of the world, most notably China and Korea. Amongst the many reasons, one of the pointers that secutech attracts so many people annually is because of Taiwan's continued reputation as a leading manufacturer and producer. This year, a&s International talked to a few international visitors at secutech and we found out that many of them still favor sourcing from Taiwan even though they are facing fierce competition from China in their local markets. Looking at the Asian manufacturing industry on a broader scale, the types of products that global buyers are sourcing from Taiwan, China, and Korea now still have a few different variables. Taking video surveillance products as an example, in Korea, the types of products that buyers look for now are still higher-end analog systems and HD-SDI. China is now a superpower in more of the run-of-the-mill analog-based products, and production is on a tremendous scale. In Taiwan, buyers are now looking more for value-added products, and products that stand out. Taiwanese IP/IT-based products, especially in the global middle range market sectors, remain its strength.
Dating all the way to the 1980s and the 1990s, the words "Made in Taiwan" continues to evoke confidence in the product without the drawbacks of high prices. This is a continuing trend not just in IT-related industries but the security industry as well.
Historically, Taiwan has always been an IT-driven country. There are multiple "Silicon Valleys" dotted all around the island. Major IT companies are headquartered here: Foxconn, Asus, Acer, and HTC just to name a few. On the security side, VIVOTEK, QNAP, and GeoVision are names that stir confidence. According to an anonymous distributor from the Middle East, "I feel like Taiwan is getting stronger in IP. VIVOTEK rose around 2000 and GeoVision came later. GeoVision products have an advantage in the integration of video and access control products. It helped us to get a project in Africa." Another thing that Taiwan has going for them is due to its IP technology; Taiwanese products have been much improved in terms of being more open and not so closed anymore.
CHINESE COMPETITION AND THE GLOBAL RECESSION DRIVING THE MARGINS OF GLOBAL DISTRIBUTORS DOWN
The rise of the security industry in China has impacted the world on a global scale. Because Chinese products are as a whole inexpensive and produced on a large scale, this has changed the dynamics of global distributors. With the Chinese driving prices farther and farther down, this has also forced the rest of the world to slash prices in order to stay competitive. It has also forced some distributors to start looking into China for manufacturing and production. Avi Bareket, CEO for Anteco Security Systems in Israel, elaborates, "In the CCTV and intercom fields, the 'war' is more intense. Because Israel's first priority is given to price and not quality, a big company like us has a hard time competing because our overhead is bigger." Bareket further explains, "my competitors can go for Chinese products and they can buy a NVR for US$20 and an analog cctv camera for US$10 or less. The only thing my competitors are interested in is the price. With Chinese market prices, although it's improving in quality, it has destroyed the option of competing with some dignity in past years." Because of the almost fanatic slashes in prices all across the board, companies have seen their margins fall farther and father. A manufacturer in the Middle East also says, "The Chinese kills us. They have made us cut the margins again and again. Last year, I finished with something like a 2 percent margin. Most of my customers say, ‘we want a company like you, but this is the price.' I need to survive."
Another factor that is driving businesses down is the global economic recession. This economic decline has also impacted the European industry and indeed, the entire world and forced them to look into other methods. Spain in particular has been hit especially hard. Enrique Rebollar Fernandez, Sales Manager for LSB explains, "the business has gone down because of the global recession. Our systems integrators in Spain have been looking into other countries in order to find projects."
HOW COMPANIES ARE SURVIVING THE PRODUCT COMPETITION
One of the key points for continual survival lies in value-added services. For distributors looking to wade into the competition, trying to keep pace in the price wars against China is fruitless and above all, a losing battle. Some examples of value-added services would be things like more training for systems integrators, certain perks for customers, like installation help and guides on the site, continued service and troubleshooting, and how to get certification. Other things, like advanced and long-term warranties being offered, also help.
Rene Scetbon, CEO for AASSET Security
International, explains. "First, it's training the SIs. Second is helping to set up products, even on site. With bigger and more powerful software, better hardware, client servers, and networks, it's also becoming obvious that clients will need to be certified, and we need to provide continual maintenance. In the long run, these needs are coming from end-users, and though it means less margin earned in the long run, the more services you provide, the more satisfied the customer is."
Companies are also branching out into new product lines. While it's not totally set in stone, most are at an agreement that IP is definitely the future. Alongside IP, there are also transitions into home automation and smart homes. In some viewpoints, home automation is actually already viewed as an extension of IP-based security products. According to a visitor from Dubai, "I believe that home surveillance will be turned into IP. The reason is, you can buy two cameras very easily now and hook them into cloud. You also don't really need to buy anything, you can subscribe to a service and you can monitor it, even when you're not at home. So the game is shifting towards IP."
