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2.1.1 Energy Efficiency ........................................................................................................................................ 18
2.1.2 Smart Lighting, Communications and Smart Metering: ZigBee, DALI and Demand Response ................. 19
2.3.2 Adura Systems ........................................................................................................................................... 26
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2.3.5 Digital Lumens ............................................................................................................................................ 27
2.3.14 GE Total Lighting Control ......................................................................................................................... 33
2.3.15 Honeywell Lighting Controls and Ex-Or ................................................................................................... 34
2.3.16 Hubbell Building Automation ................................................................................................................... 35
2.3.23 Redwood Systems .................................................................................................................................... 40
2.3.24 Schneider Electric ..................................................................................................................................... 41
2.5 Key Points from this Chapter ...................................................................................... 47
Chapter Three: Markets for Smart Lighting .......................................................................... 49
3.1 Key Drivers for Smart Lighting Markets ....................................................................... 49
3.1.1 Energy Efficiency ........................................................................................................................................ 49
3.1.2 Health and Mood ....................................................................................................................................... 50
3.2 Addressable Markets for Smart Lighting Systems ........................................................ 51
3.2.1 Commercial and Industrial Markets ........................................................................................................... 51
3.2.2 Public and Government Buildings .............................................................................................................. 52
3.2.5 Smart Lighting Systems for Automobiles and Other Forms of Transportation .......................................... 53
3.3 The Importance of the Retrofit Market for Smart Lighting ........................................... 54
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3.4 United States Markets for Energy Efficient Lighting Systems ....................................... 55
3.4.1 Uncertainties about the Phasing Out of Incandescent Bulbs .................................................................... 55
3.4.2 Leadership in Energy and Environmental Design (LEED) ........................................................................... 55
3.4.3 Energy Policy Act of 2005 ........................................................................................................................... 55
3.4.4 Energy Independence and Security Act (EISA) of 2007 .............................................................................. 56
3.4.5 Other Factors ............................................................................................................................................. 56
3.5 Japanese Markets for Energy Efficient Lighting Systems .............................................. 57
3.5.1 Regulatory and Legal Environment ............................................................................................................ 57
3.6 Chinese Markets for Energy Efficient Lighting Systems ................................................ 58
3.6.1 Impact of Environmental and Energy Legislation and Regulation ............................................................. 58
3.6.2 Phasing out of Traditional Light Bulbs in China .......................................................................................... 59
3.7 Korea Markets for Energy Efficient Lighting Systems ................................................... 59
3.7.1 Energy Legislation and the Phasing out of Traditional Light Bulbs ............................................................ 60
3.7.2 Impact of Environmental Legislation and Regulation ................................................................................ 60
3.8 Taiwanese Markets for Energy Efficient Lighting Systems ............................................ 60
3.9 Energy-Efficient Lighting Other Asian Countries .......................................................... 60
3.9.1 India ........................................................................................................................................................... 60
3.9.2 Other Nations ............................................................................................................................................. 61
3.10 European Markets for Energy-Efficient Lighting ......................................................... 61
3.10.1 Rules for Phasing Out Incandescent Bulbs in the EU ............................................................................... 62
3.10.2 A Note on the U.K. Markets ..................................................................................................................... 62
3.11 Key Points from this Chapter .................................................................................... 63
Chapter Four: Eight-Year Forecast of Smart Lighting Systems .............................................. 67
4.1 Methodology of this Forecast ..................................................................................... 67
4.1.2 Data Sources and Assumptions about Market Size and Penetration ........................................................ 68
4.2 Eight-Year Market Forecast of Smart Lighting System Type of End User ....................... 68
4.3 Eight-Year Market Forecast of Smart Lighting System Sensor Modules by End User ..... 69
4.4 Eight-Year Forecast of Smart Lighting System Central Controllers by End User ............. 71
4.5 Summary of Eight-Year Market Forecast of Smart Lighting Systems Revenue by End User
and Type of Product ......................................................................................................... 72
4.6 Eight-Year Market Forecast of Smart Lighting Systems Revenues by Generation of
System ............................................................................................................................. 73
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Abbreviations and Acronyms Used In this Report ............................................................. 78
About the Author ............................................................................................................. 79
List of Exhibits Exhibit E-1: Forecast of Smart Lighting Systems by End User Market ($ Millions) ........ Error! Bookmark not defined.
