Smart Windows Markets 2012

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Smart Windows Markets 2012
Nano-515

Published March 2012

© NanoMarkets, LC

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Table of Contents
Executive Summary ............................................................................................................... 1
E.1 Three Key Trends Creating Opportunities for Smart Windows Manufacturers ............... 1 Page | i
E.1.1 Key Trend 1: Energy Conservation, Smart Windows and the Future ..........................................................1
E.1.2 Key Trend 2: Smart Rather than Solar .........................................................................................................2
E.1.3 Key Trend 3: Smart Window and Green Aesthetics ....................................................................................3

E.2 Smart Glass Products: Passive and Active ..................................................................... 3
E.2.1 Passive Smart Windows ...............................................................................................................................4
E.2.2 Active Smart Windows .................................................................................................................................5

E.3 Opportunities for Glass and Window Firms ................................................................... 6
E.4 Opportunities for Materials and Specialty Chemicals Firms ........................................... 6
E.5 Opportunities for Construction and Architectural Firms ................................................ 8
E.6 Opportunities for Automotive, Aerospace and Other Transportation Firms ................... 8
E.7 Firms to Watch in the Smart Windows Space ................................................................ 9
E.8 Summary of the Eight-Year Forecasts for the Smart Windows Market ......................... 11

Chapter One: Introduction ................................................................................................... 14
1.1 Background to this Report .......................................................................................... 14
1.1.1 Passive Smart Windows .............................................................................................................................14
1.1.2 Active Smart Windows ...............................................................................................................................15
1.1.3 Geographic Regions for Growth and Target Markets ................................................................................16

1.2 Objectives and Scope of This Report ........................................................................... 17
1.3 Methodology of this Report ........................................................................................ 18
1.4 Plan of this Report ...................................................................................................... 19

Chapter Two: Smart Windows Market: Dynamics and Opportunities .................................... 20
2.1 Key Market Drivers ..................................................................................................... 20
2.1.1 Energy Conservation ..................................................................................................................................20
2.1.2 LEED Construction ......................................................................................................................................21
2.1.3 Style and Convenience ...............................................................................................................................22


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2.1.4 Product Differentiation ..............................................................................................................................22

2.2 Smart Window Technologies: Their Advantages and Disadvantages ............................ 23
2.2.1 Passive Smart Window Technologies .........................................................................................................23
2.2.2 Active On-Demand Smart Window Technologies ......................................................................................26
2.2.3 Photochromic Smart Windows ..................................................................................................................29 Page | ii
2.2.4 Thermochromic Smart Windows ...............................................................................................................29

2.3 Smart Windows Opportunities in Different Market Segments ..................................... 30
2.3.1 Smart Windows in Residential Buildings ....................................................................................................30
2.3.2 Smart Windows in Commercial (Income) Buildings ...................................................................................31
2.3.3 Smart Windows in Institutional Buildings ..................................................................................................32
2.3.4 Smart Windows in Transportation .............................................................................................................33

2.4 Geographic Market Outlook for Smart Windows Opportunities .................................. 34
2.4.1 U.S. Market Outlook for Smart Windows Opportunities ...........................................................................34
2.4.2 European Market Outlook for Smart Windows Opportunities ..................................................................37
2.4.3 Asian Market Outlook for Smart Windows Opportunities .........................................................................39
2.4.4 Latin America Market Outlook for Smart Windows Opportunities ...........................................................43
2.4.5 Summary of Geographical Smart Windows Opportunities ........................................................................45

2.5 Key Points Made in This Chapter ................................................................................. 46

Chapter Three: Smart Window Products, Technologies, and Supply Chains ........................... 49
3.1 The Smart Windows Market: Manufacturers, Influencers (Marketing, Sales), and Service
Providers ......................................................................................................................... 49
3.1.1 Basic Plastic Film Substrate Providers for Smart Window Applications ....................................................49
3.1.2 Flat Glass Substrate Providers for Smart Window Applications ................................................................52
3.1.3 Functional Materials and Component Providers for Smart Window Applications ....................................55
3.1.4 Marketing, Sales and Service Providers in the Smart Windows Market ....................................................56

3.2 Passive Smart Windows: Products, Technologies, and Supply Chains ........................... 57
3.2.1 The Passive Retrofit Window Film Market.................................................................................................58
3.2.2 The Passive Low-e Glass Smart Windows Market .....................................................................................61
3.2.3 The Passive Thermochromic Windows Market .........................................................................................62
3.2.4 The Passive Photochromic Windows Market ............................................................................................63

3.3 Active On-Demand Smart Windows: Products, Technologies, and Supply Chains ......... 64
3.3.1 PDLC Active On-Demand Smart Windows .................................................................................................65
3.3.2 SPD Active On-Demand Smart Windows ...................................................................................................66
3.3.3 Electrochromic Active On-Demand Smart Windows .................................................................................68

