The security industry has entered its second half in 2024, but most people in the industry feel that the industry is becoming increasingly difficult, and depressed market sentiment continues to spread. Why is this happening?
The business environment is weak and G-end demand is sluggish
As the saying goes, the development of an industry requires a good business environment. However, since the outbreak of the epidemic, various industries in China have been impacted to varying degrees. As an industry closely related to social economy and production activities, the security industry is naturally no exception. The most obvious result of the impact is the decline in the start-up rate of government-side projects.
As we all know, the traditional demand of the security industry mainly includes government, industry and consumer markets, among which the government market occupies a large proportion. Especially driven by construction projects such as “safe city” and “smart city”, the market size of the security industry has grown by more than 10% at the highest rate, and has exceeded the trillion mark by 2023.
However, due to the impact of the epidemic, the prosperity of the security industry has declined, and the growth rate of the government market has slowed down significantly, which has brought severe challenges to the output value output of enterprises in various segments of the security industry chain. Being able to maintain normal operations is a successful performance, which reflects the strength of the enterprise to a certain extent. For small and medium-sized security companies, if they cannot turn the tide in a harsh environment, it is a high probability event to withdraw from the stage of history.
Judging from the above data, the overall demand for government security projects is relatively sluggish, while the demand in the industry and consumer markets is showing a steady recovery trend, which may become the main driving force for the development of the industry.
As industry competition intensifies, will overseas become the main battlefield
It is a general consensus in the market that the security industry is involuted. However, there is no unified answer to where the “volume” lies. The engineering companies/integrators have given their ideas, which can be roughly summarized into the following categories!
First, the “volume” is in price. In recent years, the security industry has continuously penetrated various application scenarios, resulting in more and more players joining and increasingly fierce competition. In order to compete for market share and enhance competitiveness, some companies have not hesitated to compete at low prices to attract customers, resulting in the continuous decline of prices of various products in the industry (products below 60 yuan have appeared), and the profit margins of enterprises have been gradually compressed.
Second, the “volume” is in products. Due to the increase in security players and the impact of price wars, enterprises have insufficient investment in innovation, which has led to the proliferation of homogeneous products in the market, thus causing the entire industry to fall into a competitive deadlock.
Third, the “volume” is in application scenarios. The industry has entered the era of security + AI 2.0. In order to fully reflect the differences between enterprises in the 2.0 era, most enterprises often add new functions in different scenarios. This is a good thing, but it will make it difficult to standardize products, thereby exacerbating industry chaos and unhealthy competition.
Gross profit continued to decline and profit margins narrowed
Generally speaking, if the gross profit of a project is less than 10%, there is basically not much profit margin. It is only feasible if it is maintained between 30% and 50%, and the same is true for the industry.
A research report shows that the average gross profit margin of security engineering companies/integrators has dropped below 25% in 2023. Among them, the gross profit margin of the well-known company Dasheng Intelligent dropped from 26.88% to 23.89% in 2023. The company said that it was mainly affected by factors such as intensified competition in the smart space solution business.
From the performance of these integrators, we can see that the industry competition pressure is huge, which impacts the gross profit margin. Moreover, the decline in gross profit margin, in addition to indicating a narrowing profit margin, also means that the price competitiveness of each company’s products has weakened, which is negative for the company’s long-term development.
In addition, in the security track, not only has the competition between traditional manufacturers intensified, but also technology giants such as Huawei and Baidu have poured into this track, and the competitive atmosphere continues to heat up. In such a business environment, the innovation enthusiasm of small and medium-sized
a business environment, the innovation enthusiasm of small and medium-sized security companies is inevitably frustrated.
In general, only when the company has gross profit can it have core profit and a series of subsequent business operations.
Lack of initiative, seeking stability first
Generally speaking, in the fierce market competition, if enterprises want to maintain continuous development and growth, market development is a crucial strategic move. However, through dialogue and communication, it is found that security integrators and engineering companies are not as enthusiastic about market development as before, and are not as active in exploring emerging technologies as before.
Post time: Aug-09-2024