Is Signify's IoT glass half empty or half full? (UPDATED)

No outfit embodies the push into Internet of Things (IoT) lighting more than Signify, the industry's largest company. The better part of a decade has passed since just about anyone that has anything to do with selling illumination has been trumpeting the future of turning the lighting infrastructure into an Internet-connected doer of everything. Signify has been among the loudest in sounding the call.

So how's it going? We at LEDs Magazine have provided occasional updates over recent years assessing the progress as slow. Now, after watching a half-day of online presentations given by Signify brass to financial analysts last week, we have no reason to radically alter that take, other than to say that at Signify, the situation is a classic case of the glass that could be either half empty or half full.

On the half full side: Signify CEO Eric Rondolat told analysts who gathered virtually for Signify's annual Capital Markets Day that at the end of 2019, Signify has 56 million connected light points, up from 10 million in 2013. (The number as of 2020's third quarter was 71 million, but Signify did not use this figure at Capital Markets Day, because it wanted to make full-year comparisons only).

That sounds like, and probably is, good news.

But here's the thing: At the same gathering, Harsh Chitale, the leader of Signify's Digital Solutions group, said only 3% of the installed base of luminaires in the general professional market will have been connected by the end of this year. Signify's percentage is believed to be larger, but perhaps not by a huge amount — the company declined to provide LEDs with its own figure. Chitale's group targets the non-residential market. It is his group that positions the company's Interact brand of IoT goods and services across warehouses, commercial offices, retail stores, leisure venues, hospitality, sports venues, landmarks, and other environments.

That's where things start to get into the empty/full discussion. One might be patently unimpressed by the low levels. Or one could optimistically view them as leaving plenty of room for growth.

Outwardly, Signify takes the latter view — that there is an expanse of lighting users who can be converted to the benefits of outfitting smart lights with all sorts of chips and sensors, hooked up by wires and wirelessly to the Internet and to data scrubbers. A quick review of just some of those benefits: Smart lights gather data on building occupancy that provide insights on how to optimize space; they track assets; they help guide people through unfamiliar physical space; they reveal in-store shopping trends and can communicate and engage with consumers; and so on.

Back in the earlier days of the 2020 coronavirus pandemic, CEO Rondolat said Signify would use the slow economic times as an opportunity to educate the market on smart lighting. He continues to remain upbeat that users will eventually go for it in much greater numbers.

Of course, as Rondolat recently acknowledged to LEDs, there is a great unknown surrounding the future of office working in general once the pandemic eases, now that workforces have been habituated to work-from-home routines during the days of lockdowns and social distancing. Speaking to analysts last week, Rondolat noted, “We see headwinds on the professional side of the business because of the lockdowns.”

And, whatever the extent of commercial office use turns out to be, one challenge that Signify and the lighting industry in general continue to face is that as lighting companies try to morph more into IT and networking outfits, they are competing against, whadya know, dyed-in-the-wool IT and networking outfits. Most likely, partnerships will be key.

Then there is the matter of monetizing the connectivity. That is where Signify perhaps faces its greatest challenge.

In this day-and-age of smart anything and everything, it has become a cliché that data is the new oil. It is the data collection and analysis that would seem to have the most potential value to Signify's Interact lighting initiative.

Yet at nearly three years since Signify (then called Philips Lighting) launched Interact, Rondolat described the data aspect as “still small.” He did not commit to a point in time when that might change, noting only that “we believe the market will be revealed probably in the coming years.”

Chitale had a similar assessment. He described four revenue prongs to connected lighting that include upfront product sales as well as three different service streams: lighting as a service (LaaS), asset management (looking after city street lights, for instance), and data-related operations such as monitoring and analyzing air quality, occupancy, people movement, and space utilization.

As LEDs has reported before, the data category appears to be lagging the others by a long shot. Chitale described it as “not yet fully developed, and yet to mature.” That is no overstatement. “There are proof points emerging, there are initial subscribes emerging who are paying for it, but that space has yet to pay out,” Chitale said.

But, back on the glass half-full side, Chitale said that Signify is optimistic. About 380 outside developers are accessing Signify APIs (application programming interfaces) to develop programs that would tap the data, he said. He also noted that a quarter of his new business is coming from connected lighting on some level or another, and that by the end of this year, every lighting fixture his group sells will have a connectable option.

Meanwhile, taking a sidestep in the smart lighting discussion, as LEDs Magazine watched last week's proceedings, we were on the lookout for any Li-Fi update. Li-Fi is the lighting-based technology that uses modulated light waves, rather than Wi-Fi's radio waves, to transmit data. Enthusiasts have long heralded its great potential to act as an Internet carrier that could, at the least, greatly supplement and offload Wi-Fi.

But like smart lighting in general, it has been slow to emerge. One big reason, as LEDs has written many times, is that major phone, tablet, and laptop makers have yet to embed the the technology in their devices, the way they have with Wi-Fi.

CEO Rondolat said as much himself.

“We know there is one formidable driver for the business,” he told the analysts. “It's going to be when there are Li-Fi transmitters and receivers on our phones.”

Signify used the occasion of Capital Markets Day to deliver a forecast for 2020, which ends on Dec. 31. In light of the pandemic, it had withheld forecasts earlier this year. It now said it expects comparable sales to fall by between 13% and 13.5%, and that adjusted EBITA margin will be in the range of 10.2% and 10.6%.

It also issued guidance for the years 2021 through 2023, when it expects yearly comparable sales to grow by between 0% and 5%. Adjusted EBITA margin will be 11% to 13% by 2023, and free cash flow will exceed 8% of sales in the 2021–2023 period, it said.

Capital Markets Day included detailed presentations not only from Rondolat and Chitale but from other executives as well, spanning a wide berth of subjects beyond professional connected lighting and including connected home lighting brands Hue and WiZ, the integration of Cooper Lighting Solutions and Zhejiang Klite Lighting Holdings Co., the company's ambitious accomplishments and goals in sustainability, UV-C lighting for deactivating the coronavirus, and its growth potential in agriculture and horticultural lighting, in solar lighting and in 3-D printing of luminaires.

LEDs will be bringing you further insights from the online event (which, it should be noted, impressively went off seemingly without a hitch as Signify connected presenters and analysts from around the world) in upcoming stories.

MARK HALPER is a contributing editor for LEDs Magazine, and an energy, technology, and business journalist ([email protected]).

*Updated Dec. 18, 2020 2:30 PM for clarifying detail on percentages of connected lighting installed. In our original version, we stated that Signify's digital solutions division had connected only 3% of the lights in its installed base. In fact, 3% is a general industry figure and is an estimate for year-end 2020. Signify's own percentage appears to be higher, but the company would not reveal its own number. Also, after we published, Signify clarified that it had 71 million connected light points at the end of this year's third quarter. It did not provide that figure during Capital Markets Day, when it stated 56 million, which was its number of connected light points at the end of 2019. The company does not yet have a full year 2020 count, and thus abstained from using a 2020 number in the annual presentation.

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