Industry Overview The Security Technologies Industry in Germany
The Security Technologies Industry in Germany Germany is the Geographic and Economic Center of Europe Germany counts as one of the most secure countries in the world. As such, state-of-the-art technology and system competence levels are helping drive security technology industry success in both domestic and international markets. Close working partnerships between the private sector and academic research institutes are also contributing significantly to this fast-emerging market. In fact, the market for security technologies and related products and services provides long-term growth opportunities in Germany alone, the security market is expected to increase to EUR 31 billion by 2015. Lying at the heart of Europe, at the crossroads between the highly developed west and the booming east, Germany offers unparalleled infrastructure and market opportunities.
The German Security Technologies Industry in Numbers The German security technologies market is characterized by a high growth dynamic and constant change which is helping create numerous opportunities for investors and innovative companies alike. With overall turnover of almost EUR 20 billion in 2008, the German security technologies industry is the biggest in Europe. The German Ministry of Economics and Technology forecasts that the German market will increase to EUR 31 billion by 2015. Security technology is perceived as one of the major up and coming sunrise industries and, being bolstered by government aid, this will make the industry to one of the winners in the next decades. Annual Turnover and Growth of the Security Technologies Market in Germany 2008-2015 (in EUR billion)* 40 30 20 10 0 20 31 2008 2015 * Source: Marktpotential von Sicherheitstechnologien und Sicherheitsdienstleistungen, 2009, VDI/VDE/IT German Security Technologies Market - Market Share 2008 Investigation and forensics 4% IT security 23% Control and detection of hazardous substances 4% Identification, authentication, biometrics 5% Systems, technologies, and services for protection against fire, gas, and smoke 8% Security Made in Germany is a strong brand with a high worldwide recognition that is associated with quality, neutrality, and expertise which is especially in demand in booming markets like Russia and the Middle East. Systems, technologies, and services for protection against theft, burglaries, and assaults 35% Equipment for persons in the field of civil security 11% Systems, technologies, and services for information and communication about threats or in the case of threats 10% * Source: Marktpotential von Sicherheitstechnologie und Sicherheitsdienstleistungen, 2009, VDI/VDE/IT Industry Overview 2009 www.gtai.com 3
The Advantages of Germany as a Location for Security Technologies Investments Market In an increasingly globalized world, risks and threats are spreading more rapidly than ever before. As such, businesses rely on robust and well-functioning infrastructures. Accordingly, innovative security technologies help benefit businesses in key industries such as automotive, telecommunications, transport, logistics, and banking to name but a few. Germany is Europe s economic engine with the highest industrial output. The German security technologies market is Europe s largest in terms of consumer size. Research and development (R&D) is considered to be among the most important areas for the development of the German economy. To that end, both industry and the public sector have made a significant commitment to spend around three percent of national GDP per year on R&D activities. This amounts to approximately EUR 70 billion R&D spending each year. In addition, an unprecedented campaign to foster the advancement of new technologies has been launched by the German government. This campaign known as the High-Tech Strategy is combining the resources of all government ministries, committing EUR 4 billion to the development of cutting-edge technologies in 2009. As a result, R&D projects can count on numerous forms of financial support. There are many programs allocating support in the form of R&D grants, interest-reduced loans, and special partnership programs. Personnel A highly skilled labor force has been the key success factor for Germany s economy. The country s long-established dual education system - which combines on-thejob training with instruction in parttime vocational schools - provides excellently qualified employees, helping significantly reduce hiring and training costs. This unique education system secures continuity in German engineering expertise. In addition, the German government is committed to further increasing the availability of graduates from technical apprenticeships and study paths. It is the Federal Government s stated aim through initiatives like the Qualification Initiative to improve the range of training prospects available to people of all ages. With the creation of additional training places and promotional scholarships, the initiative will help to provide a steady flow of highly trained labor. R&D Germany is home to a world-class scientific community including numerous internationally renowned research institutes (e.g., Fraunhofer, Max Planck, Leibniz, and Helmholtz). According to the World Economic Forum s (WEF) Global Competitiveness Report 2007 2008 of 131 nations, no other economy tops Germany in terms of its capacity for innovation. Companies investing in Germany can benefit from joint research activities with some of the world s leading engineering technology research institutes and universities. Numerous innovation clusters integrate industry, science and education in security technology related areas such as IT, mechatronics, robotics & automation, mechanical engineering, manufacturing processes, and material sciences. Technology Leader Technology leadership