Recently, Hikvision, a domestic security giant, has been exposed to large-scale layoffs, sparking heated debate on related topics. While some netizens lamented that many companies are laying off employees, others were curious about the reasons behind Hikvision's layoffs. So why are there rumors of layoffs at Hikvision?

According to media reports, the news came from Hikvision employees. Some employees revealed that the company is currently undergoing large-scale organizational adjustments, with 32 R&D regions being consolidated into 12. Except for a few core regions, the rest will be optimized, affecting over 1,000 employees, with compensation being N+2. Regarding this news, several self-proclaimed Hikvision employees stated that they had already received layoff notices, with the R&D department being particularly hard hit.

After the incident drew attention, Hikvision responded to the news. Hikvision personnel told the media that there were no large-scale layoffs but rather adjustments to business strategies. "We need to optimize R&D capabilities in our headquarters and key sales cities, so we have made corresponding adjustments to some regional job settings." Although denying large-scale layoffs, Hikvision's response indicated that adjustments were indeed being made.

Image source: Weibo screenshot

According to its official website, Hikvision, founded in 2001, is a technology company focused on technological innovation. As of the end of 2023, Hikvision employed a total of 58,544 people, including 28,479 R&D and technical service personnel, accounting for nearly 50% of the total workforce. Hikvision's impressive R&D capabilities are crucial to its leading position in the global intelligent video surveillance market. According to the 2023 Global Intelligent Video Surveillance Market Report released by Omdia, Hikvision holds a 25.9% market share, ranking first. In addition to video surveillance products, Hikvision also produces backend products, display products, software products, etc.

Behind Hikvision's strong capabilities lie influential shareholders. Its largest shareholder, CETC Hikvision Group Co., Ltd., is 100% owned by China Electronics Technology Group Corporation. Its second-largest shareholder, Frank Gong, is not only a member of the Honorary Board of Trustees of Westlake University but also the founder of Jiadao Private Capital. In 2022 and 2024, Frank Gong ranked 29th on the Forbes China Rich List and 62nd on the Hurun Global Rich List, respectively. In terms of outbound investments, Hikvision has invested in 66 enterprises, most of which are technology and manufacturing companies.

Image source: Tianyancha

Regarding the optimization of R&D capabilities, Hikvision has not disclosed the specific reasons. Consequently, speculation abounds. One view is that Hikvision's move is related to the pressure on its growth in recent years. Financial reports show that Hikvision's total revenue has increased year over year from 2019 to 2023, approaching RMB 90 billion last year. However, in the past two years, Hikvision's overall revenue growth rate has declined, with 2.14% and 7.42% in 2022 and 2023, respectively, compared to 28.21% in 2021. Moreover, after Hikvision's net profit attributable to shareholders of listed companies reached RMB 16.8 billion in 2021, it fell below this figure in both 2022 and 2023. Although Hikvision's total revenue increased year-on-year in the first half of this year, its net profit attributable to shareholders of listed companies continued to decline.

Image source: Baidu

Another view is that as technologies such as artificial intelligence, big data, and cloud computing advance, video surveillance equipment is undergoing upgrades. Hikvision's move may be an adaptation to the ever-evolving industry. In fact, in addition to optimizing its R&D capabilities, Hikvision recently made adjustments to its management team. Hu Yangzhong was appointed Chairman of the Board, Xu Peng as General Manager, Huang Fanghong as Senior Vice President and Secretary to the Board, and Ren Jinyan as Senior Vice President and Chief Financial Officer. Hikvision revealed that this adjustment aimed to bring in younger talent.

While these speculations remain unconfirmed, it is certain that the growth rate of the security market is slowing down. According to the "Analysis and Forecast Report on the Current Situation and Development Prospects of China's Security Industry from 2024 to 2029" released by China Research and Intelligence Institute, although the global security market size continues to increase, its growth rate is slowing down overall. Meanwhile, the increasing number of players has intensified competition in the security industry.

Even so, as an industry giant, few companies pose a threat to Hikvision's position. Dahua Technology, which shares half of the security market with Hikvision, is undoubtedly also among the top players in the industry. However, there are still gaps between the two companies in some aspects. In terms of performance, Dahua Technology's revenue exceeded RMB 30 billion last year, while Hikvision's approached RMB 90 billion. In terms of net profit attributable to shareholders of listed companies, Hikvision's was almost twice that of Dahua Technology. In terms of market value, Dahua Technology also lags behind Hikvision. As of the close on October 11, Dahua Technology's total market value was RMB 52.381 billion, while Hikvision's was RMB 273.6 billion.

Image source: Canned Stock Photo Library

As for other companies in the industry, Uniview Technologies, which ranked among the top four globally in 2018, has not made any significant breakthroughs in its total revenue since exceeding RMB 10 billion in 2021. Huawei's HoloSens, launched in 2019 as a smart security brand, is considered to have significant development potential due to its backing by Huawei. However, a search by "Interesting Business Explanation" revealed that the product is not available on Huawei's official mall or Tmall flagship store.

Considering Hikvision's stable position in the industry, some believe it has the potential to break through its current challenges. Time will tell how much impact this optimization will have on Hikvision.