Geoff Archenhold: 2017 – more structural changes are coming

With major western brands going through divestment, and Asian brands starting acquisition of global market share, can the lighting industry still be relevant in a highly commoditised sector? Dr Geoff Archenhold investigates.

In 2016 the majority of western lighting brands confirmed that between 50 and 80% of their lighting portfolios had already converted from traditional light sources to LED based artificial lighting sources – a major achievement considering my first article eleven years ago had LED penetration at less than 0.1% of the market.

The rapid pace of R&D and those early LED pioneers have transformed the lighting sector within a decade, yet the majority of products being shipped at a luminaire level are virtually the same formats as traditional light source equivalents, which suggests further design revolutions could be on the horizon. The rush to deliver the energy efficiency gains of LED luminaires has resulted in an unprecedented level of cost reduction that will make it difficult for companies to continue the pace of R&D and product launches moving forward – so what next?

FURTHER MARKET CONSOLIDATION

In 2016 we have seen more divestments or division/plant closures from the large players such as Philips, OSRAM and GE and the rise of Asian acquisitions such as Havells and Bridgelux. As prices fall, the LED supply chain (as with other industries) are a prime target for large scale consolidation, especially from Asia where acquiring brands and new routes to global markets make strategic sense whilst low cost money is still readily available. From the failed acquisition of Lumileds to Grand Chips Investment’s proposed acquisition of Aixtron and the purchase of Sharp by Foxconn, we will see a significant increase in acquisitions over 2017. Indeed, within the next two to three years we may see the big two or three lighting companies acquired but only once their senior management teams have divested the non-profitable parts of their business, cleaned up their balance sheets and found an acquirer willing to pay to access the European and US marketplaces.

At the other end of the spectrum we will see an increase in smaller transactions where the larger players acquire start-ups that have developed interesting technologies covering:

• Intelligent Building Control Systems

• Data analytics and Governance

• Artificial Intelligence and Self-Learning Systems

• Smart Sensors

• Secure Building Solutions and Services

• VLC and Lifi covering indoor GPS, Marketing and data communications

• Power and Ethernet based solutions

Despite the fact 2016 hasn’t seen any stand-out new technologies come to market, the fact that there is a lull suggests the next two to three years is going to be highly interesting and may be even more turbulent for incumbent organisations than the transition from conventional to LED sources.

I expect large controls companies will look to consolidate their place in the market by acquiring smaller competitors or risk starting to lose their own market positions over the next few years as their product portfolio’s become expensive and outdated compared to nimbler and newer start-up organisations who better understand the intelligent building agenda.

LIGHT + BUILDING

In March, the global lighting industry congregated to show each other their latest technology with the majority of industry players exclaiming how the launch of their new smart lighting system will revolutionise the industry. However, the majority of systems were unproven and had no large-scale real-world deployment.

The stand-out issues for me included:

• Lack of understanding of the issues of RF based control systems.

• Lack of security principles and skill sets related to intelligent building solutions.

• Very little new technologies on show with exception of Lifi and a select few PoE solutions.

• Disregard for the term Flicker-Free which was used by virtually everyone yet the majority of systems still used low frequency PWM solutions.

• Little presence of tangible light as a Service (LaaS) technologies.

I expect Light + Building 2018 to have a significant number of new technologies on show compared to this year and I would be surprised if VLC and Lifi doesn’t take a leading role amongst companies as well as a transition of the majority of lighting control solutions over to Ethernet-based IP back-bone technology launches. There may even be glimpses of laser lighting solutions in certain applications and low cost sensing solutions.

ETHERNET-BASED LOW VOLTAGE LIGHTING SOLUTIONS

In May I outlined how the industry would make the transition to a digital lighting market and this year Cisco has certainly ramped up its marketing efforts with end users interested in the digital ceiling concepts. Cisco has created an interesting collection of digital lighting partners such as Philips, Cree and Eaton, however the adoption of low voltage lighting solutions have been slow due to:

• Huge capital costs compared to traditional control solutions, which are driven by:

– Proprietary PoE solutions with limiting volume and  scalability.

