Security Industry To Fragment, Not Consolidate: Report
THE $US110 billion global electronic security and services industry will not consolidate but will fragment, according to a report, “Total Physical Security Equipment and Services – 2013” released by IHS.
According to the report, the Americas generated $US46 billion in revenue last year — 41 per cent of global physical security equipment and services market. Asia Pacific followed with $33 billion, trailed by the collective Europe-Middle East-Africa (EMEA) region with $29 billion. IHS forecasts strong growth in all the markets for the next few years.
“This is an industry that managed to stay strong during the recession,” IHS Senior Analyst David Green says. “Now with the general improvement in the global economy, we expect total industry revenue to reach $170 billion a year by 2017, even though growth rates will probably peak before then.”
However, IHS researchers suggest the level of competition will see the current fragmentation of the market continue.
According to the report, just 2 entities broke the $2 billion level in annual revenue, with both accounting for a combined market share of 10 per cent. Behind them, only 5 other companies possess a market share of 1 per cent or higher and the top 15 companies together had a market share of around 20 per cent. The other 78 per cent of the market is up for grabs among thousands of other companies, according to the report.
Meanwhile, in the electronic security equipment market, about 40 players achieved revenue in excess of $100 million a year in 2012.
“It’s extremely competitive in every vertical, product and region,” Green explains. “You have several companies that are offering virtually the same product in specification and price, yet the highly personal nature of security sales means that each company can claim its own little niche within the market.”
After the split of Tyco Int’l — one of the largest companies represented in the 2012 data — into ADT, Tyco Integrated Security and Pentair Ltd, the service market is also set to become even more fragmented in the near-term, IHS predicts.
The report accounts for the inevitably of mergers and acquisitions in the electronic security products market. For a company to jump up the table, it would realistically need the combined share of 5 or more existing manufacturers.
“That’s just not going to happen overnight — this is not an industry where one acquisition propels you straight to the top,” Green says.
“It defies accepted market logic to some extent,” Green says. “But then at $110 billion and beating the recession, it’s hardly a typical industry anyway.”