Smart Windows Markets, Exec Summary

NanoMarkets, LC | PO Box 3840 | Glen Allen, VA 23058 | TEL: 804-270-1718 | FAX: 804-360-7259

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Smart Windows Markets 2012 Nano-515

Published March 2012

© NanoMarkets, LC

NanoMarkets, LC PO Box 3840 Glen Allen, VA 23058 Tel: 804-270-1718 Web: www.nanomarkets.net


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Table of Contents

Executive Summary ............................................................................................................... 1

E.1 Three Key Trends Creating Opportunities for Smart Windows Manufacturers ............... 1

E.1.1 Key Trend 1: Energy Conservation, Smart Windows and the Future .......................................................... 1

E.1.2 Key Trend 2: Smart Rather than Solar ......................................................................................................... 2

E.1.3 Key Trend 3: Smart Window and Green Aesthetics .................................................................................... 3

E.2 Smart Glass Products: Passive and Active ..................................................................... 3

E.2.1 Passive Smart Windows ............................................................................................................................... 4

E.2.2 Active Smart Windows ................................................................................................................................. 5

E.3 Opportunities for Glass and Window Firms ................................................................... 6

E.4 Opportunities for Materials and Specialty Chemicals Firms ........................................... 6

E.5 Opportunities for Construction and Architectural Firms ................................................ 8

E.6 Opportunities for Automotive, Aerospace and Other Transportation Firms ................... 8

E.7 Firms to Watch in the Smart Windows Space ................................................................ 9

E.8 Summary of the Eight-Year Forecasts for the Smart Windows Market ......................... 11

Chapter One: Introduction ................................................................................................... 14

1.1 Background to this Report .......................................................................................... 14

1.1.1 Passive Smart Windows ............................................................................................................................. 14

1.1.2 Active Smart Windows ............................................................................................................................... 15

1.1.3 Geographic Regions for Growth and Target Markets ................................................................................ 16

1.2 Objectives and Scope of This Report ........................................................................... 17

1.3 Methodology of this Report ........................................................................................ 18

1.4 Plan of this Report ...................................................................................................... 19

Chapter Two: Smart Windows Market: Dynamics and Opportunities .................................... 20

2.1 Key Market Drivers ..................................................................................................... 20

2.1.1 Energy Conservation .................................................................................................................................. 20

2.1.2 LEED Construction ...................................................................................................................................... 21

2.1.3 Style and Convenience ............................................................................................................................... 22


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2.1.4 Product Differentiation .............................................................................................................................. 22

2.2 Smart Window Technologies: Their Advantages and Disadvantages ............................ 23

2.2.1 Passive Smart Window Technologies ......................................................................................................... 23

2.2.2 Active On-Demand Smart Window Technologies ...................................................................................... 26

2.2.3 Photochromic Smart Windows .................................................................................................................. 29

2.2.4 Thermochromic Smart Windows ............................................................................................................... 29

2.3 Smart Windows Opportunities in Different Market Segments ..................................... 30

2.3.1 Smart Windows in Residential Buildings .................................................................................................... 30

2.3.2 Smart Windows in Commercial (Income) Buildings ................................................................................... 31

2.3.3 Smart Windows in Institutional Buildings .................................................................................................. 32

2.3.4 Smart Windows in Transportation ............................................................................................................. 33

2.4 Geographic Market Outlook for Smart Windows Opportunities .................................. 34

2.4.1 U.S. Market Outlook for Smart Windows Opportunities ........................................................................... 34

2.4.2 European Market Outlook for Smart Windows Opportunities .................................................................. 37

2.4.3 Asian Market Outlook for Smart Windows Opportunities ......................................................................... 39

2.4.4 Latin America Market Outlook for Smart Windows Opportunities ........................................................... 43

2.4.5 Summary of Geographical Smart Windows Opportunities ........................................................................ 45

2.5 Key Points Made in This Chapter ................................................................................. 46

Chapter Three: Smart Window Products, Technologies, and Supply Chains ........................... 49

