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Times & Trends: The New Wave in R&D

Sept. 29, 2017
Look for more electrical manufacturers to increase their R&D spending on the development of IoT-enabled Tier 3 products.

In this month’s article, “The Five Big Deals of the Day” (page 18), EW’s editors make their picks for the news and trends with the most potential for game-changing impact on electrical manufacturers.

When talking about electrical manufacturers, the conversations often center on the latest merger or acquisition, the rise and fall of their stock prices, who took a job with which company, or which rep took on a new line. For the technically minded, the talk may be about differences in international electrical standards.

But a topic that may have even more impact in the future is the steady growth in electrical manufacturers’ R&D investment in Internet of Things (IoT)-enabled products, renewables and other products that will one day form the foundation of an interlinked electrical network from the power source right on down to everyday electrical products.

This new network won’t be as dominated by centrally located, investor-owned coal-fired power plants. If the power is coming from a utility — and is not being produced locally by companies, local municipalities or homeowners — it will often be produced by natural gas turbines, utility-scale wind farms, solar installations or battery storage systems.

This power will one day flow through a thoroughly upgraded transmission system designed to handle the ebb and flow of the intermittent power produced by wind and solar (and smoothed out by massive battery storage systems), right on down to electrical products and circuits being controlled by smartphone apps in the palm of your hand. Products like IoT-enabled lighting systems and wiring devices will be the norm instead of on the cutting edge.

If you haven’t heard the term “Tier 3,” you should get familiar with it. Manufacturers’ R&D efforts include not only an investment in “Tier 1” products that gather information at the local device level through sensors, and “Tier 2” gateway products that process the information gathered by Tier 1 devices, but also the development of products for the “Tier 3” data level, where much of the analytics happens. Information gathered there is piped up to “Tier 4,” where it undergoes higher-level analytics or is archived in the cloud for access by applications.

At Acuity Brands Inc., Vernon Nagel, the company’s CEO and president, said on a recent conference call with analysts that much of his company’s R&D is aimed at harnessing Acuity’s IoT software platform and that its sales of Tier 3 connected lighting products were up 35% in its most recent financial quarter. These products now represent more than 13% of Acuity’s total sales.

And when Hubbell bought iDevices, Avon, CT, a company that focuses on developing IoT-enabled products for a home’s power, lighting and climate control systems, Hubbell’s CEO David Nord said in a press release, “iDevices accelerates our capabilities and expertise in IoT technology, propelling us more quickly toward our vision of providing Tier 3 energy management solutions via connected hardware with a software front-end.”

Other examples exist of mainstream electrical manufacturers with Tier 3 technologies. When Legrand launched its ELIOT (electrical IoT) system late last year for connecting products in the built environment, the company said that as of as of Nov. 2016, it had more than 22 million Legrand connection points in existence. Its sales of these devices were over $350 million in 2015, up 34% over 2014, and Electrical Marketing reported that Legrand wants double-digit sales growth for connected products by 2020 and it expects to double the number of its connected product families from 20 in 2014 to 40 in 2020.

When you step back and look at the electrical industry as we have typically defined it and its ongoing marriage with the IoT world, perhaps a statement Christopher Davis, iDevices’ CEO and founder, made at the time of his company’s acquisition by Hubbell puts this transition in perspective, not only for those two companies but for the entire electrical wholesaling industry.

“Hubbell was born at the dawn of electricity, iDevices at the dawn of IoT,” he said in a press release. “We are at the precipice of a revolution in technology that will forever change people’s lives and the way they interact with the world around them.”