as a key strategic advantage is playing a growing role in the fast-moving business environment. Germany s ability to serve the world s growing demand for technical solutions and processes underlines the country s competitive international business location edge. Physical Infrastructure Located at the heart of Europe, Germany offers a sophisticated infrastructure that integrates stateof-the-art transportation networks with the most modern and costefficient IT and telecommunications systems available today. Germany s position as the world export champion is supported by its unique, highly efficient, and smooth-operating infrastructure of roadways, railways, waterways, seaports, and airports. Stable Investment Environment Highly developed social, economic, and political frameworks provide the necessary security for your business investment. According to the World Economic Forum (WEF), Germany is one the world s best locations in terms of planning and operating security. Germany is one of the world s leading nations in terms of intellectual property protection and protection from organized crime. The German legal system also counts as one of the world s most efficient and independent. 4 Industry Overview 2009
Graphic: www.typoly.de IT Security - bwcon Baden-Württemberg Connected (Stuttgart) - IT Saar (Saarbrücken) - REGINA e.v. Kompetenznetz Informatik/IT (Aachen) - GEOkomm networks (Potsdam) - IT4work Kompetenznetz virtuelle Arbeitswelten (Darmstadt) - IMST (Kamp-Lintfort) - mobile solution group (Bremen) - Horst Görtz Institute for IT Security (Bochum) - Fraunhofer SIT (Darmstadt) - Institute for Internet-Security (Gelsenkirchen) - Institute of IT Security and Security Law (Passau) - Bundesamt für Sicherheit in der Informationstechnik (Bonn) - eurobits e.v. the European Competence - Center for IT Security (Bochum) - TeleTrust Germany (Berlin) - IFIT Freies Institut für IT-Sicherheit Nordwest e.v. (Bremen) Security Technologies A Selection of Networks of Competence THE NETHERLANDS BELGIUM Security Technologies - Future Security BW Fraunhofer Innovationscluster (Freiburg) - Kompetenzzentrum für Sicherheit - KoSiB (München) - Initiativkreis Sicherheits- und Wehrtechnik in Süddeutschland e.v. (München) - bavairia e.v. (München) - Network Systems for Integrated Monitoring (Berlin) - IDENTSYS (Berlin) - Tunnelsicherheit (Berlin) - Kompetenznetz Integrierte Systeme für den Hochwasser- und Katastrophenschutz (Potsdam) - Security and Safety Made in Berlin- Brandenburg (Potsdam) - Brain Trust IT (Berlin) - Fraunhofer -Cluster Sichere Identität (Berlin) - Aktionsgemeinschaft luft- und raumfahrtorientierter Unternehmen e.v. ALROUND (Bonn) LUXEM- BURG Rheinland-Pfalz Saarland Saarbrücken FRANCE Düsseldorf Mainz SWITZERLAND NORTH SEA Lower Saxony North Rhine- Westphalia Wiesbaden Hessen DENMARK Bremen Baden-Württemberg Stuttgart Kiel Hanover - NAVISAT e.v. (Herne) - GSW Gesellschaft der sicherheits- und wehrtechnischen Wirtschaft in NRW e.v. (Düsseldorf) - Competence Center for Applied Security Technology (CAST) e.v. (Darmstadt) Schleswig-Holstein Hamburg Erfurt Thuringia SWEDEN DENMARK BALTIC SEA Schwerin Saxony-Anhalt Magdeburg Bavaria Munich AUSTRIA Mecklenburg- Vorpommern Brandenburg Potsdam Saxony Berlin Dresden CZECH REPUBLIC BALTIC SEA POLAND National Border (Federal) State Borders (Federal) State Capital City-State Industry Overview 2009 www.gtai.com 5
Opportunities The market in Germany for civil security technologies can be subdivided into eight different segments. A number of these segments are expected to record significant increases in the immediate future. Primary Growth Segments IT Security The IT security segment consists of IT products and IT services designed to ensure the confidentiality, availability, and integrity of data. This includes the fields of anti-virus software (malware), content and spam filtering, firewall and intrusion prevention, mobile security, remote access, e-mail encryption, identity management, and other security technologies and applications. The IT security field also presents many opportunities for consultancy service providers specializing in IT security management systems and training, preventive measures, incident response and open source monitoring. The overall market accounted for EUR 4.7 billion in 2008, and it is anticipated that the market will generate EUR 10.6 billion by 2015. The main reason for this forecast growth is the ongoing increase in security risks. Systems, Technologies and Services for Protection against Theft, Burglary and Assault With revenue of EUR 7.1 billion in 2008, this segment is the largest in the German security technologies market. It is expected that the market will generate EUR 9.5 billion by 2015. Video surveillance systems and technologies including contact analysis for the supervision of public spaces show promising growth prospects. The worldwide market for network IP cameras will increase by around 50 percent annually. The corresponding transmission network market will record an impressive increase of 30 percent. Another forward-looking industry subsegment is autonomous robotic systems. These are still very much in the early development stage in terms of the civilian security market, but the latest technological advancements will lead to significant quantitative growth in the years ahead. Systems, Technologies and Services for Threat Information and Communication This segment generated EUR 2 billion in 2008. By 2015, the market is expected to generate EUR 2.3 billion. This segment includes event management (e.g. evacuation techniques and video surveillance) and infrastructure protection (e.g., mission control centers, management systems). Civil Security Personnel Equipment Equipment for civil security personnel includes protective clothing and communications technology such as functional clothing for emergency services