Communications Equipment, NEC

SIC 3669

Companies in this industry

Industry report:

This classification covers companies primarily engaged in manufacturing communications and related equipment, not elsewhere classified. Important products of this industry include intercommunication equipment, traffic signaling equipment, and fire and burglar alarm apparatus. Establishments that provide security systems monitoring and maintenance are discussed in SIC 7382: Security Systems Services.

While this miscellaneous communications equipment industry, valued at $4.2 billion in 2008, includes a number of visible and important products, such as railroad signaling devices and various traffic control equipment, the revenue accrued in this industry originates primarily from the sale of security and smoke/fire alarm systems. Traffic control equipment makes up about the second largest category, followed distantly by intercommunications systems.

There were 428 firms operating 452 establishments in this industry, according to the U.S. Census Bureau in 2009. While some were multibillion-dollar companies, 67 percent were small shops employing 19 or fewer workers. About 23 percent employed between 20 and 99 people, and 10 percent employed more than 100 workers. Of the 16,400 employed by the industry in 2008, about 44 percent were production workers earning an average wage of $18.34 an hour. Overall employment in the industry was expected to decrease by an average of almost nine percent annually between 2008 and 2018, according the Bureau of Labor Statistics.

Alarm Systems.
The United States has long dominated the alarm manufacturing and alarm monitoring industries worldwide. A myriad of alarm manufacturers were able to establish themselves over the years: in 1997, the National Burglar and Fire Alarm Association estimated that 13,100 local installation companies were operating in the United States. The number of alarm systems installed grew from 2.1 million in 1994 to 2.4 million in 1997, while sales in the industry grew from $9.8 billion to $13.9 billion, respectively.

The amount Americans spent on professionally installed security products and services continued to increase, from $14.8 billion in 1997, to $18.7 billion in 2001, to $25.9 billion in 2006, according to the Electronic Security Association. Long-term factors that were expected to drive security system sales included economic conditions, crime rates, sales and marketing prowess, disposable consumer income, and capital spending by businesses.

Three major trends drove the growth of the security systems market in the 1990s and 2000s: growing public concern about crime, reluctance on the part of the U.S. government to increase public safety expenditures, and a combination of technological advances and intensified price competition that made home security systems more affordable. By the mid-2000s, the average cost of a home security system was around $1,500, according to ESA. Revenue for this segment was about $20.3 billion in 2002, but about half of the companies in this industry segment had sales of $250,000 or less per year and only a handful of employees.

The increasing use of personal computers in American homes also opened a new and exploitable market niche for manufacturers of security systems. In the late 1990s, for example, security system manufacturers began to develop software that integrated equipment from various providers or allowed for future upgrades.

Manufacturers of alarm systems generally produce two kinds of component systems: perimeter and interior alarms. Perimeter systems typically consist of magnetic contacts that detect the opening of doors and windows, detectors that pick up the cutting and breaking of glass, and alarm screens that allow windows to be opened for fresh air but activate an alarm if the screen is tampered with. Interior systems usually provide infrared motion detectors located in strategic areas, fire alarms, panic buttons that can be operated manually to alert the monitoring station, and an electronic keypad that both accesses and operates the system. By the late 2000s, newer technologies such as microwave, fiber optic, and ultrasonic detectors were being used in alarm systems.

In the late twentieth century, manufacturers also created new alarm systems capable of operating in concert with other home automation features so that homeowners could manipulate their surveillance system along with their entertainment systems and heating and cooling systems. Alarm systems were also integrated with voice over IP (VoIP) technology.

A study by the Rutgers University School of Criminal Justice in 2009 demonstrated the effectiveness of home alarm systems in reducing crime. The study also noted the importance of technological advances in making these systems more reliable and more available to middle-class homes. According to one of the researchers, Dr. Seungmug Lee, "Computers, printed circuits, digital communicators, and microprocessors have refined monitoring and signaling technology, and modern electronic sensors now include ultrasonic, infrared and microwave devices which were formerly available only in more sophisticated commercial and industrial applications." In 2009, about 25 percent of Americans owned an electronic home-security system, according to research firm Parks Associates, and that figure was expected to rise into the 2010s.

Fire Systems.
There are two smoke-sensing technologies commonly used in residential smoke detectors: photoelectric and ionization. Both are available in 9-volt battery and 110-volt house current models. Photoelectric detectors are more sensitive to slow, smoldering fires, while ionization detectors respond to fast-burning fires like stove grease flare-ups or burning newspapers. Fire caused $15.5 billion in property damage in the United States in 2008, according to the National Fire Protection Association.

Leaders in the industry in 2010 included large, diversified companies such as United Technologies Corp. of Hartford, Connecticut, which had overall revenues of $52.9 billion in 2009, as well as smaller companies such as System Sensor, based in St. Charles, Illinois, and a division of Honeywell International, and Tyco Safety Products of Lansdale, Pennsylvania, a division of Tyco International Ltd. Tyco International also owned ADT Security Services and in 2010 purchased Brink's Home Security.

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