Exhibit 2-1: Lutron Lighting Control Systems .............................................................................................................. 38
Exhibit 4-1: Forecast of Lights Controlled by Smart Lighting Systems by End-User Market Type .............................. 69
Exhibit 4-2: Forecast of Local Intelligence in Smart Lighting Systems (Sensors and Intelligent Ballast) by End User
Type .................................................................................................................................................................... 70
Exhibit 4-3: Forecast of Intelligent Switches for Smart Lighting Systems by End User Type ...................................... 71
Exhibit 4-4: Forecast of Central Controllers for Smart Lighting Systems by End User Type ....................................... 73
Exhibit 4-5: Forecast of Smart Lighting System Revenues by Product Type and End User ($ Million) ....................... 74
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Executive Summary
E.1 Opportunities and Strategies for Smart Lighting Systems/Luminaire Manufacturers
E.1.1 The Shifting Meaning of Smart Lighting
The term "smart lighting" is widely used but vague in meaning. This vagueness rests in the
word "smart," but as used in "smart lighting" (and in similar phrases) this seems to mean adding
a level of functionality to lighting systems in a manner that increases its responsiveness to
outside stimuli of various kinds.
At the most basic physical level what we are talking about then when we talk about smart
lighting is lighting equipped with a range of sensors, control electronics and communications
interfaces. The reasons for adding these enhancements are discussed below, but we note here
that energy efficiency, enhanced comfort and health are the top reasons currently given for
adding "smartness" to lighting.
The word "currently" is important here, because the meaning of "smartness" in "smart lighting"
is history dependent. Yesterday's smart lighting—exemplified by rest-room lighting attached
to, and switched on and off by, a motion sensor—should probably no longer be considered
smart lighting. At the very least this kind of lighting represents a relatively mature market; not
where one would go looking for smart lighting opportunities.
These opportunities—the focus of this report—become available when adding "smarts" to
lighting grows addressable markets, distinguishes products in existing markets, or adds value to
products in some way. How this occurs—or, in other words, where the opportunities are likely
to be found—will change in significant ways over the period considered in this report.
Other terminology: By way of a footnote to these definitional comments, we note that a great
deal of what it is reasonable to call "smart lighting," is now included under the much more
mundane terminology "lighting control systems," so that the discussion in this report covers
much that might be covered as "control systems" in another report. Again, for the purposes of
our analysis here, we are really only interested in the leading edge "lighting control systems."
That said, an interesting question whose answer may be suggestive of areas where there are
additional opportunities is the relationship between smart lighting and centralized energy
management systems of various kinds. Such energy management systems are not in any sense
"leading edge." In one form or another they have been around since the 1970s and have been
quite common since the 1980s. They are now quite common for controlling HVAC, but they are
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far less common for controlling lighting. Since lighting accounts for a relatively high percentage
of energy consumption, this would seem to be a "missed" opportunity. Perhaps new business
revenues will be generated by interfacing new smart lighting to this kind of established
technology. But there do not seem to be many firms interested in this possibility at the present
time.
Finally, another term that comes up from time to time, is "intelligent lighting," which (based on
how the terms "smart" and "intelligent" tend to be used in the computer community) has more
or less the same meaning as "smart lighting." However, we also note that in the recent past—
and perhaps still to some extent—"intelligent lighting" referred to advanced stage lighting for
the theater. This is not a topic that is covered at all in this report.
E.1.2 Prospects for Immediate Opportunities: Why It's Time to Treat Smart Lighting Seriously
Some of the above suggests that one might be a little skeptical about the potential for smart
lighting. For starters, it suggests that under different names, smart lighting has been around a
while and that it doesn't exactly have a glorious past. Perhaps the current interest in smart
lighting is no more than bringing up and old idea under a different name? This may, in fact, be
the case, but sometimes a reframing of an idea can lead to success in the marketplace.
