Feilo Sylvania speaks up on the real value of IoT lighting, the move to Budapest, why they won’t co-brand, and much more (MAGAZINE)

CEO CHRISTIAN SCHRAFT and global strategy director BASTIAAN DE GROOT tell MARK HALPER they won't play second fiddle to the tech firms in smart lighting, but they will partner. Oh, and they won't forget about "dumb" lighting, either.

Feilo Sylvania looks determined to stay out in front in the smart lighting game.

The Chinese-owned, Budapest-based LED stalwart has made a number of moves in the last couple of years to up the ante in Internet-connected lighting. Last summer, Feilo launched its ambitious SylSmart initiative, casting itself as a systems integrator pulling together IT partners to help turn the lighting infrastructure into intelligent communication and data gathering networks.

Furthering its cause, Feilo in swift order established two new innovation centers - dubbed "SLIC" for SylSmart Lighting Innovation Centers - where it is collaborating with partners like Internet of Things (IoT) specialist Gooee and with customers to develop products, services, and business cases for using lights as data collectors and disseminators.

Schraft: "In five or ten years, the light output of a fixture might just become a collateral benefit of a different activity. Actually producing a few photons to put some light on a desk might be a secondary function." Photo credit: Feilo Sylvania.

Of the many potential uses for smart lighting, Feilo strongly believes that the biggest value at the moment is in helping facilities managers gather insights into how to better operate their premises - something that Feilo began putting into practice at the headquarters building for Dutch standards group NEN in Delft a year and a half ago.

To help customers afford the transition to smart lighting, last year Feilo also commenced a financing scheme.

Not one to sit still, the company itself made a major transition in August, when it moved its headquarters from London to Budapest. That major relocation came a mere year and a half after parent Shanghai Feilo Acoustics Co. Ltd. acquired the outfit from India's Havells Sylvania. Its brands include Sylvania, Concord, and Lumiance. It does about 60% of its business in Europe, about 35% in Latin America, and is increasingly using the Middle East as a trial ground for smart lighting. (Its parent company handles the China market, with brands including Feilo, Yaming, and others. Feilo does not have rights to the Sylvania brand in North America, where LEDvance is currently using it).

"The Middle East is an emerging region for us," Feilo CEO Christian Schraft told LEDs Magazine recently when we had a chance to sit down with him and with global director of strategy and new business development Bastiaan de Groot. "It's still small, but really the Middle East presents an opportunity in terms of growth, especially when it comes to smart lighting - indoor and outdoor - because people are happy to invest into modern technology and want to almost show off a bit by having the latest and greatest installed in the airport, in street lighting, offices, museums."

In our question-and-answer session, Schraft and de Groot had plenty to say about Feilo and its IoT push. For example, while the company is indeed emphasizing partnerships, it is at the same time moving away from co-branding. Its top IoT priorities do not include the indoor positioning systems that some lighting companies are championing; and while Feilo is indeed steeling itself for the IoT, it is also strengthening its conventional LED line of goods.

All this and more - Brexit wasn't far from their lips - came up in our conversation, which began with us asking Schraft and de Groot about the move to Budapest.

LEDs: You're based in Budapest now. You slid over there last September. How's it going?

Christian Schraft: Correct. August, September of last year we moved the global headquarters to Budapest. London continues to be a regional headquarters for us. But most of the global functions are now based out of Budapest. It's going well. The availability of talent, which is one of the reasons for the move, is generally quite good. Increasingly, this became an issue in London, where the availability of talent, and the cost associated with it, was making things more and more difficult. And there are a few other things that helped us take the decision. Brexit was one of them. So now, whatever the result of the Brexit negotiations, we're independent of it. We don't need to watch Theresa May and the European Union try to get this sorted. (Editor's note: For more context on the potential repercussions of Brexit, see our feature from last September.)

De Groot: "We don't take a strong stand for ZigBee, for example, nor do we take a strong stand for Bluetooth Low Energy. We strongly believe in the right tool for the right job." Photo credit: Mark Halper.

LEDs: Was it that the talent was hard to find in London? Or was it expensive?

CS: It's both. At a cost that we would have historically considered appropriate, it became almost impossible to recruit talented people. It's also because we're recruiting more in the new space these days - smart lighting, connected lighting, and not necessarily the lamp products manager. At the higher cost, you can always get the result, but we feel we're in a better position here now in Budapest.

LEDs: What sort of talent are we talking about? Are these engineers primarily?