3.4 Self-Cleaning Smart Windows ..................................................................................... 72
3.5 Key Points from This Chapter ...................................................................................... 75


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Chapter Four: Eight Year Smart Windows Forecast ............................................................... 78
4.1 Forecasting Methodology ........................................................................................... 78
4.1.1 Data Sources ..............................................................................................................................................80 Page | iii
4.1.2 Alternative Scenarios .................................................................................................................................80
4.1.3 Scope of the Smart Windows Market Forecasts ........................................................................................81

4.2 Forecasts of Passive Smart Windows by Application Area ........................................... 82
4.2.1 Forecast of Low-e Glass in Passive Smart Windows ..................................................................................84
4.2.2 Forecast of Retrofit Window Film in Passive Smart Windows ...................................................................85
4.2.3 Forecast of Thermochromic Film in Passive Smart Windows ....................................................................87
4.2.4 Forecast of Photochromic Film in Passive Smart Windows .......................................................................89

4.3 Forecasts of Active Smart Windows by Application Area ............................................. 90
4.3.1 Forecast of PDLC Film in Active On-Demand Smart Windows ...................................................................92
4.3.2 Forecast of SPD Film in Active On-Demand Smart Windows .....................................................................93
4.3.3 Forecast of Electrochromic Smart Glass in Active On-Demand Smart Windows.......................................95
4.3.4 Forecast of Electrochromic Film in Active On-Demand Smart Windows ...................................................97

4.4 Summary of Forecasts ................................................................................................ 98
Abbreviations and Acronyms Used In this Report ........................................................... 103
About the Author ........................................................................................................... 104

List of Exhibits

Exhibit E-1: Key Players in the Smart Windows Market ........................................................................ 10
Exhibit E-2: Smart Window Glass and Film Market, 2012-2019 ($ Millions) ........................................... 11
Exhibit 2-1: Likely End-Use Applications by Smart Window Technology ................................................ 34
Exhibit 2-2: Regional Demand for Smart Windows by Technology ........................................................ 45
Exhibit 2-3: Regional Growth of Smart Windows by Market Segment .................................................... 46
Exhibit 4-1: Total High Quality Float Glass Market for Thermochromic film, Photochromic film and Low-e
glass in million sq. meters @ 7% AGR, 2012-2019 ...................................................................... 79
Exhibit 4-2: Volume of the Passive Smart Window Film/Glass Market (million sq. meters) 2012-2019 .... 82
Exhibit 4-3: Value of the Passive Smart Window Film/Glass Market ($ Millions), 2012-2019 ................... 83
Exhibit 4-4: Passive Smart Window Market –Low-e Glass, 2012-2019 ................................................... 85
Exhibit 4-5: Passive Smart Window Market - Retrofit Window Film Market, 2012-2019 .......................... 86


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Exhibit 4-6: Passive Smart Window Market - Themochromic Film, 2012-2019 ....................................... 88
Exhibit 4-7: Passive Smart Window Market - Photochromic Film 2012-2019 .......................................... 89
Exhibit 4-8: Volume of the Active Smart Window Film/Glass Market (million sq. meters), 2012-2019 ...... 91
Exhibit 4-9: Value of the Active Smart Window Film/Glass Market ($ millions), 2012-2019 .................... 92
Exhibit 4-10: PDLC Active On-Demand Smart Window Film Market, 2012-2019 ..................................... 93 Page | iv
Exhibit 4-11: SPD Active On-Demand Smart Window Film Market, 2012-2019...................................... 94
Exhibit 4-12: Electrochromic Active On-Demand Smart Glass Market, 2012-2019 .................................. 96
Exhibit 4-13: Electrochromic Active On-Demand Smart Window Film Market, 2012-2019 ....................... 98
Exhibit 4-14: Smart Window Glass and Film Market, 2012-2019 ($ Millions) .......................................... 99


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Executive Summary

E.1 Three Key Trends Creating Opportunities for Smart Windows Manufacturers
Smart window technologies already have large end-use markets within the architectural Page | 1
(residential and commercial buildings) and transportation (cars, airplanes, boats, etc.) sectors.
NanoMarkets believes that the market for smart windows will grow significantly over the next
eight years, becoming a $42 billion market by 2012, and more than doubling to $87 billion by
2019 (although much of this is made up of low-e glass).

NanoMarkets sees three key trends that are currently driving the smart windows market and
need to be taken into consideration in building the business case for any smart windows
product. Each of these three trends are obvious at one level, but each has subtleties that are
important for smart windows firms to consider and each has changed somewhat since
NanoMarkets issued its last report on smart windows.