However, there can be no denying that in the past smart lighting-like systems have not had
building owners and managers jumping up and down with excitement. Many potential
purchasers of such systems have made their economic calculations with regard to lighting
control systems and found them not worth the price of entry. Nonetheless, in the past few
years there have been important marketplace and (to a lesser extent) technology changes that
may have revived the prospects for so-called "smart lighting." It is for these reasons that
NanoMarkets believes that a report of this kind is due.
The rising price of energy: The most important of these recent changes is the growing
perception that energy will continue to rise in price—in real terms—for the foreseeable future.
This increases the value of any system that claims to save energy in the eyes of consumers; this
includes "smart lighting."
As a result, an expanded addressable market has been created for smart lighting systems. It is
important to understand this as a long-term trend. Global consumption of energy is increasing
because of rapidly growing industrialization in Asia and this is something separate and more
powerful than short-term fluctuations caused by world crises and supply chain interruptions.
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For the most part, however, further discussion of this topic lies well beyond the scope of this
report. However, it informs most of the discussions and arguments throughout the report.
The solid-state lighting (SSL) revolution: The beginnings of a wholesale conversion to more
efficient lighting in the form of compact fluorescent lights (CFLs) and light-emitting diodes
(LEDs) has begun worldwide. The use of efficient OLED lighting may not be far behind. In much
of the world there are mandates requiring the phase out of incandescent bulbs. All this has
implications for smart lighting systems manufacturers.
This changeover has made the market more open to energy efficiency message: a fact that can
be exploited by smart systems manufacturers. But, the energy efficiency that resides in the
current thrust of lighting replacement is focused entirely on the "bulbs" themselves, which
represent just 20 percent of the total value in a lighting system.
Smart lighting systems can reposition much of the rest of the value to be more in tune with the
energy efficiency meme. That is, they can make luminaires and electronics "smart," thereby
adding value and (perhaps) attracting new customers. It should be noted that the luminaires
and electronics account for almost 70 percent of the value of a lighting system.
Progress in sensor and microelectronics technology: The progress of Moore's Law and the
latest developments in nanomaterials mean that more sophisticated smart lighting systems can
be built. This means that while the potential market for smart lighting is currently being
expanded, systems can now be manufactured that better meet the needs of the new markets.
E.1.3 How (and Where) New Markets and New Value are Being Created by Smart Lighting
NanoMarkets believes that the opportunities available to manufacturers of smart lighting
systems, components and materials can and should be analyzed at three levels, with each part
of this analysis including a discussion of how the opportunities are likely to evolve over time.
The three levels of the analysis to which we refer are (1) functionality, (2) the physical layer,
and (3) end-user segment. All three of these areas are important considerations in all parts of
the lighting industry but take on new meaning in the context of "smart lighting."
Functionality: Almost all discussions of smart lighting today focus on adding greater energy
efficiency to lighting. NanoMarkets concurs that is where almost all the immediate
opportunities for smart lighting are likely to appear driven by (1) likely short- and long-term
energy cost increase expectations and (2) consumer and government concerns regarding
environmental issues.
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While energy efficiency may be the prime functionality required from smart lighting systems
today, it is important to remember that it is not the only way that smart lighting can create
value. Lighting can be enhanced to provide more convenience, better aesthetics, and improved
mood—or even improved health—of the people exposed to the lighting. All of these factors
could be increased using "smart" lighting technology and we think that such opportunities
outside of today's mainstream energy efficiency meme will start to emerge in the next few
years.
Physical layer: The opportunities in the smart lighting space can also be defined in terms of the
physical components/infrastructure associated with the system. Only about one fourth of the
value of a lighting system is actually found in the "lamp" itself, with most of the rest coming
from the electronics and luminaire.
Currently the technology development emphasis in the lighting industry is on lamp
replacement, with an efficiency-driven trend towards compact fluorescent lamps and solid-
state lighting. Lamp technology—in its current incarnation—is inherently "dumb," so the
opportunities for smart lighting development reside primarily in the electronics and luminaire
sectors.