Another manufacturer from Dubai explains their methods: "It starts like this, for the companies that don't have any solutions, and you'll know what happens when they go for a new project. They want an all-in-one, single platform. For our parking solutions, we are looking to complete our portfolio. Start from parking to security and onto other things. A lot of things that are involved are in total projects. We have a very good number of support teams and we are doing in-house integration and testing."
Another important point to make is the fact that traditional box distributors are now facing stiff competition from IT distributors, who tend to work with lower margins. Other players, like networking and telecommunications industries, are also entering the battle, and a lot of companies are being forced to pull double duty, acting both as systems integrators and as distributors.
In some cases, distributors have also been forced to move from a purely distribution-only standpoint to looking at other methods like going directly to end users or wholesaling. According to Felix Adam, CEO of LogiCom Media, "it was complicated competing in a mad market and they all fight about prices. These types of integrators, they're not really looking for a high quality product, they are looking at prices. So we came to a different mold, let's keep doing wholesaling and even go to the end-users, the key customers. That way we can give them something better, like value-added products. We'll also include extended warranties; we'll do the installing and support, and we'll give it to them at no additional cost the first year." The shift towards IP is transforming a highly specialized market into one that is closer to the consumer side. It is now more important than ever to provide highly-added values in terms of uniqueness and customization for offers and solutions, running parallel with the continued need to strengthen existing business relations, in order to avoid any further implications in the markets.
ENTER TAIWAN
Since global buyers look for added value to their products in order to survive and gain better margins, they can see the value and strength of Taiwanese products, especially IP-based video surveillance products. Alongside the giant that is China, Taiwan has stayed more or less true to its roots.
There is a real confidence in that "Made-in-Taiwan" tag. With a resoluteness in Taiwanese R&D capability and quality control, Taiwan's IP-based products are preferred. Taiwanese products are also a good choice for SIs because of the perceived value-added products. SIs need products that stand out and are unique, in order to win projects. The majority definitely agree that there is a real sense of quality in Taiwanese products. "It's also easier to communicate with the Taiwanese. The language is clear and they are reliable," says Bareket. M. Rüştü Arseven, GM & Board Member of Tesan further elaborates, "Taiwanese companies have made a difference with R&D investments as well as their success in relationship management. It does not take much to recognize the growth in competition while moving forwards from analog to IP solutions."
The quality is not the only good thing going for Taiwan. Another issue that a lot of people are worried about is the ability to establish long-lasting business relationships. A manufacturer stresses, "I am very Taiwanese orientated. I have companies here in Taiwan and I have long lasting relationships. The company that makes my chasis, In Win, we have been partners for many years."
Another factor for Taiwan's security industry is their target markets. The recent shift towards IP has been seen most obviously in the middle class segments. Taiwanese products are really market-focused now, especially in the mid-range and upper-intermediate market. Right now, North American products and European products are really predominantly in the upper echelon of the markets. Paul Hennessy, MD for Northwood Technology, explains, ̋I think North American brands are strong at the enterprise level. But they are generally not as strong nor active in the low or mid-range market. Nor do I think they are interested as their products are just too expensive for that market range. ̋ However, because Taiwan is so catered to such a specific market, they do need put forth more investment into R&D. ̋I think Asian manufacturers are creating this vacuum with a cost-effective solution, ̋ says Hennessy.
This is another viable solution for smaller markets like South America. J. Daniel Arrua, Commercial Manager for Megapar Ingenieria in Paraguay, says, "Since our market is very small, we have to cover everything. But for CCTV, we only work with high-end solutions. We only work with banks, manufacturing industries, and mostly only with IP solutions." Arrua adds, "because we are also systems integrators, we are also dealing with different market sectors. Our sales department is putting a lot of effort into taking over the market because it's a way to minimize the risks. We are considering dividing our whole operations into larger projects and small solutions."
Verticals that include hospitals, banking, and education require products that are highly reliable. Not only are Taiwanese IP products suited for these markets, it doesn't come with the added burden of price. Scetbon adds, "Most of the time we are looking for vertical markets. Through vertical markets, you can find some dedicated products. Some customers are still afraid of the typical Chinese product, but Taiwanese technology has gone up, and a lot of IT and computer manufacturers are already based in Taiwan. For Chinese products, they are still afraid."