3.1 The Smart Windows Market: Manufacturers, Influencers (Marketing, Sales), and Service

Providers ......................................................................................................................... 49

3.1.1 Basic Plastic Film Substrate Providers for Smart Window Applications .................................................... 49

3.1.2 Flat Glass Substrate Providers for Smart Window Applications ................................................................ 52

3.1.3 Functional Materials and Component Providers for Smart Window Applications .................................... 55

3.1.4 Marketing, Sales and Service Providers in the Smart Windows Market .................................................... 56

3.2 Passive Smart Windows: Products, Technologies, and Supply Chains ........................... 57

3.2.1 The Passive Retrofit Window Film Market................................................................................................. 58

3.2.2 The Passive Low-e Glass Smart Windows Market ..................................................................................... 61

3.2.3 The Passive Thermochromic Windows Market ......................................................................................... 62

3.2.4 The Passive Photochromic Windows Market ............................................................................................ 63

3.3 Active On-Demand Smart Windows: Products, Technologies, and Supply Chains ......... 64

3.3.1 PDLC Active On-Demand Smart Windows ................................................................................................. 65

3.3.2 SPD Active On-Demand Smart Windows ................................................................................................... 66

3.3.3 Electrochromic Active On-Demand Smart Windows ................................................................................. 68

3.4 Self-Cleaning Smart Windows ..................................................................................... 72

3.5 Key Points from This Chapter ...................................................................................... 75


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Chapter Four: Eight Year Smart Windows Forecast ............................................................... 78

4.1 Forecasting Methodology ........................................................................................... 78

4.1.1 Data Sources .............................................................................................................................................. 80

4.1.2 Alternative Scenarios ................................................................................................................................. 80

4.1.3 Scope of the Smart Windows Market Forecasts ........................................................................................ 81

4.2 Forecasts of Passive Smart Windows by Application Area ........................................... 82

4.2.1 Forecast of Low-e Glass in Passive Smart Windows .................................................................................. 84

4.2.2 Forecast of Retrofit Window Film in Passive Smart Windows ................................................................... 85

4.2.3 Forecast of Thermochromic Film in Passive Smart Windows .................................................................... 87

4.2.4 Forecast of Photochromic Film in Passive Smart Windows ....................................................................... 89

4.3 Forecasts of Active Smart Windows by Application Area ............................................. 90

4.3.1 Forecast of PDLC Film in Active On-Demand Smart Windows ................................................................... 92

4.3.2 Forecast of SPD Film in Active On-Demand Smart Windows ..................................................................... 93

4.3.3 Forecast of Electrochromic Smart Glass in Active On-Demand Smart Windows ....................................... 95

4.3.4 Forecast of Electrochromic Film in Active On-Demand Smart Windows ................................................... 97

4.4 Summary of Forecasts ................................................................................................ 98

Abbreviations and Acronyms Used In this Report ........................................................... 103

About the Author ........................................................................................................... 104

List of Exhibits Exhibit E-1: Key Players in the Smart Windows Market ........................................................................ 10

Exhibit E-2: Smart Window Glass and Film Market, 2012-2019 ($ Millions) ........................................... 11

Exhibit 2-1: Likely End-Use Applications by Smart Window Technology ................................................ 34

Exhibit 2-2: Regional Demand for Smart Windows by Technology ........................................................ 45

Exhibit 2-3: Regional Growth of Smart Windows by Market Segment .................................................... 46

Exhibit 4-1: Total High Quality Float Glass Market for Thermochromic film, Photochromic film and Low-e

glass in million sq. meters @ 7% AGR, 2012-2019 ...................................................................... 79

Exhibit 4-2: Volume of the Passive Smart Window Film/Glass Market (million sq. meters) 2012-2019 .... 82

Exhibit 4-3: Value of the Passive Smart Window Film/Glass Market ($ Millions), 2012-2019 ................... 83