As such, NanoMarkets believes that smart lighting represents an opportunity for luminaire and
electronics components firms to capitalize on the latest requirements for energy efficient
lighting. It also seems that to the extent that smart lighting is able to catch on it will serve as a
driver for the energy-efficient lighting technology business as a whole, so the makers of CFLs,
LEDs and OLED lighting have an interest in promoting smart lighting in some way.
Their direct participation in smart lighting might also make sense as a way to pump up the value
added for "lamp" suppliers, but, of course, only some of these suppliers have the resources to
participate in the smart lighting market. Finally, it is possible that—through the use of smarter
materials—the LED and OLED industry may be able to participate more directly in the smart
lighting business.
Of course, all the opportunities set out above are likely to shift over time. For one thing, firms
in the luminaire and lighting electronics business will have to shift from a strategic focus on
energy efficiency to other kinds of functionality or to certain kinds of aesthetics.
There are also, NanoMarkets believes, likely to be more opportunities in the future for
networking lighting both as a way of enhancing the cost of managing lighting and as a way of
fitting lighting systems more appropriately into the much ballyhooed Internet-of things. More
specifically, over time we anticipate there will be opportunities to create communications
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interfaces both for local communications (among local sensors and local sensors and a local
control box) and for connections to the Internet.
End user segment: Different kinds of end users have different requirements for "smartness" in
lighting. Our sense of the market is that the first large segments that will seriously buy into
smart lighting will be the commercial and industrial segment and the street lighting segment.
This is because in these areas energy efficiency can be easily translated into dollar savings and
this in turn creates an immediately realizable opportunity; that is, smart lighting can be shown
to be worth or not worth the price of entry.
This is less of an issue in some of the other end-user segments in which smart lighting will
generate revenues. Thus, in individual residential units, it seems unlikely that energy savings
are usually going to be enough to change consumer behavior. So, some of the other factors—
impact of mood, health, aesthetics or even an ideological propensity towards "green lighting"
are likely to play a major role in shaping the residential market.
Since NanoMarkets believes that such factors—or at least some of them—are likely to become
a much bigger part of smart lighting capabilities in the future, this suggests to us that residential
markets for smart lighting are likely to evolve after the commercial, residential and street
lighting segments have evolved.
Something similar can be said about lighting in transportation as well. Here, efficiency may be
something worth having. But does it really matter that much in a car or a bus? Again, other
factors that coincide with future capabilities of smart lighting are likely to be more powerful
adoption factors.
Finally, there are large public and government buildings. These would seem to open to the
same kind of rational argument involving efficiency as other large buildings whether they are
industrial, commercial or residential multi-tenant buildings. However, there is also an added
dimension. It is not unusual in the case of such buildings for the owners to make some claim on
posterity by including unique architectural features and smart lighting could in some sense
facilitate that. Smart lighting could achieve that goal by enabling the building owner or
management to claim that the building is especially energy efficient; a selling feature for
possible tenants/users. Or moving to the next stage of development of smart lighting, advanced
lighting may add mood lighting, or something; which would also be a selling feature.
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E.1.4 Some Risks to Consider for Smart Lighting Manufacturers
Obviously, the smart lighting business is subject to risks, some of which will probably be
unexpected. However, a few risks stand out as being something for smart lighting firms to
specifically look for.
Smart lighting's future may be like its past: As we discuss above, and throughout this report,
there are powerful reasons to suppose that smart lighting's time has come round at last.
However, one can, of course, never be quite certain of this, and, as discussed above, the history
of smart lighting—under different name—has not been one of unqualified success.
With this in mind, therefore, one cannot rule out the possibility that another promising way of
reducing the cost of energy consumed by lighting systems will not ultimately fail in the
marketplace. Perhaps the additional complexities and costs that smart lighting systems will
inevitably bring to the market will simply not be enough to convince potential end users of their
efficacy. In other words, in a sense, smart lighting may turn out to not be smart enough!
But this risk is mitigated somewhat by the fact that more advanced technology should permit
smart lighting systems to offer more sophisticated and nuanced responses than older systems.
