Signify’s WiZ Acquisition

In April 2019, Signify, the re-branded Philips Lighting business, acquired smart bulb company WiZ for an undisclosed sum. Signify is the company that pioneered and really led smart home lighting adoption. However, despite its long-standing and steadily expanding range of smart lighting options, the smart lighting market is evolving to embrace new technologies, players, and strategies. Acquiring WiZ helps bring Signify into a new and growing area of the smart home lighting market.

Hong Kong-headquartered WiZ, founded in 2015, has a team of 53 employees distributed around the world due to the company’s sales in 25 countries across the Americas, Europe, the Middle East, and Asia-Pacific.

Alongside a range of LED white and color bulbs, the company expanded its product line to include smart table lamps and, rare, smart recessed downlights. In its more recent commercial lighting offerings, the company also offers its cloud lighting management platform as well as lights with embedded Bluetooth beacon capabilities. The company also extends its business by offering its devices and supporting cloud platform and control app Original Equipment Manufacturers (OEM) customers. At the time of its acquisition, WiZ said it had more than 60 lighting vendors using its technology to deliver smart lighting offerings.

Signify is expected to close its acquisition of WiZ in 2Q 2019. According to the company, WiZ will remain as a separate brand and will operate as a separate unit within Signify.

This acquisition by Signify illuminates a changing smart lighting marketplace.

Lighting is a key smart home function and one whose value is clear to most end users. Lighting has long been linked to smart home’s stalwart U.S. application—security, but lighting control can also play to energy management aspirations. Lighting is also a home system that all residents regularly engage with. That engagement requires physical effort of going to a light switch and changing it and although the changes are minimal, these are exactly the kinds of tasks best handed off to smart home capabilities. The ability to operate lights and lighting setting by app or increasingly through voice command is immediately understandable and appealing. However, the cost and complexity of installing such systems has been prohibitive for many end users.

Signify built and maintained a dominant position in the residential smart lighting market. That position was built upon not just its  market longevity, but in delivering valued products, with a strong brand (Hue) and its ability to parlay all of that into a broad range of integrations and partnerships that have made it an obvious choice for many end users looking to add smart lighting.

Over the past few years, the cost of smart bulbs has fallen significantly. While the lowest price bulbs still command a premium over non-connected bulbs, those from Signify are now around US$25, half the price from when they launched in 2012. The growing value of the smart home lighting market combined with lower Bill of Materials (BOM) costs for connected lights and a significant rise in the number of competitors have played a key part in that reduction. Signify faces far greater competition these days and there is no shortage of specialist lighting competitors as well as mega-brands like Ikea with offerings in the market. For example, Ikea has its own smart lighting range with bulbs that reached down to below US$10 per bulb. Those IKEA bulbs use the same low-power Zigbee connectivity used in Signify’s Hue range. What is key about Zigbee is that consumers need to buy not just a single bulb to start with smart lighting but a bridge device. Zigbee has yet to be widely adopted in broadband routers and a lack of interoperability support within smart home in general can hamper connectivity even where Zigbee is available within a router. As we have seen in the development of the mainstream popular smart home market, paying for gateways or bridges—even when bundled with smart bulbs in starter kits—raises the cost of adopting lighting deployments, and this cost falls hardest in small initial deployments.

What WiZ brings to Philips Lighting is proven experience in embedded Wi-Fi within smart bulbs and in managing the connectivity, security set-up, and control of those lights. The lowest-priced WiZ bulbs also sell for around US$25 but without the requirement for a bridge or a gateway. The upfront cost to a consumer looking to invest in smart lighting is notably lower.

Wi-Fi has been making in-roads into the smart lighting market for the past two years but primarily from start-ups. Wiz was one of a handful of Wi-Fi focused smart lighting companies in a field that now includes LIFX, Sengled, FluxSmart Lighting, Eufy, and others.

Signify’s move into the Wi-Fi connected residential market is further validation of its growing appeal. It also speaks to the growing value of by-passing smart home gateways and bridges by adopting Wi-Fi in smart home devices. Lighting is particularly suited to Wi-Fi adoption given that lights are overwhelmingly static (Hue does have mobile lighting options) and therefore can be permanently connected to a power supply. This alleviates the key power demand concerns over embedded Wi-Fi. Even so, the recent conversion to Wi-Fi in smart locks attests to confidence that Wi-Fi can even be supported in battery powered devices. ABI Research discusses this conversation in more detail in the insight “Smart Locks at CES Point the Way.”

There is another key dynamic disrupting smart lighting, and that also plays to the potential for Wi-Fi. 2018 has seen a wave of players introducing smart light switches. Offering an alternate way for lighting control to be managed but without connectivity in the bulbs, but rather in the switches. While Hue launched its own Zigbee dimmer in 2018, other vendors including Leviton, TP-Link, WEMO, KASA, and other fuller functioned controller light switches such as those from Brilliant or Noon have supported Wi-Fi.

Smart switches have the potential to bypass the requirement for smart bulbs for consumers still exploring smart lighting potential while smart switch players look to draw in new build as well as retro-fit markets with their offerings. Vendors continuing to focus on Zigbee connectivity are faced not just with having to defend the purchase of a bridge or hub for their lights but also a dependence upon repurchasing connectivity with each bulb rather than adding connectivity and control at the switch.

Signify certainly has the resources to develop its own Wi-Fi-based products, but this acquisition gets it there quicker and with established brand and retail partnerships. The Wi-Fi focus of WiZ’s offerings means there is little overlap between the Hue and WiZ offerings and, in keeping the WiZ branding, Signify will be able to judge and benefit from the appeal of Wi-Fi lighting without running the risk of directly challenging or cannibalizing the Hue brand. Equally separate branding should also prevent confusion amongst its existing customers looking to add WiZ lighting into their existing Hue systems.

In extending its engagement - if not its brand - into Wi-Fi lighting, Signify is showing that the technology has established its presence and value in the smart home space, and we are likely to see the technology increasingly embraced and tested for a wider range of smart home devices.