CS: It's a mix. We're not looking at the traditional product engineer developing mechanical housing or optical systems. This is something that we continue to do at other locations. It's more on the product management side and of course on the smart lighting side and the connected lighting side. One of the things we are doing is we're creating a small center of excellence, a center of competence for anything related to smart and 'beyond lighting.'

LEDs: Let's review what you said about Brexit. So you had some Brexit motivations for moving the headquarters?

CS: It's very simple. Today the European Union represents one common market. There are no trade or tariff barriers between the various countries. When the UK becomes an independent country outside the European Union, we may or may not be getting barriers between the UK and the European Union. Today, the way we're set up, most of our physical logistics are in continental Europe in the European Union. But our invoices are all done from our UK legal entity. So that is not a model we can entertain going forward, and therefore, we will now shift all the invoicing procedure into continental Europe.

LEDs: Was Brexit the prime motivator then for this move, or had you already been planning it?

CS: It's the latter. We had been looking at options beyond the UK for various reasons - cost, talent, also to have a little bit more of a European view on the marketplaces. I would say Brexit was certainly an accelerator for the whole project. There was another element that wasn't necessarily the decisive factor, but you may be aware of the Chinese One Belt, One Road project of reestablishing the old links between China, the Silk Route, Eastern Europe, southern Asia, and all that. So lots of activities are happening in Eastern Europe, and our mother company Feilo already had significant activities in Budapest - we're not the first to come to this place in the group. There is already an infrastructure in place here that we can rely on.

LEDs: We've been watching the move by the lighting industry into the smart sector. It's almost as if the lighting industry is morphing into an IT industry.

CS: In terms of market growth drivers for lighting, I can see three waves. The first one is all about energy savings. That's today. The second wave will be powered by intelligent lighting. The LED actually allows for better lighting, easy to control, easily adaptable to the task. Some people call it human-centric lighting. It's not my preferred term, but it's all about having adaptable, intelligent, and easy to control light.

The third wave, and it's the one that's still starting, is all about connected lighting, or going 'beyond lighting.' Smart cities, smart buildings, smart homes, and so forth. 'Smart' is about collecting, using, and disseminating information. We are learning that a fixture is becoming a data collection machine through sensors - whether they're for daylight, motion, occupancy, possibly temperature, whatever you want. So fixtures become data hubs. You're also aware of Li-Fi, VLC [visible light communications], and so forth, so the ability of light to transmit information by modulating the LED light output at a very high frequency so the eye doesn't see it.

At the same time, fixtures are the only electrical device that are everywhere that humans go. So therefore the lighting infrastructure in a building or in a city will automatically become the infrastructure backbone for anything smart. If you take that to an extreme, in five or ten years, the light output of a fixture might just become a collateral benefit of a different activity. Actually, producing a few photons to put some light on a desk might be a secondary function.

LEDs: And yet this is all the domain of the IT companies. So I'm wondering how you see the big IT companies. Are they friend, foe, partners, competitors? All of the above?

CS: The answer is all of that. The other answer is: We need to figure it out. There was a quote from the CEO of Daimler Benz, Dieter Zetsche, along the lines of, 'We will not be the subcontractor of Google.' I think there's a lot in that quote, and you can apply it to the lighting industry as well. We're obviously keen not to be just the metal sheet vendors for somebody else who controls the power position in that industry, and has control of the margins. Which is why the partnering approach is important. It's all about finding the right partners within and beyond the lighting industry, for us to be in a position to create value and add value to what the customer is looking for.

How we work in the future becomes fuzzy. But I do want to give you one example, the NEN building. It's a building in the Netherlands in Delft which we've equipped with lighting across the entire building. Lights are collecting information so the facilities managers can better manage the building. For the facility manager to have access to the data, he has to pay us a monthly service charge. For a product company like ourselves, this is the first case where we actually have a recurring revenue for the service that we provide. And that is quite revolutionary for a business that has historically been shipping boxes. In [conventional] lighting as a service, the customer basically pays a monthly fee and there's lighting everywhere. We've taken a step beyond. The monthly fee is not for the lighting; it's for the data collected by the lighting.

LEDs: How do you structure that? Are the charges based on the amount of data? What are the business metrics?

Bastiaan de Groot: The charge is based on a per-service agreement. So for every additional block of data collection we add, we have a fixed fee per month. There is no fee for the data actually used. We find it is too complex a model. We of course have a cost based on the amount of data, but we just offer that as a flat fee to our customers.

LEDs: Who owns the data?

