Many of the firms that jumped into the smart lighting space a few years back have disappeared or been acquired under fire sale conditions. Some apparently innovative smart lighting products have also been launched, yet have been greeted with a yawn by the lighting marketplace.
NanoMarkets continues to see smart lighting as a major business opportunity over the next decade. But we think it will take both a new kind of technology and a different focus to make it happen:
Technology-- Still Some Way to Go: The “smart” in “smart lighting” might seem to provide a way for lighting firms to differentiate themselves in the market. Yet many smart lighting systems today use technology that is not especially novel; these supposedly “smart” systems might be better characterized as “lighting management systems,” a product “species” that has been around for a couple of decades at least.
Although we think that such older technology will go into decline in the next few years, almost 70 percent of the revenues from “smart” lighting systems in 2014 will come from these conventional lighting management systems. Using this technology, it is hard to make lighting systems stand out in the marketplace.
Value Proposition – Not As Clear As it Seems: Most smart lighting systems are aimed at increasing energy efficiency and this is a clear enough message in an era of rising real energy prices. However, for many end users who have only just switched to LEDs as a way of saving on their lighting bills, installing a smart lighting system may be a bridge too far. Some will want to wait to see what LEDs alone can do. Other end users – perhaps the most sophisticated – will take a more holistic approach and may decide to eschew smart lighting. For example, they might consider the latest generation of smart windows and highly insulated windows as their energy-saving technology of choice.
The point here is that while cutting down on energy bills is a good thing per se, building owners and managers are not likely to install every energy saving technology available. They will choose among such technologies most of the time. Smart lighting has significant competition in this sense.
Despite these issues, NanoMarkets continues to believe that smart lighting remains a considerable business opportunity both in terms of market size -- just over a billion dollars in revenues expected in 2014 – and in terms of growth – NanoMarkets believes that billion dollars will turn into around 11 billion dollars by 2019 or so. However, bullish assertions of this kind assume that (1) the latest electronics and sensor technology will be embedded in smart lighting in a manner that will both impress potential customers and which can be protected as viable intellectual property and (2) the functionality of smart lighting will evolve beyond energy efficiency so that smart lighting has more to offer those customers than just a saving on electricity bills:
Making lighting truly smart: The line between the lighting management systems mentioned above and truly smart lighting is a fine one. However, it is fair to say that ”real” smart lighting systems are smaller, lighter, more wireless oriented and can be controlled through smart phones. This kind of smart lighting system is attracting the attention of the semiconductor industry where a handful of firms are designing specialized controller chips for this leading edge kind of smart lighting. Established standards in wireless networking are also being adapted to smart lighting requirements.
These are all important developments, but NanoMarkets suspects that it will take more to get smart lighting into the mainstream. In particular, we are hopeful that smart lighting will get caught up in the Internet-of-Things (IoT) meme, with smart lighting becoming the natural extension of IoT into the lighting sphere. The point here is that the IoT megatrend could become a powerful force for the diffusion of smart lighting technology.
Beyond energy savings – the mood factor: Some of the latest smart lighting technology is already showing how this kind of lighting can move beyond mere energy efficiency and can therefore expand the addressable markets available to smart lighting.
More specifically, while future smart lighting offerings will continue to be highly energy efficient, we expect them to offer sophisticated mood and health features, perhaps based on smart spectrum and brightness tuning functionality. It has always been understood that quality of light can impact quality of life, work performance and even health in a significant way. This type of smart lighting system – as it emerges – will continue to cater to the need for energy efficiency but will provide many more reasons for building owners and managers to buy smart lighting. It can therefore go some way to countering the objection mentioned above that smart lighting is just one way among many to reduce energy consumption in a building.
However, there are some important uncertainties here that in the end may prove to be market limitations for the spread of smart lighting into the mood and health business. On the one hand, there seems to a growing literature “proving” that mood lighting is beneficial to health, work performance and mood. On the other hand, NanoMarkets has discovered that there is still a considerable amount of skepticism about such things in the medical community. Nonetheless, NanoMarkets is still forecasting that by 2019 smart mood lighting will be generating $2.9 billion, which is a large enough market for any lighting firm to chase after.
The bottom line with smart lighting then is that we are just starting out. Much of what is being branded as smart lighting today is only slightly less clunky than the lighting management systems that were on the market a generation ago. We think that new electronics and sensors standards designed specifically with smart lighting in mind will make a qualitative difference, transforming smart lighting into part of the IoT.
NanoMarkets also thinks that the dominant view that smart lighting is just another energy saving technology may not be enough to turn smart lighting into a ubiquitous technology and that novel functionality – such as mood and health enhancement – will be necessary to make smart lighting all it can be.