– Lack of competition so no prices down pressures.

• A limited number of technical solutions in the market place with limited choice of luminaire designs.

• A lack of knowledge on such systems with architects, specifies, M+E consultants and lighting designers, resulting in traditional solutions still being specified.

• A limited number of qualified low voltage lighting installers.

• The 802.3bt high powered PoE standard hasn’t been ratified, holding back R&D supply chain development of high powered PoE solutions.

The essential key to PoE adoption will be based on cost effective pricing of PoE switches and end-points and this won’t occur until mid-2018 due to the 802.3bt standard not being ratified until the end of 2017. Once the standard is ratified it will take six months for the semiconductor companies to develop compliant chipsets, followed by another six to twelve months for technology companies to develop PoE drivers and sensor solutions for the market.

Once the standard is ratified, the industry will be able to predict pricing of PoE solutions, which should drop rapidly below £50 per point by 2020 if not beforehand. At these prices, PoE becomes comparable to traditional control solutions yet offer significantly more intelligence.

As mentioned previously, deploying low voltage digital lighting solutions offers significant advantages for intelligent building designs, including:

• Installation Phase Savings:

– Quick set up and programming compared to DALI. Some systems offer 500x speed improvement for commissioning.

– Reduced commissioning costs – no need for programming engineers.

– Simple low voltage wiring required – no need for specialised electricians as mains voltages not prevalent in the system.

– Reduces the need for skilled labour during installation as well as ongoing programming and maintenance.

– Reduces the need for large mains distribution boards within confined riser cupboards.

– Significantly fewer issues with inrush currents and RCD trip currents compared to standard LED driver solutions.

– Philips and Cisco have both evidenced a 50% reduction in installation costs for Ethernet-based connected lighting systems compared with conventional AC-powered systems

• Maintenance Phase Savings:

– Centralised driver maintenance has no access issues.

– Saves overtime/out of hours labour costs – can access drivers easily without disrupting retail spaces, school, hospital and commercial spaces.

– Less client disruption results in improved customer satisfaction.

– Easy to change lighting configuration as systems are DC based and can use simple RJ45 plug-and-play connections.

– Simple to add, remove or replace fixtures/drivers as recommissioning is done simply without expensive engineers.

The question is: does the lighting industry have the leadership capabilities to forge a new industry based on digital technologies and services or if it delegates this to technology companies such as Cisco, Google, Apple, Microsoft or Facebook?

CYBER SECURITY AND INTELLIGENT LIGHTING

Three years ago I was invited to talk on a panel at a smart lighting conference where I highlighted my concern regarding the lack of security systems knowledge in the lighting industry and the majority of the ‘experts’ felt that security wasn’t necessary or most smart systems were already secure. Today, I still feel that security of lighting control systems is not high on the supply chains agenda and this is a major concern that needs to be addressed.

As IoT and smart lighting networks grow, the industry will face a huge problem – just looking in the media in the last few months – security vunerabilities are the tip of a growing iceburg. In September a massive internet outage occurred after hackers flooded Dyn, a major internet gatekeeper for sites like Facebook, Spotify and Netflix, with false bandwidth requests (DDoS) from an ocean of unsecured internet-connected devices. Just read the article ‘How hackable are your smart home gadgets?’ by Cnet. As lighting systems offer more features and incorporate complex devices, the software developers and companies generally recycle libraries and don’t have the resources to continually test for vulnerabilities only focussing on feature issues instead. Moving forward, systems will have to become either very simple (so security testing can be undertaken) or system costs will naturally become higher for control systems that offer a higher degree of security.

WHAT IS COMMON CRITERIA (CC)?

Common Criteria is an international standard (which led to the formation of ISO/IEC 15408) for computer security certification and is accepted internationally.

It provides a framework in which computer system users can specify security functional and assurance requirements (SFRs and SARs) through the use of Protection Profiles (PPs), vendors can then implement and/or make claims about the security attributes of their products, and testing laboratories can evaluate the products.

In other words, CC provides assurance that the process of specification, implementation and evaluation of a computer security product has been conducted in a rigorous, standard and repeatable manner that is commensurate with the target environment for use.