with integrated sensor and communications technology and medical monitoring using sensors during deployment. The market generated EUR 1.9 billion in 2008, and it is expected that the market will grow to EUR 2.3 billion by 2015. Primary customers in this segment include the police, fire departments, the technical emergency service, and private security firms. Systems, Technologies and Services for Protection against Fire, Gas and Smoke This segment includes all components, equipment and systems for preemptive fire protection including integrated systems and emergency equipment (e.g. fire extinguishers). In 2008, the market generated EUR 1.6 billion. It is forecast that the market will generate revenue of EUR 2 billion by 2015. Identification, Authentication, Biometrics The identification, authentication, biometrics segment includes all systems and technologies used to verify a person s identity in areas such as border security (e.g. airports), law enforcement, e-commerce, and general access control. In 2008, market volume stood at EUR 920 million. It is estimated that the German market will grow to EUR 1.7 billion by 2015, and show an above average yearly growth in leading subsegments including access management (seven percent), biometrical identification cards (15 percent), and forgery-proof systems (10 percent). Control and Detection of Hazardous Substances Control and detection of hazardous substances refers to all components and systems whose purpose is to detect and classify hazardous substances. Typical application areas for products in this segment are airports, sea ports, and train stations. The German market in this segment generated a total turnover volume of EUR 850 million in 2008, and it is estimated that the market will generate annual turnover of EUR 1.2 billion by 2015. Exceptional high demand is foreseen for sophisticated chemical and biological analytic systems. Investigation and Forensics Investigation and forensics generated EUR 800 million in 2008. It is anticipated that the market will reach the EUR 920 million level by 2015. 6 Industry Overview 2009
Security Technologies in Germany Primary Segments 2015 2008 IT security Systems, technologies, and services for protection against theft, burglaries, and assaults Systems, technologies, and services for information and communication for threats or in the case of threats Equipment for persons in the field of civil security (police, fire squads, THW, security companies) Systems, technologies, and services for protection against fire, gas, and smoke Identification, authentication, biometrics Control and detection of hazardous substances Investigation and forensics +18.5% +22.4% +4.7% +87% +50.6% +15% +124% +33.5% 0 2.500 5.000 7.500 10.000 * Source: Marktpotential von Sicherheitstechnologie und Sicherheitsdienstleistungen, 2009, VDI/VDE/IT Value Chain Growth Important Technology Segments Because of the variety of existing possible applications, a number of technology segments cannot be assigned exclusively to the security technology industry. Nevertheless, they have a crucial influence on functionality and performance of components for engineering security and safety products. Measurement and Sensors Technology German companies in this field enjoy international market share of 30 percent and were able to achieve average annual growth of nine percent over the last 10 years. This accretion will continue with a forecast growth of between eight and 12 percent in the medium term. Major technological trends including miniaturization, sensor arrays, and intelligent sensors make it a very innovative and competitive market with diverse business opportunities. RFID (Radio Frequency Identification) This cross-sectional technology will influence various industries in making operational processes more efficient. The VDE (German Association for Electrical, Electronic & Information Technologies) estimates that around eight percent of gross value added will be influenced by RFID technologies by 2010 compared to just 0.5 percent in 2004. Future trends such as integrated additional functions, interconnectedness, and energy self-sufficiency will broaden the application areas for this technology tremendously. Biometrics According to strategy consultants Roland Berger, the German biometrics market will grow by more than 200 percent in the years to come: turnover of around EUR 120 million in 2006 is forecast to grow to EUR 300 million by the year 2010. There are currently around 100 German companies employing thousands of people in the field of biometrics and system integration. Biometrics technology is helping create new applications, particularly in the banking, retail trade, and access control management sectors. Fingerprint recognition remains the most important technology, with facial recognition gaining in importance. Industry Overview 2009 www.gtai.com 7
Incentives in Germany Incentives Germany offers numerous incentives for all investors - regardless of whether they are from Germany or otherwise. There is a large selection of programs designed to support a wide variety of business activities at different stages of the investment process available. Support ranges from cash incentives for the reimbursement of direct investment costs to incentives for labor and research and development (R&D). Incentives for Setting Up Production Facilities Investor production facility set-up costs can be significantly reduced using a number of different measures from Germany s extensive investment incentives package. The main instrument is cash incentives provided in the form of non-repayable grants. Cash Incentives Germany offers two major programs directing the allocation of these cash incentives: the Joint Task for the Promotion of Industry and Trade (Joint Task); and a special cash incentives program to promote investment activities in Eastern Germany