E.1.1 Key Trend 1: Energy Conservation, Smart Windows and the Future
The "smart" in "smart windows" can be used to describe many different kinds of functionality,
including futuristic capabilities such as windows that can double as panel lighting or solar
panels. However, in reality most of the revenues that will be generated by the products
mentioned throughout the forecast period considered in this report will essential be derived by
the needs of building owners and managers to improve on energy conservation.

Smart windows may be just what the doctor ordered when it comes to providing reduced
energy use in buildings, since according to some sources it can provide improvements in this
regard of up to 40 percent.

However, NanoMarkets believes that smart windows firms must react to two separate trends
with regard to energy conservation needs:

 The most important of these trends is the long-term real cost increase for energy that
we expect to see over the next decade and beyond. What we have in mind here are the
price pressures that growing demand for energy from large, rapidly emerging countries
(especially China and India) are likely to produce. Energy production could keep up with
this new demand, but is unlikely to until well into the next decade.

Thus energy efficiency is likely to be a persistent concern of building mangers, owners
and construction companies throughout the period under consideration. Because smart
windows are able to offer a clear and distinct solution here, we think that smart


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windows makers will be able to ride the wave of energy shortage (as it were) throughout
the period under consideration.

 We also expect energy efficiency bubbles to appear over the next few years that will be
especially good for the smart windows business, but only for brief periods. These will Page | 2
not be phenomena driven by real-world demand, but rather by high levels of inflation or
deflated currency; that is, they are monetary phenomena and are relatively temporary
in nature. For example, the cost of heating fuel shoots up in dollar and euro terms
causing a spurt in sales for energy efficient devices including smart windows. It is
important for smart windows firms to capitalize on such sentiments, while recognizing
that they are likely to be temporary and for that reason it is important that they don't
over commit.

This kind of bubble phenomena seems more likely to occur sooner than it did when
NanoMarkets last published a report on smart windows, given the current financial state
of most of the countries in which smart windows are sold.

E.1.2 Key Trend 2: Smart Rather than Solar
NanoMarkets also believes that sustainable energy architecture may be about to experience a
change in direction and this is also something new to note since our last smart windows report.
The change that we are talking about is one that deemphasizes some of the green energy
technologies (solar and wind) as subsidies decline in various geographies. This is already
happening in Germany and we expect this to happen in other important countries over the next
few years.

Assuming this analysis is correct, one possible consequence of a decline in government support
for green energy generation will be to integrate greenness into building materials and products
in order to improve the economics of green building. In other reports, NanoMarkets has
discussed extensively this trend in the context of building-integrated PV (BIPV), but it is just as
likely to impact the smart windows market.

In other words, the green building of the future may look a little more like a passive solar
building, with a distinct architecture and no highly visible generation systems. However, what
we are talking about here is not really a passive building in the old sense, but one in which the
active components are much more fully part of the building.

Making this kind of development more possible is the arrival of green standards such as LEED
and some equivalent standards from Europe. These can be embedded in building codes and


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frequently are, which has the implicit effect of broadening the addressable markets for green
building products including smart windows. In the context of this development, smart windows
may also form an important part of net zero energy buildings.

The existence of codes embody LEED and the like make novel energy efficient products—such Page | 3
as smart windows—more acceptable and credible to building owners and managers and
therefore both broaden addressable markets and take the green building market further from
the highly customized space in which it began.

E.1.3 Key Trend 3: Smart Window and Green Aesthetics
So far, the general trends that we have discussed here are ultimately based on various aspects
of the significant energy efficiency benefits that smart windows can bring in their wake.
However, there is an aesthetic aspect attached to all of this, too. Architects, construction firms
and building managers are likely to be attracted to using green building materials in order to
create a sense of "green chic" that can help market themselves and their buildings to certain
owner/lessor demographics.

To the extent that the next-generation green buildings take off, smart windows are likely to be
part of the story that sells them. The new types of smart windows—that is, primarily the active
smart windows—may become part of some future aesthetics that combine "greenness" with
high tech.

This type of new aesthetic may have a different appeal in different geography and an analysis of
architectural tastes in different countries lies well beyond the scope of this report. However,
we note that the desire for novelty and convenience in new architectural designs has been
particularly pronounced in the emerging economies of China, India, Brazil, and others. One
example of a convenience-driven smart window application is the use of PDLC film smart
window technology for privacy glass in the internal walls of hotels and offices in China.

E.2 Smart Glass Products: Passive and Active
Although several technologies, such as thermochromic, electrochromic, and photochromic
windows are maturing and growing in acceptance, in our estimation, the penetration of energy
saving smart windows as a percentage of the global high-quality float glass market remains low
(~22 percent), and that is only considering "smart windows" under the broadest definition.
This penetration is mainly dominated by energy saving passive low-e glass and retrofit window
film products.


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In this report, NanoMarkets makes a distinction between "passive" smart windows and "active"
on-demand smart windows.