IP CONTINUES TO PAVE THE ROAD AHEAD
It definitely goes without saying that analog is going the way of the dodo. Scetbon also says that in the next few years, everything will turn to IP. "IT companies, systems integrators, and security companies, now they are all selling IP products. Everyone adapts," explains Scetbon. The good news for Taiwan is, they have already been heading down this path for a while now, and with the IT advantage and experience, Taiwan should continue to sail with a steady ship. "Taiwanese companies were always IT, so Taiwanese companies have caught the train, some came in a little late, but they still caught the train," he explains. "IP is going to be easy breezy, everything will be plug and play soon. It's already becoming the case; 32 channel NVRs, there are no questions, you plug it in and it works. I would say that every big project, every medium project is now IP. Small systems are just starting to have acceptance, but IP prices are dropping so fast that it will be accepted soon by everybody."
Fernandez also adds, "the part that is growing the fastest for us is that a few of our systems integrators have developed a global system solution for video surveillance in trains, buses, police cars, etc. and this solution has been successfully exported to projects in other countries. Suppliers like VIVOTEK provides the best choices in IP cameras as parts for these systems."
TAIWAN: THE ASIAN LEADER IN IP
Ultimately, Taiwan's IT experience and knowledge of IP should prove testament enough that their IP industry is overall a solid ship. Adding more good news, recent reports also state that they have an advantage when it comes to uniqueness and customization. While true that there are still a lot of OEM manufacturers that cater to the R&D of other countries and regions, Taiwan's IP technical advancements are nothing to scoff at either. Recent shifts in the industry and the world's competitive economy and market have really brought out the importance of product uniqueness and customization. According to a manufacturer from the Middle East, "Because of the need for more support for customers, and the fact that they have specific requirements, simply carrying branded items wouldn't bring any value and the customers would just buy it from shops." the manufacturer also adds, "But suppose I ask a well-known brand, they wouldn't customize, no. Large brands, no. " The fact of the matter is, large brand name corporations are too largely developed to deviate from their current paths. Now, the majority of them only focus on quantity and numbers, and they don't really build lasting relationships. It can be difficult to communicate with them.
SPEED BUMPS AND ROAD BLOCKS
Unfortunately, all is not completely rosy in Taiwan. One of the bigger problems it faces now is the matter of shipping, especially to the Middle East and African regions. A systems integrator based in Nigeria, says, "Taiwan has the same problem as Korea. It's very hard to get a visa. What happened in the past few years with visa problems has really affected the market share in Nigeria. Another problem in Taiwan is shipping. We are only allowed to use TNT and DHL to ship from Taiwan. Shipping to and from China is much easier for us. If we can have more flexibility with shipments with Taiwan, we would probably want to buy more from Taiwan." A distributor based in Iraq also comments, "Really, I like to work with Taiwan. They have good manufacturers and are of good quality. But it's hard to work with Taiwan because there is no way to transport goods to Iraq. For example, if I want to send samples to Iraq, it's too difficult. I can only use DHL, no post." The distributor also adds that "Taiwan now, they don't have any communications with the Middle East, maybe just with Dubai. So I need to send it to Dubai first and that will cost me a lot of extra money."
Another issue that Taiwan has to compete with now is the price wars from China. Because of the sheer amount of people in China, and also with their rising economy, the net result is China can afford to lower prices to a point that other countries aren't unable to compete with. It stands to reason that Taiwan, and indeed the rest of the world, must find other competitive edges in order to match up. Mansour Farzaneh, Chairman for PFN Technology, says, "Taiwan has to find something to compete with Chinese products. Although they say the general quality is still not as good as Taiwanese products, they are improving very fast. If Taiwan isn't able to do something different, or something more, they will lose more market share."
FUTURE OUTLOOK
In the end, there are many factors that need to be taken into account in regards to Taiwan, and indeed, Asia's future in the security industry. When talking just about Taiwan, a big part of the process also hinges on China. Ever the growing machine, it's a good prediction that in ten years time, China's industry will have completely caught up or even surpassed Taiwan. It therefore stands to reason that in order for Taiwan to survive in the long run, it must develop products and innovations that stand out and our unique.
According to Mohammed Ismail, MD for i-Lax Electronics, "Some of the keys for Taiwan to gain the market back are to have new ideas, better ideas, and also to have new developments. So if they are able to make some real investments in technology, and give a bigger piece of the pie for R&D development, they will be able to gain the market back again." Definitely, when taking into account these factors, Taiwan can still look forward to a bright future.
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