Hikvision, a Chinese state-owned A-share listed company, has long been an object of attention among many western media outlets. As a hardware giant focusing on security systems, the use of its products is seen as suspicious by many oversea observers. 

On the stock market, however, Hikvision is showing a strong rising trend to all investors; the performance of Hikvision has frequently outperformed the rest of the market, notably after 2015.

Keen on core technology

Although smeared by some US media, Hikvision is a video surveillance equipment provider that does not participate in politics, at least according to official statements. It has rather kept acting as a source for the core technology of the whole security industry – adapting to technological progress and moving from (Digital Video Recording) DVR to AI algorithms, for instance – since it was established 19 years ago.

Founded in 2001 in Hangzhou City, Zhejiang, Hikvision entered the security market a year later, seizing the chance of the fast-developing Chinese real estate market. Entering the second decade of the 21st century, Hikvision further led the way for AI applications in security systems. According to global market data provider IHS Markit, Hikvision has 38% of the global market share, and it has been in first place since 2011.

Hikvision has a keen passion for research on state-of-the-art technologies such as visual recognition, cloud computing and their adoption in security scenarios. Hikvision has accumulated complete technology solutions and diversified products. It now offers selections of network cameras, video recorders, surveillance software systems, etc. 

Benefitting from its stably increasing operating income, Hikvision is able to continuously devote ample capital to research. Hikvision’s research expense for the first three quarters of 2019 exceeded CNY 4 billion (USD 0.57 billion), which was already close to the amount for full year 2018.

New Chance in the AI age

After 2009, the new concept of the smart city significantly extended the scope of security surveillance. Hikvision is now viewed as one of the lead players here. Hikvision has market-defining advantages in surveillance monitoring hardware and software control systems and is the main solution provider in the Chinese market. 

For the new smart city security systems, AI is the core technology. In order to process the massive data gathered from a whole city, the new systems need to have advanced elements like cloud computing, face recognition and Automatic Number-Plate Recognition (ANPR). 

Hikvision has kept up a rapid pace in researching AI technology and commercialization in the smart city field.

In 2016, Hikvision achieved 1st place in the scene classification task of ImageNet challenge, a world-famous visual recognition challenge, with most of the attempts for other tasks coming top 3. Meanwhile, researchers from Hikvision Research Institute continuously publish papers submitted to the world’s most recognized AI conferences like CVPR and IEEE.   

Besides its impressive technical ability, Hikvision is also skilled at commercialization. It has won a list of government contracts for its smart city surveillance systems based on its cutting-edge technology, including CNY 0.79 billion for the Xi’an City public safety surveillance project and CNY 0.5 billion for Urumqi.

New internet players vs. Hikvision: Unification vs. fragmentation

 As with most AI-related fields, tech giants entered the smart cities/ security game after the AI buzz in 2016. Alibaba published its ET City Brain platform. Huawei released its Software-Defined Camera and integrated security solution, HiCampus, in 2018. The full list includes internet companies (such as Alibaba, Baidu), Information and Communications Technology (ICT) companies (such as Huawei) and AI algorithm provider companies (such as SenseTime and Yitu Technology) – each one has its own standpoint on the security sector.

To tech giants, security surveillance is not only an important component of a smart city but also a vital segment of IoT ecology. So most of these companies emphasize the unity of the IoT system. 

Hikvision, on the contrary, keeps stressing the fragmentation of application scenarios – not only of the security surveillance sector but also the whole IoT industry. The opposite view from Hikvision shows different future development plans compared with tech giants, and more basically, the unique advantages Hikvision has as a traditional security equipment manufacturer against new coming players.

As a hardware manufacturer and solution provider, Hikvision has accumulated experience in equipment manufacturing and project construction, which leads to a wider and better segmented customer distribution.

The top 5 customers account for 22% of revenue according to its 2018 financial report. Customers of Hikvision include various levels of Chinese local government for city or district level traffic and police surveillance. Compared with most tech giants, which focus on AI technologies for security, Hikvision has a closer connection with customers and more practical experience in fulfilling personalized requirements.

In other words, the reason for Hikvision to keep mentioning the fragmentation of the security sector is in fact to emphasize the entry barrier it holds against new players, while tech giants usually demonstrate the unity of the IoT sector to convince the public that they can apply their advantages from their experienced AI departments and provide a high-quality security service as well.

However, the security market is indeed fragmented, and Hikvision will be glad to see the situation continue. The tech giants are trying to integrate the market by providing an all-round platform to serve all customers in the market, which would absolutely impact the business model pursued by Hikvision.

In conclusion, Hikvision still holds its leading position in the security sector. However, the giants have just made some small moves and how firm their will is to enter this sector is unclear. More interestingly, their competition with Hikvision in the future may also morph into collaboration. Their advantages in AI may generate more benefit if equipped with Hikvision’s capability of hardware production and project integration. We may very likely witness a fast-developing security industry with more diversified participants.