Exhibit 4-4: Passive Smart Window Market –Low-e Glass, 2012-2019 ................................................... 85

Exhibit 4-5: Passive Smart Window Market - Retrofit Window Film Market, 2012-2019 .......................... 86


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Exhibit 4-6: Passive Smart Window Market - Themochromic Film, 2012-2019 ....................................... 88

Exhibit 4-7: Passive Smart Window Market - Photochromic Film 2012-2019 .......................................... 89

Exhibit 4-8: Volume of the Active Smart Window Film/Glass Market (million sq. meters), 2012-2019 ...... 91

Exhibit 4-9: Value of the Active Smart Window Film/Glass Market ($ millions), 2012-2019 .................... 92

Exhibit 4-10: PDLC Active On-Demand Smart Window Film Market, 2012-2019 ..................................... 93

Exhibit 4-11: SPD Active On-Demand Smart Window Film Market, 2012-2019...................................... 94

Exhibit 4-12: Electrochromic Active On-Demand Smart Glass Market, 2012-2019 .................................. 96

Exhibit 4-13: Electrochromic Active On-Demand Smart Window Film Market, 2012-2019 ....................... 98

Exhibit 4-14: Smart Window Glass and Film Market, 2012-2019 ($ Millions) .......................................... 99


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Executive Summary

E.1 Three Key Trends Creating Opportunities for Smart Windows Manufacturers

Smart window technologies already have large end-use markets within the architectural

(residential and commercial buildings) and transportation (cars, airplanes, boats, etc.) sectors.

NanoMarkets believes that the market for smart windows will grow significantly over the next

eight years, becoming a $42 billion market by 2012, and more than doubling to $87 billion by

2019 (although much of this is made up of low-e glass).

NanoMarkets sees three key trends that are currently driving the smart windows market and

need to be taken into consideration in building the business case for any smart windows

product. Each of these three trends are obvious at one level, but each has subtleties that are

important for smart windows firms to consider and each has changed somewhat since

NanoMarkets issued its last report on smart windows.

E.1.1 Key Trend 1: Energy Conservation, Smart Windows and the Future

The "smart" in "smart windows" can be used to describe many different kinds of functionality,

including futuristic capabilities such as windows that can double as panel lighting or solar

panels. However, in reality most of the revenues that will be generated by the products

mentioned throughout the forecast period considered in this report will essential be derived by

the needs of building owners and managers to improve on energy conservation.

Smart windows may be just what the doctor ordered when it comes to providing reduced

energy use in buildings, since according to some sources it can provide improvements in this

regard of up to 40 percent.

However, NanoMarkets believes that smart windows firms must react to two separate trends

with regard to energy conservation needs:

The most important of these trends is the long-term real cost increase for energy that

we expect to see over the next decade and beyond. What we have in mind here are the

price pressures that growing demand for energy from large, rapidly emerging countries

(especially China and India) are likely to produce. Energy production could keep up with

this new demand, but is unlikely to until well into the next decade.

Thus energy efficiency is likely to be a persistent concern of building mangers, owners

and construction companies throughout the period under consideration. Because smart

windows are able to offer a clear and distinct solution here, we think that smart


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windows makers will be able to ride the wave of energy shortage (as it were) throughout

the period under consideration.

We also expect energy efficiency bubbles to appear over the next few years that will be

especially good for the smart windows business, but only for brief periods. These will

not be phenomena driven by real-world demand, but rather by high levels of inflation or

deflated currency; that is, they are monetary phenomena and are relatively temporary

in nature. For example, the cost of heating fuel shoots up in dollar and euro terms

causing a spurt in sales for energy efficient devices including smart windows. It is

important for smart windows firms to capitalize on such sentiments, while recognizing

that they are likely to be temporary and for that reason it is important that they don't

over commit.

This kind of bubble phenomena seems more likely to occur sooner than it did when

NanoMarkets last published a report on smart windows, given the current financial state

of most of the countries in which smart windows are sold.