called the Investment Allowance. The Joint Task program regulates the distribution of non-repayable grants for investment costs throughout Germany. Money available through this program is usually distributed in the form of cash payments. Joint Task funds must be applied for before the investment project begins. Germany Trade and Invest s incentives experts offer specific information and consultation services in advance. Types of Incentives in Germany Cash Incentives Investment Grants Investment Allowance 1 1) only in Eastern Germany Investment Incentives Package Interest- Reduced Loans KfW Loans (National Level) State Development Bank Loans In Eastern Germany, investment grants are complemented by the Investment Allowance, which is usually provided in the form of a tax-free cash payment but can also be allotted in the form of a tax credit. Public Loans and Guarantees Interest-reduced loan programs make up a second component of Germany s investment incentives package. They are offered by publicly organized financial institutions submitting loans at below market interest rates. The provision of such loans usually makes it easier for investors to access funding from private lending banks. Public Guarantees State Combined State/ Federal Alternatively, the German states and federal governments help to secure private bank loans by granting public guarantees replacing absent securities. Commitments vouched for within public guarantees are normally subject to intensive individual examination by external assessors. + Operational Incentives Package Labor-Related Incentives Recruitment Training Support Wage Subsidies R&D Incentives Grants Loans Silent/Direct Partnership R&D Project Funding Germany offers several incentives programs targeted at reducing the operating costs of R&D projects. Programs operate at the regional and national level wholly independent from investment incentives. At the national level, all R&D incentives programs are subsumed under the Federal Government s High-Tech-Strategy. The High-Tech- Strategy defines specific sectors with a high dependency on new hightech developments. Each sector comprises various R&D programs. Approximately EUR 4 billion has been made available annually for all sectors in 2009. High-Tech-Strategy funding is generally allocated in the form of what are termed R&D grants - usually following specific calls for proposals. On average, incentives cover up to 50 percent of eligible project costs. Collaboration with research partners is usually required. 8 Industry Overview 2009
Research for Civil Security Within the framework of the High- Tech-Strategy, a special R&D program for security technologies has been created: the German Research for Civil Security Program. Priority is given to the following research areas. Scenario-oriented security research -Protection and rescue of persons (e.g. image analysis systems for response measures, standardized situation reports based on Galileo technology) -Evacuation techniques (e.g. ICT for mission control centers and positioning information) -Detecting explosives (e.g. spectroscopic methods; Terahertz Radiation) -Protection against failure of the supply infrastructures (e.g. distributed sensor networks, wireless sensor systems and robust sensor software for extensive surveillance; ad hoc networks for disaster and emergency management) -Protection of transport infrastructures (e.g. automatic access control with integrated biometric systems) -Securing the supply chains (e.g. mobile scanning devices; mass sensor systems to detect contaminants and hazardous substances) Technology interconnections -Integrated protection systems for emergency and security services (e.g. functional clothing for emergency services with integrated sensor and communication technology; service robots for information, assistance and hazardous situations) The High-Tech Strategy: Sectors and Budgets (in EUR million) R&D projects in the security technology industry can be subsidized through different programs according to the individual project objectives. Calls for proposals are published on a regular basis by the relevant government ministries. Space Technologies Energy Technologies Information and Communication Tech. Health Research and Medical Technology Automotive and Traffic Technologies Nanotechnologies Biotechnology Environmental Technologies Materials Technologies Optical Technologies Plants Aviation and Aeronautical Technologies Production Technologies Microsystems Technology Maritime Technologies Security Research Services Source: German Federal Ministry for Education and Research (BMBF) -Multi-sensor systems for CBRNE risks (e.g. marker systems, identification and detection methods for new classes of explosive substances, toxins or pathogens) -Biometry for personal identification (e.g. automatic image, data and text analysis processes and web search technologies; machine translation and voice recognition technologies) -Biometrics (e.g. integrated biometric sensor systems; 3D facial recognition) In addition, other sectors relevant for security technology enterprises within the High-Tech-Strategy may also be appropriate (e.g. information & communication technologies and microsystems technologies). 800 770 640 430 420 420 310 300 270 250 220 150 80 50 1,180 2,000 3,650 Human Resources Labor-related incentives play a significant role in reducing the operational costs incurred by new businesses. Germany s Bundesagentur für Arbeit ( Federal Employment Agency ) and the German states offer a range of labor-related incentives programs designed to fit the different company needs when building a workforce. The range of programs offered can be classified into three main groups: programs focusing on recruitment support, training support, and wage subsidies. Industry Overview 2009 www.gtai.com 9
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