Technology risks: Another "hidden" assumption of this report is that there is not major change
in the technology environment in which smart lighting is immersed:
One part of this assumption is that computer/semiconductor technology is up to
providing the kind of functionality that our analysis suggests will generate most of the
revenues that we predict for the smart lighting sector. This seems pretty certain to be
the case most of the time. However, there is a lot of technological uncertainty about the
Internet-of-things concept that we see as playing a role in the growth of smart lighting
There is also the possibility of some major breakthrough that would propel the smart
lighting business forward at a much higher rate than suggested in this report. Since
high-speed processing doesn't seem to be a major requirement for smart lighting
systems, the most likely point where such a breakthrough could occur would be in
sensors that would enable smart lighting systems to take on entirely new functionality.
One obvious risk is that technological changes occur in the energy industry that
significantly reduce the cost of energy; this would reduce the value of any smart lighting
system and probably kill off the smart lighting market as a whole. Such developments
within the period considered in this report seem highly unlikely however and, again, a
detailed discussion of such issues seems well beyond the scope of this report.
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The changeover to CFLs and LEDs is largely occurring as the result of government
mandates. It is far from clear how fast these markets would appear without such
mandates and the argument of those who favor mandates are precisely that the
markets for energy-efficient lighting would grow slowly if action favoring them was not
taken by the government; that is, there is claimed to be a market externality.
This immediately raises the question of what would happen if the lighting mandates
went away or weren't effective and the likelihood of this being the case. We note that
there has already been some effective resistance to lighting mandates in the U.S. and
we expect that rules will be widely disobeyed in other geographies; so penetration of
the lighting place by CFLs and LEDs may proceed at a slower pace than some observers
currently expect. This penetration is a necessary—but not sufficient—condition for
substantial sales of smart lighting to occur.
E.1.5 Smart Lighting Systems Marketing Strategies
While smart lighting systems can trace their conceptual history back decades, today's systems
are obviously a new breed; bringing together the latest sensing, control, communications and
illumination technology. NanoMarkets believes that this implies the need for a product/market
strategy that focuses on market creation. This is especially important in that building
automation in the past has been viewed by users with such skepticism, and this is especially
true of residential end users. In other words, the fact that something like "smart lighting"
systems existed in the past, might actually be regarded as a disadvantage.
This suggests to us that some specific marketing tactics will be required. It also suggests that
the smart lighting market is one that is crying out for leadership for a firm that has the
resources to create credibility for the current generation of smart lighting. Such a firm would
probably have to be a large firm with an established role in the building automation—or much
better—the lighting industry.
Messaging to end users: The trends toward the spread of CFLs, LEDs and OLEDs and energy
conscious lighting sector lie well beyond the control of smart lighting systems makers.
However, we believe that these manufacturers can most effectively serve or expand existing
addressable markets for smart lighting systems by messaging (1) how their systems can lead to
reduced energy costs and (2) work especially effectively with the new lighting technologies.
Some of this development work will be aimed at the final consumer and will be designed to
overcome reluctance to buy such systems that may have been created by the poor
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performance of the industry in the past and especially by bad experiences that potential end
users of smart lighting systems may have had with similar systems.
Building an industry: The smart lighting systems business at the present time finds itself in
something of a "Wild West" situation and is in need of an industry leader to tame it and give it
credibility.
This will take one or more firms taking upon themselves the role of sheriff in this Wild West
situation for this to happen. The specifics go beyond the scope of this report, but what we are
talking about here is firms pushing the concept of smart lighting both to the lighting industry
and to the ultimate consumer; in other words, a firm that is willing to create a buzz around the
smart lighting concept.
Several kinds of firm could play a role here. A pure-play smart lighting firm has a strong
incentive to take this path, but they seldom have the financial ability to adopt this strategy.
However, this may not be true of all smart lighting start-ups and if the availability of risk capital
were to increase during the period under consideration here, this situation may change.