E.2.1 Passive Smart Windows
The first kind of smart window is entirely passive. They might reasonably be thought of as Page | 4
being built wholly from smart materials and do not include an embedded electrical or electronic
system. In passive smart windows, one or more components in a window passively but smartly
carry out a function, such as blocking UV rays, absorbing heat/IR radiation from sunlight while
allowing most of sunlight to pass through the window, without any external stimulus provided
by the user. Generally speaking, these technologies have been around for quite a while, so they
are mature and only so much market growth can be squeezed out of them.

Another issue is that for those looking to build high-tech buildings the responsiveness of the
passive smart windows may not match the kind of requirements that the building owners and
managers expect and/or require. Specifically, one big disadvantage of passive smart window
technologies is that they do not provide energy saving benefits on-demand with the flip of a
switch. This kind of functionality is found in the active smart windows systems, which is where
the new opportunities for smart windows are to be found going forward.

Low-e glass: Low-e glass allows for energy savings in buildings by blocking harmful radiation
and heat from sunlight. This technology is the most mature among all of the energy saving
smart window technologies and the market for low-e glass is already huge.

Nonetheless, NanoMarkets see the market for this material expanding significantly in the future
driven by the energy efficiency trends mentioned above. Nonetheless, this is a fairly
undifferentiated product, where the opportunity for distinguishing products in the marketplace
is not that great.

Architectural window film: Apart from its most obvious difference—one is glass and one is
film—the economics and functionality of window film is very similar that of low-e glass. One
other factor, however, is that window film is often found in use in transportation applications,
which low-e glass is not.

Thermochromic windows: This type of window provides clarity or tint in response to
temperature changes and can be used in transportation as well as architectural applications.
However, while the technology is interesting it has not yet proved high performing. And as a
result, the market for such windows has not proved very large; NanoMarkets does not expect
this market situation to change much during the period under consideration.


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Photochromic windows: The thermochromic windows story is very much repeated for
photochromic windows. In particular, the market for these kinds of windows is very small and
likely to stay that way. Photochromic windows change tint in response to exterior light,
otherwise these windows also allow for energy savings similar to thermochromic windows.
Page | 5
E.2.2 Active Smart Windows
The bottom line is that until fairly recently all the technologies and solutions that could address
the trends and opportunities mentioned at the beginning of this chapter, were fairly primitive
and inadequate to meet future needs for smart windows.

As a result, the new active smart windows which are emerging from several different
technology research programs offer a much stronger way to address these needs and—as a
result—NanoMarkets' revenue growth projections for these technologies are quite bullish.
Despite being fairly disparate technologically, they all share the ability of fast response time
providing building users with enhanced comfort and improved energy savings.

In active smart windows, one or more of the components in the window carry out a function
such as blocking or transmitting sunlight on-demand in response to an external stimulus, such
as an electric current provided by the user (the flip of a switch).

PDLC film-based smart windows: This technology is based on liquid crystals dispersed in a
polymer matrix that are sensitive to electric fields. It dims through the use of diffraction of light
upon application of an electric field.

NanoMarkets does not believe that PDLC will ever be huge market and seems likely to be
confined to architectural markets for the extent of the forecasts presented in this report.
However, the technology has already, found use in interior privacy applications and we expect
this technology to produce revenues in the low hundreds of millions of dollar through much of
the forecast period.

SPD film-based smart windows: This technology, NanoMarkets believes, will produce revenues
about twice to three times that of PDLC. This is because this technology has considerable
potential in the transportation sector as well as the architectural sector; SPD has already found
applications in transportation, such as in automobiles and airplanes, for example.

SPD provides gradual tinting upon application of an electric field to field-sensitive particles
suspended in a polymer matrix.


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Electrochromic technology: Electrochromic technology is the most established of the active
smart windows technologies. Electrochromic windows provide clarity or tint in response to an
electrical field. Electrochromic glass for transportation markets is already a half-billion dollar
market, but electrochromic glass for architectural applications is only just beginning to emerge
and should be a substantial market by 2017 or so. Electrochromic films, however, seem much Page | 6
more likely to be confined to niche markets.

E.3 Opportunities for Glass and Window Firms
Smart windows provide a growth platform for architectural glass manufacturers and window
manufacturers:

 Already "pricey" architectural glass and window products can be sold at incremental
premiums, while providing valuable additional features such as energy savings with
smart coatings on the windows and glass facades. Thus, smart windows will enable
higher-priced product sales for glass and window manufacturers.

 By partnering with architectural and construction companies, which typically determine
the product specifications for their buildings, window and glass manufacturers can
create industry leverage, and thus can make substantial money by developing energy
saving smart films or glass that can be used in smart windows.

NanoMarkets further believes that, as awareness of the smart windows market grows, end-
users (building owners/operators, home owners, and auto owners) will further demand added
functionality, such as solar energy generation and OLED lighting integrated with smart
windows. Such technology advances will further fuel the growth and adoption of smart
windows.