BDG: The data is stored on our servers, but the intellectual property is always the property of the customer.

CS: While we don't own the data itself, we do own the key to get the data. What we're selling is not the data, but access to the data

LEDs: Do you have other customer examples?

CS: We don't have any other named projects. But there are a few examples where we can illustrate the new business models. For the European market, we're seeing the financing proposition for our customers become more important. We've teamed up with two leading international banks for small-to-medium project financing. This starts anywhere from €20,000 ($24,540) and goes to a few hundred thousand and possibly beyond that. Projects would typically be in spaces like shops, boutiques, small office practices, and law firms. The pipeline of quotes that have gone out with financing proposals is growing exponentially. If you look at a supermarket chain, is it more important for them to own the lighting installation, or is it more attractive to put that money into more stores opening up and hence more sales?

LEDs: So these financing deals are leasing deals?

BDG: In the majority of countries, we offer it as a lease.

LEDs: Any further thoughts on the technology protocol wars? Since Bluetooth Mesh got ratified, is that coming more into the forefront, or is it still horses for courses, where you'll use some technologies in one instance and others in another scenario?

BDG: We don't take a particularly strong stand like some others do. We don't take a strong stand for ZigBee, for example, nor do we take a strong stand for Bluetooth Low Energy. We strongly believe in the right tool for the right job.

CS: There's one thing I'd like to add. Whereas in the past we've been keen to co-brand and go to the market together with a technology provider, we've now changed that approach and we're now positioning our own brand and product range under SylSmart. We want to have the best solution that can exist for the customer under SylSmart, and what kind of technology we're putting behind that is of less importance. And the name of the provider of that technology is also of less importance.

LEDs: Are the Gooees of the world happy to have you brand it SylSmart, or is that a discussion point?

BDG: It's an ongoing discussion point. Of course, a lot of the platform providers are trying to establish their brand and their platform as well. We also don't hide the technology providers we work with. But in the end, it's us that typically talks to the customers. We will select the right solutions for our customers.

LEDs: Christian, you mentioned Li-Fi. Is Feilo Sylvania getting involved in Li-Fi?

BDG: We are experimenting with it, and working with several partners in our SLIC and doing pilots. At the moment, it's still a very early-stage technology, but we see, especially in France, some very interesting opportunities where the legislation is forming now a very strong business case for this technology. There's specific legislation around the maximum power that Wi-Fi and other radio technologies can now use. It's creating a specific drive for Li-Fi and VLC technologies.

CS: It's fuzzy also in terms of where the revenue is actually coming from, who's going to pay for it, and how are the various players going to make money in this space.

LEDs: Of all these smart applications, what is the number one application?

CS: It's building management and then extending control of the building to HVAC and to heating and those kinds of things.

LEDs: So indoor positioning is something you're interested in, but not top of the list?

CS: You cannot do everything at the same time. You have to set priorities. For us, it's about extracting value instead of doing a little bit of everything. So the focus is currently very much on what we describe as facility management.

LEDs: Any possibility of you linking up with GE or acquiring their facilities in Budapest? Where does that stand, or did that stand? How much of a possibility is or was it that you would acquire some facilities or assets from GE in Hungary? Or, with rumors that GE might sell its energy and lighting group Current, might you be interested?

CS: We're not going to give any official comment on that, given the very early stage of the entire thing.

LEDs: Is there anything I haven't asked you about that you wanted to touch on?

CS: Yes, there is. We're all quite excited about the opportunities that exist around smart lighting, around connected lighting, around 'beyond lighting.' Sometime people tend to forget that there is still a very significant amount of 'just lighting' based business - LED lamps and fixtures. That's a business that has been an historical strength, and whilst we invest heavily in smart and connected, we're also putting more focus on what we call FMG - fast-moving goods - basically, commodity kind of products in the lighting space around fixtures and LED lamps. People need simple, affordable, easy-to-install standard lighting solutions just as much as innovation. We've created a new separate unit that is entirely focused on bringing competitive products to market very, very fast.

LEDs: Is this called the Start range?

CS: Yes, indeed.

LEDs: So Start is basically a range of lamps or fixtures that are not built to be connected and intelligent and that sort of thing?

CS: Ahhhh. This is a very interesting question. In principle you could argue yes, whenever it's a 'dumb' lighting solution, a commodity, then it's Start. But no, we are thinking beyond that. We are believing that eventually easily connected lighting solutions will also become a commodity. And connectivity should not in the longer run be just the realm of expensive, high-end fixtures.