E.1.2 Key Trend 2: Smart Rather than Solar

NanoMarkets also believes that sustainable energy architecture may be about to experience a

change in direction and this is also something new to note since our last smart windows report.

The change that we are talking about is one that deemphasizes some of the green energy

technologies (solar and wind) as subsidies decline in various geographies. This is already

happening in Germany and we expect this to happen in other important countries over the next

few years.

Assuming this analysis is correct, one possible consequence of a decline in government support

for green energy generation will be to integrate greenness into building materials and products

in order to improve the economics of green building. In other reports, NanoMarkets has

discussed extensively this trend in the context of building-integrated PV (BIPV), but it is just as

likely to impact the smart windows market.

In other words, the green building of the future may look a little more like a passive solar

building, with a distinct architecture and no highly visible generation systems. However, what

we are talking about here is not really a passive building in the old sense, but one in which the

active components are much more fully part of the building.

Making this kind of development more possible is the arrival of green standards such as LEED

and some equivalent standards from Europe. These can be embedded in building codes and


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frequently are, which has the implicit effect of broadening the addressable markets for green

building products including smart windows. In the context of this development, smart windows

may also form an important part of net zero energy buildings.

The existence of codes embody LEED and the like make novel energy efficient products—such

as smart windows—more acceptable and credible to building owners and managers and

therefore both broaden addressable markets and take the green building market further from

the highly customized space in which it began.

E.1.3 Key Trend 3: Smart Window and Green Aesthetics

So far, the general trends that we have discussed here are ultimately based on various aspects

of the significant energy efficiency benefits that smart windows can bring in their wake.

However, there is an aesthetic aspect attached to all of this, too. Architects, construction firms

and building managers are likely to be attracted to using green building materials in order to

create a sense of "green chic" that can help market themselves and their buildings to certain

owner/lessor demographics.

To the extent that the next-generation green buildings take off, smart windows are likely to be

part of the story that sells them. The new types of smart windows—that is, primarily the active

smart windows—may become part of some future aesthetics that combine "greenness" with

high tech.

This type of new aesthetic may have a different appeal in different geography and an analysis of

architectural tastes in different countries lies well beyond the scope of this report. However,

we note that the desire for novelty and convenience in new architectural designs has been

particularly pronounced in the emerging economies of China, India, Brazil, and others. One

example of a convenience-driven smart window application is the use of PDLC film smart

window technology for privacy glass in the internal walls of hotels and offices in China.

E.2 Smart Glass Products: Passive and Active

Although several technologies, such as thermochromic, electrochromic, and photochromic

windows are maturing and growing in acceptance, in our estimation, the penetration of energy

saving smart windows as a percentage of the global high-quality float glass market remains low

(~22 percent), and that is only considering "smart windows" under the broadest definition.

This penetration is mainly dominated by energy saving passive low-e glass and retrofit window

film products.


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In this report, NanoMarkets makes a distinction between "passive" smart windows and "active"

on-demand smart windows.

E.2.1 Passive Smart Windows

The first kind of smart window is entirely passive. They might reasonably be thought of as

being built wholly from smart materials and do not include an embedded electrical or electronic

system. In passive smart windows, one or more components in a window passively but smartly

carry out a function, such as blocking UV rays, absorbing heat/IR radiation from sunlight while

allowing most of sunlight to pass through the window, without any external stimulus provided

by the user. Generally speaking, these technologies have been around for quite a while, so they

are mature and only so much market growth can be squeezed out of them.

Another issue is that for those looking to build high-tech buildings the responsiveness of the

passive smart windows may not match the kind of requirements that the building owners and

managers expect and/or require. Specifically, one big disadvantage of passive smart window

technologies is that they do not provide energy saving benefits on-demand with the flip of a

switch. This kind of functionality is found in the active smart windows systems, which is where

the new opportunities for smart windows are to be found going forward.

