In recent years, China's capital market has shown remarkable vitality despite weak global financial markets and widespread financing challenges. By the end of 2016, there were 244 listed companies in the A-share securities sector, with over 200 firms active in the New Third Board. The positive market environment attracted numerous investors. In the first quarter of 2017, more than 10% of companies in the security sector reported net profit growth exceeding 70%, highlighting the sector’s strong performance.
The year 2017 marked a significant milestone for artificial intelligence (AI), which became one of the most talked-about technological trends. In China, AI applications have primarily focused on computer vision, speech recognition, and natural language processing. Leveraging the vast video surveillance infrastructure built over the past decade through initiatives like “Safe City,†computer vision has found clear and fast deployment opportunities. As a result, the security industry is expected to be the fastest to industrialize, commercialize, and compete in the AI era.
This paper aims to explore the evolving trends of the third ten-year cycle in the security industry within the context of AI, analyzing how AI influences market competition dynamics and offering insights for industry peers.
First, the ten-year cycle law reemerges, signaling a major transformation in the security industry during the AI era.
Looking back at the development of the domestic security monitoring industry over the past two decades, it becomes evident that the industry follows a cyclical pattern, roughly every ten years. In the mid-1990s, the domestic security market began, with the first cycle peaking in 2006. During this period, analog technology dominated, with products such as black-and-white/color cameras, VCRs, multi-screen splitters, and video matrices leading the market. Brands like Mintong, Panasonic, Sony, and Anxun were prominent. From 2006 onward, the industry transitioned into the digital era, with hard disk recorders, IP cameras, and HD devices becoming the mainstay. Domestic brands like Hikvision, Dahua, and Yushu gained prominence, leveraging the “Safe City†initiative to grow rapidly. By 2016, the traditional “Safe City†construction was nearing its end, with severe product homogenization and price competition dominating the market, marking the end of the second cycle.
With the rise of deep learning and AI, the third decade of the security industry has begun, and 2017 naturally marks the start of this new phase. The first decade was analog, the second digital and high-definition, and the third is clearly the AI era.
Second, analyzing the market trend changes in the third decade.
From the changes observed in the first two decades, we see that technological and product innovations drive significant shifts in market demand and competition. The shift from analog to digital brought about massive demand for “Safe City†projects and reshaped the competitive landscape. Many once-dominant foreign brands were left behind, replaced by domestic players. Now, AI-driven technological changes are expected to bring even more disruptive transformations.
1. Market demand will be redefined.
In the previous cycle, security surveillance requirements focused on clarity, reception, and transmission, emphasizing information acquisition, transmission, and storage. With AI, the focus is shifting toward query, analysis, and prediction, centering on data collection and large-scale analysis. Security systems are moving from an information-based era to a data-driven one, paving the way for big data in security.
One key example is the demand for public security big data. Despite efforts to build platforms integrating data from various sources, issues like data quality and real-time access have limited their effectiveness. However, AI technologies like facial recognition and video structuring are filling these gaps, making big data applications more practical.
2. The market size will expand significantly.
During the last decade, the security market growth slowed due to lack of innovation. However, the AI era is expected to unlock new demand and create diverse application scenarios, greatly expanding the market. It is projected that the AI security market will grow at a compound annual rate of 40–50% by 2022.
3. Market competition will face reshuffling.
AI introduces new technical barriers, allowing startups to enter the security space with fresh perspectives. Traditional giants may lose their dominance, while new players like Baidu, Huawei, and AI-focused startups like Yitu and Shangtang are entering the scene. This could lead to a more dynamic and competitive landscape.
4. A healthier security ecosystem will emerge.
The current industry is dominated by a few giants, which has stifled innovation. AI offers an opportunity to rebuild a more balanced and sustainable ecosystem, with a longer supply chain involving algorithms, hardware, and solutions.
Third, analyzing the competitive landscape in the AI era.
Besides traditional security firms, tech giants and AI startups are also entering the market. Their strengths lie in algorithms, computing power, and data resources. While some AI teams have advanced technical capabilities, they may lack deep understanding of the security industry. Traditional firms, however, have strong brand presence, sales channels, and on-site support, giving them an edge in customer relationships and project execution.
In the future, traditional companies will lead in pilot projects, helping educate the market and laying the groundwork for AI integration. Meanwhile, AI algorithm teams will continue to refine their models, pushing for more advanced solutions. Collaboration between AI and security players, through partnerships or M&A, will help bridge gaps and strengthen market positions.
In addition, internet companies have advantages in cloud services and big data, enabling them to offer comprehensive solutions for high-end users like public safety and finance. Network equipment firms can also play a key role by providing better communication and storage solutions.
The future of AI in security is promising, and I hope China’s security industry continues to lead the world in this new era, benefiting all of humanity.
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