As usual, there are some negatives to be considered here too. As we have already discussed,
there are lots of technologies floating around in this segment and there are real risks of glass or
windows companies picking the wrong horse or applying a technology to a market sector in
which it does not work particularly well.

E.4 Opportunities for Materials and Specialty Chemicals Firms
Materials and specialty chemical firms are a key part of the smart window supply chain. Just as
electronic technology in general was enabled by innovations in materials science, the growth of
the smart window market will be fueled by innovation in specialty chemicals and materials
science. This fact in itself delineates some important opportunities for materials and specialty
chem firms. The main material classes used in smart windows can be categorized as follows:


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 Substrates such as plastic films (if not glass)

 Functional coatings and their components that provide "smarts" to the window

 Adhesives and sealants for assembling an air-tight window to enable longer lifetimes for
Page | 7
the active components of the smart window

 Transparent conducting films for electrochromic smart windows

 Window frame materials

The growth of the smart windows market will bring significant growth and innovation
opportunities to materials suppliers in all of the categories described above. However, the major
growth areas are electrochromic coatings and self-cleaning coatings. Thermochromic coatings
will provide moderate growth opportunities for material suppliers.

Electrochromic glass, by itself, for the transportation and architectural markets combined will
become a $3-billion market by 2019. Most of this growth will come from the new construction
and automotive segment of the market. In addition to electrochromic coatings, there are
several other opportunities for materials suppliers to further enable the adoption of smart
windows technologies:

 Reduction of the cost of electrochromic coating materials, since they are the most
expensive component in a smart window.

 Development of photochromic coatings that provide a broader range of dimmability and
uniformity as a function of incident light.

 Development of thermochromic coatings with improved response times for tinting and
clearing; such advances would provide a big boost for adoption and market growth.

 Reduction in the manufacturing cost of PDLC films by leveraging manufacturing
efficiencies and new materials for higher market penetration of PDLC film smart
windows.

 Development of adhesives and sealants that can provide extra protection for the
transparent conducting layers of electrochromic smart windows.

From a materials stand point, the main driver for enabling smart windows growth is to develop
electrochromic materials that are cost effective and provide broad tunability for on-demand
tinting and privacy.


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E.5 Opportunities for Construction and Architectural Firms
LEED design and construction—and compliance with other similar standards in Europe—has
been arguably the single most important differentiating and growth factor for construction and
architectural firms in recent years. One such area of differentiation is the extensive use of glass
with the integration of appropriate smart window technologies. Page | 8

 Smart windows enable maximization of energy conservation through the use of natural
sunlight to control the environment inside the building in the winter and summer
months.

 The use of natural light in office buildings has also been shown to improve the
productivity of workers.

NanoMarkets believes that construction and architectural firms that focus on LEED design (and
similar standards) and construction, and who adopt smart windows technologies as part of this
focus will benefit. Such firms can also deliver energy efficient buildings with superior aesthetics,
an enhanced interior environment, and convenience.

As smart windows technology pervades the marketplace, it will eventually become a "required
technology" for LEED design and construction. Therefore, architectural and construction firms
that are early adopters of smart windows technology in their building designs could gain the
usual advantages of early entry.

E.6 Opportunities for Automotive, Aerospace and Other Transportation Firms
One of the most important drivers for new product design in the transportation market is
achieving the highest fuel efficiency possible while providing increased convenience to vehicle
owners.

Automotive, railway car, and aerospace companies achieve fuel efficiency for their products in
two ways: reducing weight and using new technologies such as smart windows to reduce
energy usage and thus fuel consumption. Manufacturers of vehicles will, therefore, benefit by
providing higher-value, fuel-efficient products using smart windows technologies. This is
already beginning to happen to some extent:

 One of the earliest successes for smart windows technology in the transportation sector
was the rearview mirror in cars.


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 The most recent example of the adoption of a smart window technology is the use of
electrochromic liquid crystal-based smart windows for the passenger windows in the
Boeing 787 Dreamliner airplane.

 Electrochromic liquid crystal-based windows in metro trains in Singapore provide Page | 9
privacy for both the passengers and people living in houses along the railway.

Electrochromic technology has been the technology of choice in transportation,
thermochromic, photochromic, and SPD film technologies are also an option:

 The initial success of electrochromic glass in automobiles was demonstrated in
dimmable rearview mirrors.

 An example, of a thermochromic technology application in automobiles is in the
sunroofs of cars.

 SPD technology has been used in automotive and airplane windows. If passengers need
privacy, protection from harmful radiation, and comfort on-demand, then
electrochromic and SPD technology are a more preferred option.