Low-e glass: Low-e glass allows for energy savings in buildings by blocking harmful radiation

and heat from sunlight. This technology is the most mature among all of the energy saving

smart window technologies and the market for low-e glass is already huge.

Nonetheless, NanoMarkets see the market for this material expanding significantly in the future

driven by the energy efficiency trends mentioned above. Nonetheless, this is a fairly

undifferentiated product, where the opportunity for distinguishing products in the marketplace

is not that great.

Architectural window film: Apart from its most obvious difference—one is glass and one is

film—the economics and functionality of window film is very similar that of low-e glass. One

other factor, however, is that window film is often found in use in transportation applications,

which low-e glass is not.

Thermochromic windows: This type of window provides clarity or tint in response to

temperature changes and can be used in transportation as well as architectural applications.

However, while the technology is interesting it has not yet proved high performing. And as a

result, the market for such windows has not proved very large; NanoMarkets does not expect

this market situation to change much during the period under consideration.


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Photochromic windows: The thermochromic windows story is very much repeated for

photochromic windows. In particular, the market for these kinds of windows is very small and

likely to stay that way. Photochromic windows change tint in response to exterior light,

otherwise these windows also allow for energy savings similar to thermochromic windows.

E.2.2 Active Smart Windows

The bottom line is that until fairly recently all the technologies and solutions that could address

the trends and opportunities mentioned at the beginning of this chapter, were fairly primitive

and inadequate to meet future needs for smart windows.

As a result, the new active smart windows which are emerging from several different

technology research programs offer a much stronger way to address these needs and—as a

result—NanoMarkets' revenue growth projections for these technologies are quite bullish.

Despite being fairly disparate technologically, they all share the ability of fast response time

providing building users with enhanced comfort and improved energy savings.

In active smart windows, one or more of the components in the window carry out a function

such as blocking or transmitting sunlight on-demand in response to an external stimulus, such

as an electric current provided by the user (the flip of a switch).

PDLC film-based smart windows: This technology is based on liquid crystals dispersed in a

polymer matrix that are sensitive to electric fields. It dims through the use of diffraction of light

upon application of an electric field.

NanoMarkets does not believe that PDLC will ever be huge market and seems likely to be

confined to architectural markets for the extent of the forecasts presented in this report.

However, the technology has already, found use in interior privacy applications and we expect

this technology to produce revenues in the low hundreds of millions of dollar through much of

the forecast period.

SPD film-based smart windows: This technology, NanoMarkets believes, will produce revenues

about twice to three times that of PDLC. This is because this technology has considerable

potential in the transportation sector as well as the architectural sector; SPD has already found

applications in transportation, such as in automobiles and airplanes, for example.

SPD provides gradual tinting upon application of an electric field to field-sensitive particles

suspended in a polymer matrix.


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Electrochromic technology: Electrochromic technology is the most established of the active

smart windows technologies. Electrochromic windows provide clarity or tint in response to an

electrical field. Electrochromic glass for transportation markets is already a half-billion dollar

market, but electrochromic glass for architectural applications is only just beginning to emerge

and should be a substantial market by 2017 or so. Electrochromic films, however, seem much

more likely to be confined to niche markets.

E.3 Opportunities for Glass and Window Firms

Smart windows provide a growth platform for architectural glass manufacturers and window

manufacturers:

Already "pricey" architectural glass and window products can be sold at incremental

premiums, while providing valuable additional features such as energy savings with

smart coatings on the windows and glass facades. Thus, smart windows will enable

higher-priced product sales for glass and window manufacturers.

By partnering with architectural and construction companies, which typically determine

the product specifications for their buildings, window and glass manufacturers can

create industry leverage, and thus can make substantial money by developing energy

saving smart films or glass that can be used in smart windows.

NanoMarkets further believes that, as awareness of the smart windows market grows, end-

users (building owners/operators, home owners, and auto owners) will further demand added

functionality, such as solar energy generation and OLED lighting integrated with smart

windows. Such technology advances will further fuel the growth and adoption of smart

windows.

