Smart lighting

www.nanomarkets.net A NanoMarkets White Paper Smart Lighting Markets 2012 Published March 2012 © NanoMarkets, LCNanoMarkets, LCPO Box 3840Glen Allen, VA 23058Tel: 804-270-1718Web: www.nanomarkets.net NanoMarkets, LC | PO Box 3840 | Glen Allen, VA 23058 | TEL: 804-270-1718 | FAX: 804-360-7259

www.nanomarkets.netThe contents of this paper were drawn from the following NanoMarkets report:Smart Lighting 2012This report provides an analysis of the worldwide smart lighting market and builds on NanoMarkets’extensive six-year experience of analyzing the solid-state lighting industry. The report shows how new value Page | 1is being created in the lighting market by adding enhanced electronics and intelligent luminaires and howsuch product strategies will be able to build on the massive trend towards introducing CFLs, LEDs, OLEDsand other forms of energy efficient lighting.But while energy efficiency is the major current driver for smart lighting, this report also discusses howNanoMarkets foresees the smart lighting market transcending energy efficiency and generating newrevenues from improved aesthetics, and more comfortable and healthy lighting. The report focuses, inparticular, on how also these opportunities will emerge within the OLED and LED lighting paradigms. But italso identifies the opportunities that smart lighting will create as it adopts more effective networkingstrategies and becomes part of a future “Internet of things” and Smart Grid.Also included in this new report is an analysis of the smart lighting strategies of the firms that NanoMarketsexpects to see as major players in the smart lighting space. This includes the major lighting and buildingautomation firms, as well as the slew of new lighting control start-ups that have emerged in the past fewyears.In adddition, this report provides an insider’s view on rapidly developing opportunities throughout the entiresmart lighting supply chain including developments in the luminaire sector all the way down to thecomponents level. For example, the report includes detailed coverage of where chip makers and sensormanufacturers will be able to derive the most benefit from the smart lighting “revolution.”Also included in the report is a discussion of the likely evolution of smart lighting standards and theirimportance to smart lighting market development. In addition, there is an eight-year market forecast withbreakouts by type of product and end user market segment.TABLE OF CONTENTSExecutive SummaryE.1 Opportunities and Strategies for Smart Lighting Systems/Luminaire ManufacturersE.1.1 The Shifting Meaning of Smart LightingE.1.2 Prospects for Immediate Opportunities: Why Its Time to Treat Smart Lighting SeriouslyE.1.3 How (and Where) New Markets and New Value are Being Created by Smart LightingE.1.4 Some Risks to Consider for Smart Lighting ManufacturersE.1.5 Smart Lighting Systems Marketing StrategiesE.2 The Making of the Smart Lighting Industry: Firms and Sectors to WatchE.2.1 Smart Lighting Start-Up StrategiesE.3 Summary of Eight-Year Forecast of Smart Lighting SystemsChapter One: Introduction1.1 Background to this Report1.1.1 Some Embarrassing Questions for Smart Lighting Vendors1.1.2 How Smart Lighting Will Overcome the Burden of its History1.1.3 Smart Lighting in Search of a Champion1.2 Objective and Scope of this Report1.3 Methodology of this Report1.4 Plan of this ReportChapter Two: Smart Lighting Systems2.1 Marketable Features and Functions of Smart Lighting Systems: Now and in the Future NanoMarkets, LC | PO Box 3840 | Glen Allen, VA 23058 | TEL: 804-270-1718 | FAX: 804-360-7259