E.7 Firms to Watch in the Smart Windows Space
NanoMarkets believes that the firms listed in Exhibit E-1 will have a significant influence on the
growth of the smart windows market in the coming years. These companies fall into four
categories smart glass, smart film, functional materials, and ancillary materials suppliers. It is
probably fair to add that certain architectural firms are also emerging that are particularly
enthusiastic about green materials and are also shaping the markets considered in this report in
important ways.

The main component of any smart window technology is either the smart film or the smart
glass. The smart window materials and coatings are on the glass or in the film that is either
applied onto the glass or laminated between two pieces of glass (in the case of laminated
glass). Thus, glass suppliers to the smart windows market have significant influence within the
value chain and on the end markets.


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Exhibit E-1: Key Players in the Smart Windows Market
Smart Glass Suppliers Smart Film Suppliers Ancillary Chemicals & Materials
Suppliers
Saint-Gobain Switch Materials DuPont Teijin Films (Film substrates)
Pilkington/NSG Group Ravenbrick Toray (Film substrates)
Cardinal Polytronix SKC (Film substrates) Page | 10
Guardian Pleotint Dai Nippon Ink
Asahi Glass US E-Chromics Landec Intelligent Materials
AFG Industries Beijing All Brilliant Material Sciences Corp
PPG Industries Sun-TEC Momentive (Silicone)
Schott Glass Chromogenics Dow (Silicone)
Soladigm DaiNippon Chemicals Solutia Performance Films (ITO)
Sage Electrochromics Hitachi Chemicals Bayer MaterialScience
Architectural Glass 3M
Projects
Gentex Solutia Performance Films
GlasNovations
Chiefway
Citala
© NanoMarkets 2012

Although no single glass supplier as of today can deliver a complete smart window "drop-in"
solution to window manufacturers, NanoMarkets believes that the recent merger and
acquisition activity in this sector indicates a recognition by materials and glass suppliers of a
need to consolidate the long and fragmented supply chain.

 Saint-Gobain acquired Bekeart Specialty Films to compliment its SAGE Electrochromics
portfolio and offer a "complete" and "drop in" smart glass to window manufacturers,
and also to gain access to the film coating technology of Bekaert.

 Solutia acquired Southwall Technologies to gain access to glass coating technologies and
to enhance its product portfolio of retrofit window films for energy savings. (Solutia
itself was recently acquired by Eastman Chemical.)

Despite these deals, the smart windows supply chain remains long and fragmented.
NanoMarkets believes that as smart window market growth accelerates, there will be
opportunities for firms with available capital to either forward integrate or backward integrate
to reduce cost, innovate new products, and offer a complete portfolio of smart window products
to window manufacturers, end users, such as building construction companies, building
operators, and transportation OEMs.


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E.8 Summary of the Eight-Year Forecasts for the Smart Windows Market
Exhibit E-2 presents NanoMarkets' eight-year forecasts for the passive and active smart film
and smart glass markets. As these numbers show, the markets considered here are dominated
throughout the period by low-e glass. However, this is, as we have already noted a huge, but
relative undifferentiated sector. Page | 11

Exhibit E-2: Smart Window Glass and Film Market, 2012-2019 ($ Millions)
2012 2013 2014 2015 2016 2017 2018 2019
Passive Smart Window Market
Passive Smart
Window Films
Passive Smart
Window Glass
Total Passive Smart
Window Forecast
($ millions)
Active Smart Window Forecast
Active Smart Window
Films
Active Smart Window
Glass
Total Active Smart
Window Market
($ millions)
Total Passive and
Active Smart
Window Film
($ millions )
Total Passive and
Active Smart
Window Glass
($ millions )
Total Passive and
Active Smart
Window Market
($ millions )
© NanoMarkets 2012


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Total Active and Passive Smart Window Market
100,000
90,000
80,000 Page | 12
70,000
60,000 Total Passive and Active
$ Millions

Smart Window Film Market
50,000
Total Active Smart Window
40,000
Market
30,000
Total Passive Smart
20,000 Window Market
10,000
0
2012 2013 2014 2015 2016 2017 2018 2019

© NanoMarkets 2012

Total Smart Window Market
100,000
90,000
80,000
70,000
$ Millions

60,000
50,000
40,000
30,000
20,000
10,000
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© NanoMarkets 2012

More interesting from the perspective of new market entry are other products and excluding
low-e glass the smart windows market is expected to grow from around $1.5 billion today to
$3.8 billion by 2017 and to $5.3 billion by 2019. Our projections suggest that glass-based
products will take a larger share of this market over the forecast period account for more than
half the smart window market for the first part by 2017.


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Again as we have noted, however, NanoMarkets' analysis suggests that some of the
technologies will never move beyond niche applications. This is especially true of the existing
passive technologies other than the most traditional window films and glass. We are also not
anticipating high growth for electrochromic films in the active sector.
Page | 13


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Chapter One: Introduction

1.1 Background to this Report
After many years of being no more than a niche, the smart windows market now seems as if it
Page | 14
is about to generate major revenues for companies that are actively involved. Drivers include:

 Growing consumer awareness of energy conservation, green building, fuel efficient
transportation, and the desire for novelty and convenience.