Under current circumstances, the "sheriff" that we are calling for here is much more likely to
emerge from the ranks of the large lighting firms or the large control/building automation
firms. The arrival of a large firm of this sort would go a long way to establish smart lighting as a
credible product and not just a fad. There are some signs that this could happen in that several
of the lighting firms have smart lighting R&D programs, but there is no company one can point
to as an early industry leader as yet.
Standards: There are quite a number of efforts directed towards creating standards for solid-
state lighting. There are also other relevant standards efforts such as BACnet in the building
automation world, and the ZigBee wireless protocol. But in the not-so-distant future these and
other protocols will have to be brought together and become more directed towards smart
lighting. The key aspect of smart lighting that is likely to be in need of standardizing is local
communications so that customers can mix and match central controllers, specialized sensors,
dimmers, ballasts and drivers.
This is yet another area where a firm that becomes an industry champion can help to shape
what happens in the future.
NanoMarkets believes that without smart lighting standards, future growth in the smart lighting
industry will be seriously impaired. This is—once again—because of the rather difficult history
that lighting automation has exhibited. Among other factors that future smart lighting
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standards seem to imply for customers are (1) the ability to mix and match products from
different smart lighting system manufacturers and also (2) a sense that the system being
acquired is to some extent future proof.
Until standards of the sort mentioned above are mature, customers are most likely to buy
everything in their smart lighting system from one vendor. Where this happens it is good news
for the supplier chosen, but in many cases we expect that potential customers will be put off
buying any smart lighting systems.
E.2 The Making of the Smart Lighting Industry: Firms and Sectors to Watch
The smart lighting sector cannot yet be said to have evolved into an industry. However, at the
present time, it can reasonably be said to have four segments: traditional building automation
manufacturers, traditional lighting manufacturers, chip makers and start-ups.
The traditional building automation firms are long-established automation firms that can
incorporate 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, but
they obviously all have the capability to be the industry champion that we talked about
previously. Both Johnson Controls and Trane have been expanding into new markets in the
recent past.
As to the large lighting manufacturers—Philips, GE, Osram, etc.—these firms would be even
better positioned to promote smart lighting as a "champion. However, for the time being these
firms seem more interested in development issues around smart lighting rather than promoting
the concept more generally. This is also true of the chip makers, but we note again that given
the huge number of devices that could be demanded if smart lighting really takes off, this
sector should be of considerable interest to traditional manufacturers of analog control chips
and communications interface chips; especially the makers of Wi-Fi and ZigBee chips.
E.2.1 Smart Lighting Start-Up Strategies
The big question mark is really over the start-ups. There are now about 20 small lighting
control systems firms out there with some reasonably well funded. These include Adura
Systems, Cavet Technologies, Daintree Networks, Easylite, Ecoflex Solutions, Energy
Automation Systems (EASI), Enlighted, Fifth Light Technologies, Lumenergi, Lutron, Redwood
Systems, Starfield Controls and Universal Lighting Technologies. This is unlikely to be a
complete list.
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All of these firms offer similar products and it is far from clear how they will all compete and
whether there will be sufficient market demand to keep all these firms going. A review of these
firms' strategies suggest that they hope to thrive—or at least survive—in the marketplace
through design and other strategies that include:
Superior user interface including Web-based control. The problem with this strategy is
that it is easily copied. 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.
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?
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.
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.
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 installation or systems integration of some kind.
In addition to these specific factors, obviously all systems compete on generic economic
factors; price and ROI. Based on what these firms have said so far, 18 months to two years is
about the current ROI, which seems reasonable enough. NanoMarkets is, however, concerned
that there is really not yet enough to distinguish these firms in a way that will be truly
meaningful to customers. In other technology markets this has tended to lead to firms having
to fall back on hype in promoting their products.
E.3 Summary of Eight-Year Forecast of Smart Lighting Systems
Exhibit E-1 summarizes our forecasts of smart lighting systems by end user market. These
forecasts are taken from Chapter Four of this report, which shows how they are derived.
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To obtain a full copy of this report please contact NanoMarkets at [email protected] or
via telephone at (804) 938-0030 or visit us at www.nanomarkets.net.