www.nanomarkets.net2.1.1 Energy Efficiency2.1.2 Smart Lighting, Communications and Smart Metering: ZigBee, DALI and Demand Response2.2 Smart Lighting Software2.3 Smart Lighting Device Evolution, Strategies and Companies2.3.1 Acuity Brands Controls2.3.2 Adura Systems2.3.3 Cavet Technologies Page | 22.3.4 Daintree Networks2.3.5 Digital Lumens2.3.6 Easylite2.3.7 Eaton2.3.8 Encelium Technologies/Osram2.3.9 Energy Automation Systems (EASI)2.3.10 Echoflex Solutions2.3.11 Enlighted2.3.12 ETC/Electronic Theatre Controls2.3.13 Fifth Light Technologies2.3.14 GE Total Lighting Control2.3.15 Honeywell Lighting Controls and Ex-Or2.3.16 Hubbell Building Automation2.3.17 Leviton2.3.18 Lumenergi2.3.19 Lumetric2.3.20 Lutron2.3.21 OSRAM Lighting Controls2.3.22 Philips/Dynalite/Lightolier2.3.23 Redwood Systems2.3.24 Schneider Electric2.3.25 Starfield Controls2.3.26 Universal Lighting Technologies/Panasonic2.3.27 WattStopper/Legrand2.4 Component Level Developments2.4.1 Smart Lighting Sensors2.4.2 Smart Lighting Chips2.5 Key Points from this ChapterChapter Three: Markets for Smart Lighting3.1 Key Drivers for Smart Lighting Markets3.1.1 Energy Efficiency3.1.2 Health and Mood3.2 Addressable Markets for Smart Lighting Systems3.2.1 Commercial and Industrial Markets3.2.2 Public and Government Buildings3.2.3 Residential Markets3.2.4 Outdoor Lighting3.2.5 Smart Lighting Systems for Automobiles and Other Forms of Transportation3.3 The Importance of the Retrofit Market for Smart Lighting3.4 United States Markets for Energy Efficient Lighting Systems3.4.1 Uncertainties about the Phasing Out of Incandescent Bulbs3.4.2 Leadership in Energy and Environmental Design (LEED)3.4.3 Energy Policy Act of 20053.4.4 Energy Independence and Security Act (EISA) of 20073.4.5 Other Factors3.5 Japanese Markets for Energy Efficient Lighting Systems3.5.1 Regulatory and Legal Environment NanoMarkets, LC | PO Box 3840 | Glen Allen, VA 23058 | TEL: 804-270-1718 | FAX: 804-360-7259

www.nanomarkets.net3.6 Chinese Markets for Energy Efficient Lighting Systems3.6.1 Impact of Environmental and Energy Legislation and Regulation3.6.2 Phasing out of Traditional Light Bulbs in China3.7 Korea Markets for Energy Efficient Lighting Systems3.7.1 Energy Legislation and the Phasing out of Traditional Light Bulbs3.7.2 Impact of Environmental Legislation and Regulation3.8 Taiwanese Markets for Energy Efficient Lighting Systems Page | 33.9 Energy-Efficient Lighting Other Asian Countries3.9.1 India3.9.2 Other Nations3.10 European Markets for Energy-Efficient Lighting3.10.1 Rules for Phasing Out Incandescent Bulbs in the EU3.10.2 A Note on the U.K. Markets3.11 Key Points from this ChapterChapter Four: Eight-Year Forecast of Smart Lighting Systems4.1 Methodology of this Forecast4.1.1 Definitions4.1.2 Data Sources and Assumptions about Market Size and Penetration4.2 Eight-Year Market Forecast of Smart Lighting System Type of End User4.3 Eight-Year Market Forecast of Smart Lighting System Modules by End User4.4 Eight-Year Forecast of Smart Lighting System Central Controllers by End User4.5 Summary of Eight-Year Market Forecast of Smart Lighting Systems Revenue by End User and Type ofProduct4.6 Eight-Year Market Forecast of Smart Lighting Systems Revenues by Generation of SystemAbbreviations and Acronyms Used In this ReportAbout the AuthorList of ExhibitsExhibit E-1: Forecast of Smart Lighting Systems by End User Market ($ Millions)Exhibit 2-1: Lutron Lighting Control SystemsExhibit 4-1: Forecast of Lights Controlled by Smart Lighting Systems by End-User Market TypeExhibit 4-2: Forecast of Local Intelligence in Smart Lighting Systems (Sensors and Intelligent Ballast) by EndUser TypeExhibit 4-3: Forecast of Intelligent Switches for Smart Lighting Systems by End User TypeExhibit 4-4: Forecast of Central Controllers for Smart Lighting Systems by End User TypeExhibit 4-5: Forecast of Smart Lighting System Revenues by Product Type and End User ($ Million) NanoMarkets, LC | PO Box 3840 | Glen Allen, VA 23058 | TEL: 804-270-1718 | FAX: 804-360-7259