 Larger addressable markets as the result of emerging middle class populations in Asia
(India, China) and Latin America (Brazil).

Meanwhile, new smart windows technologies are emerging that enable energy conservation
through smart windows and hence are providing several growth opportunities for various
companies in the smart window value chain:

 The smart windows market provides growth opportunities to everyone from
materials/coatings suppliers to glass manufacturers to window manufacturers, and most
importantly to end users such as builders, building owners, home owners, and
transportation owners.

 No matter what technologies emerge as the winners, glass manufacturers are certainly
going to be the beneficiaries of smart window growth. One factor that will help with
acceptance of the slightly higher cost of smart glass compared to the standard glass
used in buildings and transportation is the already high current cost of standard glass;
substituting standard windows with functional smart windows with only a marginally
higher cost will be more easily accepted by the consumer.

 As the demand volume for smart glass increases, there will be further growth
opportunities through cost reductions for smart coatings and materials and in smart
glass manufacturing.

1.1.1 Passive Smart Windows
Although awareness of smart windows has only increased in recent years, in reality smart
windows have existed for at least the last 15. These older smart windows were produced by
retrofitting existing windows with window films based on low-e coatings that provide energy
savings. We classify these retrofitted windows as passive smart windows; while these films are
functionally smart, they do not provide their functional benefits "on-demand".


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 There are many retrofit window film products that impart functionality and provide
other benefits to windows. These benefits include the blocking of harmful UV radiation
from sunlight, the blocking of heat coming inside through the window in the summer,
and the retention of heat inside a room and the maintenance of the ambient indoor
temperature in the winter. They all enable energy conservation by reducing the use of Page | 15
energy to keep buildings warm in the winter and cool in the summer.

 There are other window film products that also improve the aesthetics of the room.
These films eliminate the need for traditional window treatments such as blinds, shades,
curtains, etc. and save on maintenance costs.

Although the films designed for retrofitting of windows have been available for a long time, due
to their evident additional installation costs, the market for these products has started growing
only in recent years along with the increasing awareness of energy conservation.

A note on self-cleaning windows: Yet another category of passive smart windows is self-
cleaning windows. These windows offer more convenience than energy savings. Owners of
buildings (commercial and residential) spend quite a bit of money and time to maintain the
windows so that they provide a clear, aesthetically pleasing view of the exterior environment.
However, while self-cleaning windows do provide the benefit of eliminating the labor costs
associated with maintenance, the cost of applying these coatings vs. the savings in maintenance
costs is difficult to justify for existing windows.

NanoMarkets therefore believes that self-cleaning windows will be more easily adopted in new
construction where the impact of the additional cost of self-cleaning coatings can be softened
with the overall cost of a smart window. As the self-cleaning window concept becomes more
accepted in new construction, the cost of self-cleaning coatings will decrease and enable
growth in the retrofit market as well.

1.1.2 Active Smart Windows
While the market drivers listed above will provide an important new impetus for consumers to
buy passive smart windows, NanoMarkets sees the major growth in this sector coming from
thermochromic and photochromic smart windows, active smart windows/technologies that
allow users to control the energy savings and convenience benefits on-demand. There are also
challenges in this segment, however:

 Applying these coatings on existing windows


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 The uniformity of performance across various windows on a building, since they depend
on either the temperature on the glass surface or the sunlight on the glass surface.

There are several types of electrochromic technologies including Polymer Dispersed Liquid
Crystal (PDLC) and Suspended Particle Device (SPD) systems and vacuum glass coated with Page | 16
multilayer electrochromic coatings. Each has its advantages and disadvantages. Polymer
dispersed liquid crystal (PDLC) technology has, however, emerged as the clear winner in the
smart windows market at this time.

Active, on-demand smart windows provide a broad range of benefits such as energy
conservation, privacy, and convenience. They also offer future opportunities to smart glass and
window manufacturers for enhancing functionality and energy conservation benefits through
integration of organic light emitting diode (OLED) displays and building integrated photovoltaics
(BIPV) into the windows.

Several firms and research institutions are aggressively investing in improving the technology or
the manufacturing process to make smart windows more commercially viable. Given the pace
at which advances are being achieved, it is certain that the active smart window market is
poised for significant growth.

NanoMarkets believes that the key to success for smart windows growth is to integrate the
smart glass into the window frame and the smart window into a building. In this way, the
technology can be easily operated and its efficiency and benefits be maximized. With that
recognition, the trend today is to offer more complete functional materials that glass
manufacturers can easily integrate into their glass. At the same time, glass manufacturers are
moving towards a turn-key smart glass that can be seamlessly integrated into window frames.
Such trends towards easy integration may lead to unique market dynamics in the smart
windows market.