As usual, there are some negatives to be considered here too. As we have already discussed,

there are lots of technologies floating around in this segment and there are real risks of glass or

windows companies picking the wrong horse or applying a technology to a market sector in

which it does not work particularly well.

E.4 Opportunities for Materials and Specialty Chemicals Firms

Materials and specialty chemical firms are a key part of the smart window supply chain. Just as

electronic technology in general was enabled by innovations in materials science, the growth of

the smart window market will be fueled by innovation in specialty chemicals and materials

science. This fact in itself delineates some important opportunities for materials and specialty

chem firms. The main material classes used in smart windows can be categorized as follows:


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Substrates such as plastic films (if not glass)

Functional coatings and their components that provide "smarts" to the window

Adhesives and sealants for assembling an air-tight window to enable longer lifetimes for

the active components of the smart window

Transparent conducting films for electrochromic smart windows

Window frame materials

The growth of the smart windows market will bring significant growth and innovation

opportunities to materials suppliers in all of the categories described above. However, the major

growth areas are electrochromic coatings and self-cleaning coatings. Thermochromic coatings

will provide moderate growth opportunities for material suppliers.

Electrochromic glass, by itself, for the transportation and architectural markets combined will

become a $3-billion market by 2019. Most of this growth will come from the new construction

and automotive segment of the market. In addition to electrochromic coatings, there are

several other opportunities for materials suppliers to further enable the adoption of smart

windows technologies:

Reduction of the cost of electrochromic coating materials, since they are the most

expensive component in a smart window.

Development of photochromic coatings that provide a broader range of dimmability and

uniformity as a function of incident light.

Development of thermochromic coatings with improved response times for tinting and

clearing; such advances would provide a big boost for adoption and market growth.

Reduction in the manufacturing cost of PDLC films by leveraging manufacturing

efficiencies and new materials for higher market penetration of PDLC film smart

windows.

Development of adhesives and sealants that can provide extra protection for the

transparent conducting layers of electrochromic smart windows.

From a materials stand point, the main driver for enabling smart windows growth is to develop

electrochromic materials that are cost effective and provide broad tunability for on-demand

tinting and privacy.


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E.5 Opportunities for Construction and Architectural Firms

LEED design and construction—and compliance with other similar standards in Europe—has

been arguably the single most important differentiating and growth factor for construction and

architectural firms in recent years. One such area of differentiation is the extensive use of glass

with the integration of appropriate smart window technologies.

Smart windows enable maximization of energy conservation through the use of natural

sunlight to control the environment inside the building in the winter and summer

months.

The use of natural light in office buildings has also been shown to improve the

productivity of workers.

NanoMarkets believes that construction and architectural firms that focus on LEED design (and

similar standards) and construction, and who adopt smart windows technologies as part of this

focus will benefit. Such firms can also deliver energy efficient buildings with superior aesthetics,

an enhanced interior environment, and convenience.

As smart windows technology pervades the marketplace, it will eventually become a "required

technology" for LEED design and construction. Therefore, architectural and construction firms

that are early adopters of smart windows technology in their building designs could gain the

usual advantages of early entry.

E.6 Opportunities for Automotive, Aerospace and Other Transportation Firms

One of the most important drivers for new product design in the transportation market is

achieving the highest fuel efficiency possible while providing increased convenience to vehicle

owners.

Automotive, railway car, and aerospace companies achieve fuel efficiency for their products in

two ways: reducing weight and using new technologies such as smart windows to reduce

energy usage and thus fuel consumption. Manufacturers of vehicles will, therefore, benefit by

providing higher-value, fuel-efficient products using smart windows technologies. This is

already beginning to happen to some extent:

One of the earliest successes for smart windows technology in the transportation sector

was the rearview mirror in cars.