www.nanomarkets.netThe Smart Lighting Market Needs LeadershipThe term "smart lighting" refers to lighting systems that improve on both lighting efficiency anduser comfort (or even health) through the use of embedded sensors, control electronics andcommunications interfaces. In a recent NanoMarkets report we have identified this space aspotentially reaching $4.5 billion in revenues by 2016 driven by the quest to improve energy Page | 4efficiency within buildings and homes and meet requirements brought about by governmentmandates.However, NanoMarkets believes while the addressable market is substantial, there are no clearleaders in this space and that furthermore, the product and market strategies currently beingpursued by the industry are insufficient to capitalize on what is possible. Forecast of Smart Lighting Systems by End User Market ($ Millions) 2012 2014 2016 2018Commercial and industrial buildings 877.8 1,442.9 2,290.9 3,540.1Government and public buildings 111.8 189.6 310.4 494.0Residential buildings 0.0 593.2 1,665.5 2,544.7Streetlights and other outdoor 5.9 100.3 261.1 660.4TOTAL 995.5 2,326.0 4,528.0 7,239.2© NanoMarkets 2012The current generation of smart lighting systems is now focused almost entirely on largecommercial, industrial and public buildings. This makes a lot of sense. Not only is this themarket where those (relatively small) firms that play in today’s smart lighting space can get thebiggest bang for their marketing buck, but it is the one where it is easiest to make the case forusing smart lighting. It can quickly be established whether smart lighting reduces operationalexpenditures in a way that results in an attractive ROI.But we think that the residential market will eventually also open up to the latest smart lightingtechnology, too. Here, the historical parallel is with microelectronics-based business telephonesystems, which was a rapidly expanding market in the 1980s because they could offercommerce so many more features and capabilities than the old electromechanical systems thatwent before them. But within a decade all this additional functionality had found its way intoresidential telephones, and at very low cost.We think that something similar could happen in smart lighting as chips and system designbecome standardized. That is, within a few years low-cost smart lighting systems will start totarget residential lighting markets. That this low-cost issue will be important in residentialmarkets is all but self-evident. But there are other issues for smart lighting system firms to takecare of in the residential market. NanoMarkets, LC | PO Box 3840 | Glen Allen, VA 23058 | TEL: 804-270-1718 | FAX: 804-360-7259

www.nanomarkets.netMost important of these questions for smart lighting firms is that in the residential sectorindividual purchases can be quite small, which means that the manufacturers of smart lightingproducts must build a strong supply chain infrastructure of which major retailers will have to bean important part; this is not always the easiest thing to do. But it may be worth doing,because the addressable market for smart lighting becomes so much larger when potential Page | 5residential users are brought into the fold; there are just so many of them!Competitive Landscape: Start-ups Rule the Smart Lighting Market, At Least for NowThere are now about 20 firms offering modern lighting control systems. Among the names areAdura Systems, Cavet Technologies, Daintree Networks, Easylite, Ecoflex Solutions, EnergyAutomation Systems (EASI), Enlighted, Fifth Light Technologies, Lumenergi, Lutron, RedwoodSystems, Starfield Controls and Universal Lighting Technologies.Each of these firms can point to successes, but, as we have already noted, they are mostlysmaller firms, often start-ups. Such firms lack the resources (or perhaps the interest) to do thekind of business development work that needs to be done to create an industry out of smartlighting. For now, the approaches of these firms differ, but a review of these firms’ strategiessuggests that they hope to thrive—or at least survive—in the marketplace through design andother tactics that include:· Value added features such as "daylight harvesting," where ambient light is sensed throughout the day and the lighting is then raised or dimmed to a preset level. Another possible feature is to provide separate control to different zones in the building or even control of individual lighting fixtures. Again, by historical analogy with small business telephone systems, this aspect of smart lighting systems seems likely to be the main weapon with which the competitive battles in the smart lighting systems market will be fought. However, the small business telephone makers eventually ran out of useful features to add to their systems and the market commoditized; a cautionary tale for smart lighting system companies.· Advanced communications interfaces. Who will be first to integrate its smart lighting system with Smart Grid/smart metering solutions and with the Internet-of things, and will potential customers care? But if advanced demand/response solutions become standardized and proliferate, a smart lighting vendor that is early in adopting the correct interfaces may find itself rapidly gaining market share.· Number of lights that can be controlled. This obviously translates into which markets can be addressed. Not all systems will be able to control all the lights in a large commercial building. Judging by the examples provided by smart lighting vendors, many of the current NanoMarkets, LC | PO Box 3840 | Glen Allen, VA 23058 | TEL: 804-270-1718 | FAX: 804-360-7259