1.1.3 Geographic Regions for Growth and Target Markets
Although the green building and energy conservation movements are driving the awareness of
smart windows in many markets, ironically, the majority of growth in smart windows demand
has been driven by the use of PDLC-based smart glass in interior privacy applications in hotels
and offices. A majority of this growth is coming from new and retrofit construction in emerging
Asian and Middle Eastern economies such as in China, Hong Kong, Singapore, Saudi Arabia, and
Abu Dhabi.


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From the perspective of smart windows makers, much will depend on the revival of commercial
construction in the medium-term future, and for now—unfortunately—the indicators seem to
point in more than one direction. Credit markets still seem wary to finance construction, but in
some cases there are local factors that are counteracting this resistance. For example, Brazil is
gearing up for two major international events in the next eight years—soccer's World Cup and Page | 17
the summer Olympics—which should bring a boom to the economy in general, and to
construction in particular.

Because smart windows can be most easily cost-justified in commercial and industrial buildings,
the health of these sectors is of primary concern to smart windows makers. In addition, we see
moderate growth, especially in the retrofit market, due to government incentives for replacing
old windows with more energy efficient windows. But new installations in residential homes
are much harder to gauge. Conditions seem to be in place for a revival of construction in the
medium-term in the U.S., Germany and Japan (although there are also dampening effects), but
everybody is wary about a housing bust in the all-important Chinese construction market.

1.2 Objectives and Scope of This Report
This report identifies and quantifies the opportunities, challenges, and prospects for growth in
the smart windows market. Specifically, it analyzes smart window technologies, geographic
regions with high growth potential, supply chain dynamics, and their impact on smart windows
market growth; the dominant firms that will have the greatest impact on the growth of the
market; other growth drivers; and our eight-year forecast for the smart windows market.

For the purposes of this report, smart windows include any window that has functionality
applied to it either in a retrofit way or built-in manner that enables energy conservation,
privacy, and/or convenience to the user.

We are principally concerned with the smart windows and materials/coatings themselves, but
we will also consider and discuss the ancillary materials that are used in assembling smart
windows. We will also discuss the manufacturing technologies and scale that will have impact
on the growth of the smart windows market.

This report analyzes the use of and opportunities for smart windows in architectural,
transportation, and other applications. This analysis is carried out taking consideration of the
forces that shape smart coatings markets and those that shape construction and transportation
markets. We also include an assessment of each of the types of smart coatings technologies
that are likely to gain significant penetration into windows markets and the unique aspects of
their use in windows.


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While one of the major goals of the report is to provide detailed forecasts for the smart
windows market, the continued uncertainty on a global economic scale and in construction
markets in particular increases the uncertainty of such forecasts and predictions.

For example, the OLED market was predicted to be a multibillion dollar market by 2012. Due Page | 18
Economic turmoil and competition from incumbent LCD technologies has, however, resulted in
significantly slower growth for OLEDs.

This report is international in scope. The forecasts are worldwide and there has been no
geographic selectivity in the firms covered or interviewed in the collection of information for
this report. We do, however, focus our global discussion on certain countries in different
regions which we think are significant growth drivers for the smart windows.

1.3 Methodology of this Report
The information in this report comes from a variety of sources, but principally comes from
primary sources, including interviews of entrepreneurs, business owners, business
development and marketing managers, and technologists involved with various aspects of the
smart coatings and smart windows markets and emerging electronic technologies such as
OLED.

Secondary research for this report was also taken from information available on the World
Wide Web, commercial and government databases, trade press articles, technical literature,
information learned at technical conferences and trade shows, and SEC filings and other
corporate literature.

In addition, some of the data for this report comes from other NanoMarkets reports including
"Smart Coatings Market 2011" (February 2011) and "Smart Windows Market 2011" (February
2011). Whenever information has been used from an earlier report, we have reinvestigated,
reanalyzed, and reconsidered it in light of the current market status.

The forecasting approach in this report is explained in detail in Chapter Four, but the basic
approach taken here is to identify and quantify the underlying addressable markets, various
smart window technology penetrations in those market, and how other market elements such
as, for example, the commercial and residential construction industry, may impact smart
window growth. We also evaluate the stated plans of the key firms in the market in our
forecasting analysis.


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1.4 Plan of this Report
In Chapter Two, we examine the key market drivers for the smart coatings/smart window
markets. We also discuss which of the specific segments (residential, commercial, and
institutional) within the building market will have the most impact on the growth of the market
in the coming years. Page | 19

In Chapter Three, we explore smart window functional materials, technologies, and firms in the
market. We also evaluate the supply chain and the potential impact of market dynamics on the
structure of the industry and the supply chain going forward. In Chapter Four we present our
eight-year forecasts for the smart windows markets.


Smart Windows Markets 2012

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