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The most recent example of the adoption of a smart window technology is the use of

electrochromic liquid crystal-based smart windows for the passenger windows in the

Boeing 787 Dreamliner airplane.

Electrochromic liquid crystal-based windows in metro trains in Singapore provide

privacy for both the passengers and people living in houses along the railway.

Electrochromic technology has been the technology of choice in transportation,

thermochromic, photochromic, and SPD film technologies are also an option:

The initial success of electrochromic glass in automobiles was demonstrated in

dimmable rearview mirrors.

An example, of a thermochromic technology application in automobiles is in the

sunroofs of cars.

SPD technology has been used in automotive and airplane windows. If passengers need

privacy, protection from harmful radiation, and comfort on-demand, then

electrochromic and SPD technology are a more preferred option.

E.7 Firms to Watch in the Smart Windows Space

NanoMarkets believes that the firms listed in Exhibit E-1 will have a significant influence on the

growth of the smart windows market in the coming years. These companies fall into four

categories smart glass, smart film, functional materials, and ancillary materials suppliers. It is

probably fair to add that certain architectural firms are also emerging that are particularly

enthusiastic about green materials and are also shaping the markets considered in this report in

important ways.

The main component of any smart window technology is either the smart film or the smart

glass. The smart window materials and coatings are on the glass or in the film that is either

applied onto the glass or laminated between two pieces of glass (in the case of laminated

glass). Thus, glass suppliers to the smart windows market have significant influence within the

value chain and on the end markets.


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Exhibit E-1: Key Players in the Smart Windows Market Smart Glass Suppliers Smart Film Suppliers Ancillary Chemicals & Materials

Suppliers Saint-Gobain Switch Materials DuPont Teijin Films (Film substrates)

Pilkington/NSG Group Ravenbrick Toray (Film substrates) Cardinal Polytronix SKC (Film substrates) Guardian Pleotint Dai Nippon Ink

Asahi Glass US E-Chromics Landec Intelligent Materials AFG Industries Beijing All Brilliant Material Sciences Corp PPG Industries Sun-TEC Momentive (Silicone)

Schott Glass Chromogenics Dow (Silicone) Soladigm DaiNippon Chemicals Solutia Performance Films (ITO)

Sage Electrochromics Hitachi Chemicals Bayer MaterialScience Architectural Glass

Projects 3M

Gentex Solutia Performance Films GlasNovations Chiefway Citala

© NanoMarkets 2012

Although no single glass supplier as of today can deliver a complete smart window "drop-in"

solution to window manufacturers, NanoMarkets believes that the recent merger and

acquisition activity in this sector indicates a recognition by materials and glass suppliers of a

need to consolidate the long and fragmented supply chain.

Saint-Gobain acquired Bekeart Specialty Films to compliment its SAGE Electrochromics

portfolio and offer a "complete" and "drop in" smart glass to window manufacturers,

and also to gain access to the film coating technology of Bekaert.

Solutia acquired Southwall Technologies to gain access to glass coating technologies and

to enhance its product portfolio of retrofit window films for energy savings. (Solutia

itself was recently acquired by Eastman Chemical.)

Despite these deals, the smart windows supply chain remains long and fragmented.

NanoMarkets believes that as smart window market growth accelerates, there will be

opportunities for firms with available capital to either forward integrate or backward integrate

to reduce cost, innovate new products, and offer a complete portfolio of smart window products

to window manufacturers, end users, such as building construction companies, building

operators, and transportation OEMs.


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E.8 Summary of the Eight-Year Forecasts for the Smart Windows Market

Exhibit E-2 presents NanoMarkets' eight-year forecasts for the passive and active smart film

and smart glass markets. As these numbers show, the markets considered here are dominated

throughout the period by low-e glass. However, this is, as we have already noted a huge, but

relative undifferentiated sector.