CONCLUSIONS

There is still work to be done within the intelligent building market and as lighting is a key component for most buildings, the industry has a key role to play if it can sort out how to capitalise on the fact lights are everywhere.

There are several areas which need the lighting industry to take a leadership role such as:

• Creating the DALI equivalent of a new Ethernet-based lighting control protocol that can be adopted freely by the lighting community.

• Security of smart lighting systems and training a new wave of installers and integrators that is familiar with low voltage Ethernet-based lighting solutions.

• Training and disseminating best practice for human centric lighting designs.

• Further R&D of low voltage lighting systems to take advantage of renewable DC energy sources such as Solar PV, Wind and Hydroelectric.

• Focus on world-leading intelligent building and converge data IT services.

HOW DID MY 2015 PREDICTIONS DO?

Centralised LED driver solutions will gain further acceptance on prestige installations creating the beginning of Power over Ethernet based products.

With projects like the Edge in Holland, the Dubai opera house and the ceiling of light at the Victoria Gate shopping centre in Leeds, the role of low voltage lighting has become a solution of choice for many architects and designers. PoE based solutions have been slowed down due to cost and the last of an international high-power standard but solutions are on the horizon.

Increased M&A activity will be seen throughout all areas of lighting.

There has been key M&A activity across the supply chain during 2016 and this will continue to accelerate over the next few years due to Asian brands wanting to gain further access to Western markets as well as restructuring changes in China.

The reality of the IoT wireless hype will begin to be recognised as installations are deployed with integrators preferring copper wire solutions supported by RF where necessary.

I’ve had conversations with installers that have had issues with wireless technologies such as security and door entry systems and the lack of discussion with lighting may be down to few RF deployments in the field or those systems that have been installed are small systems of ~ 100 lights or so.

• ‘Lighting as a service’ will start to accelerate offsetting drastic reductions in Average Selling Prices of LED fixtures.

Services based around Li-FI and indoor location systems will start to be adopted across many sectors. 2016 is where initial quality VLC based indoor lighting systems began to be deployed, with Target announcing 100 store roll out in the US as well as retailers in the middle east and the Paris Metro system suggesting it will consider deploying a VLC based product throughout the network. When I first highlighted VLC and Lifi in mondo*arc six years ago, I envisioned it being more widespread by now but the main barriers are still access to low cost VLC LED drivers with open source control protocols. 2017 will be the year that VLC will see large scale deployment as LED driver manufacturers launch VLC systems based around open protocols.

LED flicker will become closely monitored in systems due to further health concerns.

The launch of the IEEE flicker guidance helped put flicker on the map, however the majority of manufacturers still utilise lower frequency PWM systems or combinations of Amplitude dimming and then PWM dimming at lower intensities. The debate on how effective such solutions are will stay until ripple current frequencies are high in the 30kHz range and above.

I see 2017 as a similar year to 2016 in respect of incremental improvements in LED technology so my predictions will be similar to last year:

• Low voltage lighting systems will gain acceptance within the lighting design and M+E community. The new 802.3bt PoE standard will be ratified, setting up low voltage PoE cost effective solutions from 2018 onwards. New levels of centralised power density will be achieved due to increased LED driver efficiencies. There may be trials of low voltage lighting DC grid systems which don’t use any AC/DC power conversion and instead use renewable energy and banks of battery systems to power lighting across 24 hours.

• Increased M&A activity and at least one £500m+ European lighting acquisition.

• Security of IoT systems will become increasingly scrutinised and high profile security issues will be highlighted.This will cause the adoption of CC for computer security certification for lighting applications.

• ‘Lighting as a Service’ based around low cost VLC platforms will be adopted across many sectors from retail to healthcare.

• Several well-known brands will disappear from markets as they fail or need to restructure overheads in the new world.

Geoff Archenhold is an active investor in LED driver and fixture manufacturers and a lighting energy consultant. The views expressed in this article are those of the author and do not necessarily represent the views of mondo*arc.

g.archenhold@mondiale.co.uk

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