During the course of recent IHS research on the access control market, the Asia-Pacific region was the fastest growing area globally. The region is forecast to grow at a compound annual growth rate (CAGR) of 7.3 percent, reaching $1.6 billion revenue in 2020. One particular trend that started to develop last year was the adoption of panels and other Internet Protocol (IP) based equipment. The use of IP-enabled equipment ramped up significantly in 2015 as improvements in internet infrastructure are expected to accelerate from 2016 through 2020. In fact, revenue from IP-enabled panels will grow at a CAGR of 11.8 percent, reaching $499.3 million in 2020, and comprising 58.2 percent of the market.
One of the interesting emerging nuances is that demand for IP-based products has been primarily supported by their ease of installation. In most regions around the globe, uptake of IP-enabled panels has been supported by cost reductions, especially in regard to maintenance; however, in the Asia-Pacific region, ease-of-installation benefits are having a profound impact on both the panel market and the overall access control industry. Easier installation is actually encouraging greater penetration of access control products within markets in Malaysia, Thailand and other countries.
The very low labour costs in South-East Asia, however, mean that cost reductions associated with ease of installation that normally spur IP-enabled installations in North America and Europe, barely cover the increased cost associated with the panel. The small realised gains in terms of cost reduction demonstrate easier installation plays a larger role than first imagined when encouraging the shift. The focus on ease of installation, rather than cost, is definitely an outlier in a region that is notoriously price sensitive, but end users seem to be resisting price pressures and are opting for more advanced – and more expensive – IP panels.
The commercial sector has been one of the biggest markets for IP-enabled access control equipment, due in large part to new wiring techniques now used in the construction market. New offices tend to have an IP connection point every 20 metres along interior walls, meaning that the use of IP-enabled equipment is now viable for a much larger portion of the commercial market. Commercial and residential customers are also demanding single-door IP controllers, which have allowed local companies to take advantage of a segment that has not been as fully covered by multinational suppliers.
Singapore leading the market in terms of adoption is unsurprising, as the country has good internet infrastructure, is a hub of financial and commercial trade, and already represents $38.5 million in revenue for a population of only 5.5 million. The two markets that offer more interest are Malaysia and Thailand – while less developed than Singapore, uptake of IP-enabled panels is growing in these two countries. Vietnam, Indonesia and other countries in the region have been slower to shift.
The price sensitivity over IP-enabled panels in the region has been overcome for the moment, but the declining fortunes of many South-East Asia economies could ramp up short-term pressure. The slowdown of the Chinese economy in late 2015 and early 2016 has hurt many regional economies, because China was a big purchaser of natural resources and other exports. The decline in oil prices has also hit Malaysia and other countries particularly hard, causing IHS to lower by nearly half the short-term growth profile for this market.
While there is some gloom associated with the region, there are some very positive developments surrounding internet infrastructure that should boost the market. The Asia-Pacific region has comparatively poor internet infrastructure, but investment in better systems bodes well for future uptake of IP-enabled equipment. Capital expenditure investment in cable telecommunications in Malaysia, Indonesia, Thailand and Singapore rose by $400 million after 2014, reaching $9 billion for the first time in 2015.
The use of IP-enabled panels is growing, but the increase in web-based products is not as large in South-East Asia as it is in Europe or the Americas. The South-East Asia market for web-based panels is expected to grow at a CAGR of 11.6 percent from 2015 to 2020, while PC-based panels are forecast to grow 11.8 percent. This more balanced growth between web-based panels and PC panels contrasts with the Americas and Europe, where web-based panels far outstrip PC panels in terms of growth. The pace of growth for web-based panels in South-East Asia is expected to increase between 2018 and 2020 as better product knowledge and increased internet infrastructure boosts demand. Currently, however, the shift to systems similar to those used in Western Europe and the United States is still further away.
The competitive environment currently favours many local suppliers of these products for two major reasons: first, the demand for single-door controllers in Malaysia and other countries has been poorly supplied by multinational suppliers, which has allowed a gap in the market to be exploited by local players; and second, currency exchange rates have effectively priced out many international panel offerings. For example, the Malaysian Ringgit depreciated 19.3 percent against the dollar between 2014 and 2015, the Indonesian Rupiah depreciated 12.8 percent, and the Thai Baht depreciated 5.4 percent. Although the overall Asia-Pacific market is still led by Siemens and other companies, there is a growing presence of MicroEngine, HIK Vision, Solus and other local players.
The use of IP-enabled panels in Asia-Pacific countries bodes well for other developing markets, as it can alleviate concerns around infrastructure development holding back the uptake of these devices. The region also proves that cost is not the only criteria that can increase sales of IP-enabled equipment, as ease of installation also makes a strong use case. The South-East Asia market has also developed a niche demand for single-door controllers, so traditional multinational players have had to take the time to adapt their products, which has left a gap for local companies to exploit. While various slowing economies in the region still pose a threat to the continued growth of IP-enabled panels, so far the market still seems content to continue to invest in the technology.
