Intelligent security products are selling well overseas, but the IPOs of domestic manufacturers have cooled down. | Focus Analysis

Author | Lin Qingqing

Editor | Yuan Silai

In the sunshine of California, in a typical American family backyard, an intelligent camera from China is operating throughout the day to maintain home security.

More and more overseas families are beginning to trust and use China's intelligent security products. Chinese intelligent security brands such as Reolink, EZVIZ, Imou Le Orange, etc., are quietly entering the homes of overseas consumers with their high cost performance and innovative technologies.

China's intelligent security products are ushering in a rapid growth opportunity in the global market. The China Economic Information Service predicts that the global market scale of China's intelligent security products is expected to reach 45 billion US dollars during the period from 2018 to 2023, with a compound annual growth rate of approximately 30.26%.

In the first half of this year, the total export volume of China's security products has increased significantly, and products such as smart home cameras, smart door locks, and video doorbells are particularly popular overseas.

IDC data shows that in the first quarter of 2024, the global shipment of smart cameras reached 31.53 million units, with a year-on-year growth of 10.3%. Among them, the shipment in the Chinese market was 11.38 million units, accounting for 36.1% of the global market.

Chinese manufacturers that are making money in the overseas market obviously hope to go further. In 2022, domestic security manufacturers set off an upsurge of going public. In that year alone, five companies, including Glenvision, SmartSens, Cloudwalk Technology, and Tuya Smart, went public.

Among them, after Tuya Smart went public in the US stock market, its stock price experienced a period of sluggishness. But recently, it has witnessed a wave of increase. On September 16, the stock price increased by 3.65%; on September 25, the stock price of Tuya Smart increased by 2.98% again, with a quotation of $1.555 per share.

In recent years, the overall performance of the stock prices of domestic security companies has shown differentiation, but the overall trend is fluctuating and rising.

However, since this year, affected by the tightened regulatory policies and the sluggish market in the domestic capital market, the IPO fever of security manufacturers has significantly cooled down.

The Cooling of IPO Fever

According to statistics from the China Commerce Industry Research Institute, as of the first half of this year, there are 25 listed companies in the domestic security equipment industry.

These listed companies cover multiple segmented markets in the security industry, including video surveillance, smart door locks, smart buildings, and smart police equipment, etc.

Among the listed companies in the security industry, Hikvision and Dahua Technology, with their strong performance in the video surveillance field, rank first and second respectively in the Global Security 50.

The smart home brand EZVIZ Network under Hikvision, which focuses on the smart home security field, was listed separately in 2022, with the latest market value exceeding 24.7 billion RMB.

Since its listing, the performance of EZVIZ Network in the overseas market has continued to grow. Last year, EZVIZ Network achieved an operating income of 4.84 billion yuan, of which the overseas operating income increased by 24.79% year-on-year to 1.5 billion yuan. In the first quarter of 2024, EZVIZ Network achieved an operating income of 1.237 billion yuan, and the proportion of overseas operating income further increased to 33%.

In addition to the outstanding performance of listed companies, some security manufacturers that mainly target the overseas market have also launched an impact on the IPO in recent years, but it seems not to be very smooth.

Since its establishment in 2009, Reolink Technology has been focusing on the software and hardware research and development, production and sales of home video surveillance products. Its own brand "Reolink" is mainly for the overseas consumer market, and it performs particularly well in the US market.

According to public information, the sales revenue of Reolink Technology in the overseas market accounts for the vast majority of the company's revenue, and the United States and Europe are its main sales regions.

During the period from 2019 to 2021, the company's revenue achieved a significant growth, from 525 million yuan to 1.367 billion yuan, with an average annual compound growth rate of 61.44%.

In June 2022, Reolink Technology submitted an IPO application to the ChiNext of the Shenzhen Stock Exchange and successfully passed the review on January 6, 2023. However, affected by factors such as a large dividend distribution before listing, a relatively single product, and a relatively low R & D investment, more than a year has passed, and the company has not yet been successfully listed.

The attitude of the capital market towards IPO enterprises is becoming cautious, and the difficulty of fundraising is also increasing.

SigmaStar Technology focuses on the research and development and sales of video surveillance chips, and its products are mainly applied in the fields of intelligent security, video intercom, and intelligent vehicle-mounted. In March this year, it successfully listed on the Shenzhen Stock Exchange, but its fundraising amount has shrunk significantly, from the original planned 3.046 billion yuan to the actual fundraising of 630 million yuan.

In addition, Megvii Technology, which has launched a series of intelligent security products such as smart cameras, smart access control systems, and smart inspection robots, has not made further progress in the listing after submitting the registration in September 2021.

Similarly, Lilin Technology, which is committed to providing comprehensive solutions for smart communities and smart homes, has also stalled in the listing process after launching the IPO in 2022.

Selling Well Overseas

On the one hand, although the IPO process of domestic security manufacturers has encountered a cold spell, on the other hand, in overseas markets, Chinese security manufacturers are becoming more and more active.

In the global security market, North America and Europe are one of the most mature markets, and the US market is particularly crucial.

According to a report by the market research institution the brainy insights, the global network camera market is expected to grow from 10.21 billion US dollars in 2022 to 39.63 billion US dollars in 2032, and the North American region will dominate the network camera market.

The overseas market layout of Chinese intelligent security enterprises is accelerating.

Take EZVIZ Network and Imou Le Orange as examples. They not only have gained a certain reputation in the European and American markets, but also have vigorously expanded in emerging markets such as Southeast Asia, Latin America, and the Middle East. In the first half of 2023, EZVIZ's overseas income reached 654 million, accounting for 28.6% of the revenue, an increase of four percentage points compared with the same period of the previous year.

Imou Le Orange is also working hard in the overseas market, especially in emerging markets such as Europe, Southeast Asia, Latin America, and the Middle East. It is trying to build a new market system for the C-end.

The Tapo brand of TP-LINK, which focuses on home cameras, has also achieved good results by relying on the original online and offline advantages of TP-LINK overseas. In addition, the Eufy Security brand under Anker Innovation, whose main market focuses on Europe and the United States, had an operating income of 4.391 billion in this major category in 2022, accounting for 30.82% of the total operating income.

In the process of going overseas, Chinese security manufacturers also face challenges such as technical barriers and intellectual property protection, cultural differences and localization challenges.

In order to better open up the local market, domestic security manufacturers have developed targeted product functions.

Overseas consumers have clear preferences for security products and have higher requirements for privacy protection. In Europe and the United States, most smart cameras are installed outdoors, such as in yards or garages, to meet the security needs of single-family houses.

In order to eliminate the concerns of overseas consumers about privacy and security, both EZVIZ and Imou Le Orange have been certified in accordance with the EU's General Data Protection Regulation (GDPR) to meet the compliance requirements of different markets.

In terms of sales channels, some enterprises directly enter the overseas market through cross-border e-commerce platforms such as Amazon. For example, Reolink Technology has developed its own brand "Reolink" through e-commerce platforms and achieved explosive growth during the epidemic. Hikvision has been expanding the international market since 2003 and has established marketing and service networks in more than 150 countries and regions around the world.

However, it should be noted that at this point in time, for manufacturers to achieve continuous growth, it will not only rely on the outstanding performance of the products. In addition to the conventional actions such as launching new products and participating in exhibitions, they need to adapt to the increasingly turbulent and complex global market.