www.nanomarkets.net users of smart lighting systems are medium-size commercial and industrial buildings, not large public buildings, so this should be considered and the systems not over-engineered.· Combine product with some kind of energy management/billing analysis service. The service aspect of the marketing strategy of a smart lighting manufacturer may well include Page | 6 installation or systems integration of some kind. Here is an opportunity to add more service revenues, but it is hard to imagine that this kind of thing will do well outside of the larger customer sector.· Superior user interface including Web-based control. More generally, there is clearly competitive advantage in making the system easy to use and install, with at least one vendor promoting its system as plug and play. The problem with this strategy is that it is easily copied. In the long-run, we think that smart lighting systems firms will find it hard to make much headway by stressing this aspect of their offering. All their rivals will have user interfaces as good as or better than they do; or soon could.Will the Big Lighting and Automation Companies Move into the Smart Lighting Space?In spite of these strategies, NanoMarkets is, however, concerned that there is really not enoughto distinguish these firms in a way that will be truly meaningful to customers. In othertechnology markets this has tended to lead to firms having to fall back on hype in promotingtheir products. Perhaps the additional complexities and costs that smart lighting systems willinevitably bring to the market will simply not be enough to convince potential end users of theirefficacy. In other words, in a sense, smart lighting may turn out to not be smart enough!We think that few, if any, smart lighting firms have really messaged what we are talking abouthere—and that is an entirely new class of systems, fine-tuned for the needs of today’smarkets. What the smart lighting market needs, we believe, is leadership from a firm that hasthe resources to create credibility for the current generation of smart lighting. Such a firm hasto be a large one with an established role in the building automation—or much better—thelighting industry.Unfortunately that does not seem to be happening as yet. Most of the large automation andlighting firms, if they are into smart lighting at all, are mostly pushing older technology, albeit innew packages. The smart lighting systems business at the present time finds itself in somethingof a "Wild West" situation and is in need of an industry leader to tame it and give it credibility.It will take one or more firms taking upon themselves the role of sheriff in this Wild Westsituation for this to happen. What we are talking about here is firms pushing the concept ofsmart lighting both to the lighting industry and to the ultimate consumer; in other words, a firmthat is willing to create a buzz around the smart lighting concept. NanoMarkets, LC | PO Box 3840 | Glen Allen, VA 23058 | TEL: 804-270-1718 | FAX: 804-360-7259

www.nanomarkets.netThe arrival of a large firm from the lighting or automation space that is willing to push the smartlighting concept would go a long way to establish smart lighting as a credible product and notjust a fad. NanoMarkets doesn’t see this happening in the immediate future. But the potentialover the next few years is good for a well-financed prospect to emerge as a smart lightingindustry leader. Page | 7Several of the big lighting firms have smart lighting R&D programs, but the smart lighting sectorcannot yet be said to have evolved into an industry. In the future, leadership could come fromeither the traditional building automation manufacturers or the traditional lightingmanufacturers.The traditional building automation firms are long-established automation firms that canincorporate lighting into their general scheme of things. These firms include Johnson Controls,Honeywell and Trane. None of these firms have been especially proactive in smart lighting, butthey obviously all have the capability to be the industry champion that we talked aboutpreviously. Both Johnson Controls and Trane have been expanding into new markets in therecent past and we believe they could exert an important influence on the smart lightingbusiness going forward.As to the large lighting manufacturers—Philips, GE, Osram, etc.—these firms would be evenbetter positioned to promote smart lighting as a "champion." However, for the time beingthese companies seem more interested in development issues around smart lighting ratherthan promoting the concept more generally. NanoMarkets, LC | PO Box 3840 | Glen Allen, VA 23058 | TEL: 804-270-1718 | FAX: 804-360-7259

Smart lighting

by NanoMarkets on Mar 13, 2012

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