Exhibit E-2: Smart Window Glass and Film Market, 2012-2019 ($ Millions)

2012 2013 2014 2015 2016 2017 2018 2019

Passive Smart Window Market

Passive Smart Window Films

Passive Smart Window Glass

Total Passive Smart Window Forecast ($ millions)

Active Smart Window Forecast

Active Smart Window Films

Active Smart Window Glass

Total Active Smart Window Market ($ millions)

Total Passive and Active Smart Window Film ($ millions )

Total Passive and Active Smart Window Glass ($ millions )

Total Passive and Active Smart Window Market ($ millions )

© NanoMarkets 2012


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Again as we have noted, however, NanoMarkets' analysis suggests that some of the

technologies will never move beyond niche applications. This is especially true of the existing

passive technologies other than the most traditional window films and glass. We are also not

anticipating high growth for electrochromic films in the active sector.


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Chapter One: Introduction

1.1 Background to this Report

After many years of being no more than a niche, the smart windows market now seems as if it

is about to generate major revenues for companies that are actively involved. Drivers include:

Growing consumer awareness of energy conservation, green building, fuel efficient

transportation, and the desire for novelty and convenience.

Larger addressable markets as the result of emerging middle class populations in Asia

(India, China) and Latin America (Brazil).

Meanwhile, new smart windows technologies are emerging that enable energy conservation

through smart windows and hence are providing several growth opportunities for various

companies in the smart window value chain:

The smart windows market provides growth opportunities to everyone from

materials/coatings suppliers to glass manufacturers to window manufacturers, and most

importantly to end users such as builders, building owners, home owners, and

transportation owners.

No matter what technologies emerge as the winners, glass manufacturers are certainly

going to be the beneficiaries of smart window growth. One factor that will help with

acceptance of the slightly higher cost of smart glass compared to the standard glass

used in buildings and transportation is the already high current cost of standard glass;

substituting standard windows with functional smart windows with only a marginally

higher cost will be more easily accepted by the consumer.

As the demand volume for smart glass increases, there will be further growth

opportunities through cost reductions for smart coatings and materials and in smart

glass manufacturing.

1.1.1 Passive Smart Windows

Although awareness of smart windows has only increased in recent years, in reality smart

windows have existed for at least the last 15. These older smart windows were produced by

retrofitting existing windows with window films based on low-e coatings that provide energy

savings. We classify these retrofitted windows as passive smart windows; while these films are

functionally smart, they do not provide their functional benefits "on-demand".


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There are many retrofit window film products that impart functionality and provide

other benefits to windows. These benefits include the blocking of harmful UV radiation

from sunlight, the blocking of heat coming inside through the window in the summer,

and the retention of heat inside a room and the maintenance of the ambient indoor

temperature in the winter. They all enable energy conservation by reducing the use of

energy to keep buildings warm in the winter and cool in the summer.

There are other window film products that also improve the aesthetics of the room.

These films eliminate the need for traditional window treatments such as blinds, shades,

curtains, etc. and save on maintenance costs.

Although the films designed for retrofitting of windows have been available for a long time, due

to their evident additional installation costs, the market for these products has started growing

only in recent years along with the increasing awareness of energy conservation.

A note on self-cleaning windows: Yet another category of passive smart windows is self-

cleaning windows. These windows offer more convenience than energy savings. Owners of

buildings (commercial and residential) spend quite a bit of money and time to maintain the

windows so that they provide a clear, aesthetically pleasing view of the exterior environment.

However, while self-cleaning windows do provide the benefit of eliminating the labor costs

associated with maintenance, the cost of applying these coatings vs. the savings in maintenance

costs is difficult to justify for existing windows.

NanoMarkets therefore believes that self-cleaning windows will be more easily adopted in new

construction where the impact of the additional cost of self-cleaning coatings can be softened

with the overall cost of a smart window. As the self-cleaning window concept becomes more

accepted in new construction, the cost of self-cleaning coatings will decrease and enable

growth in the retrofit market as well.

1.1.2 Active Smart Windows

While the market drivers listed above will provide an important new impetus for consumers to

buy passive smart windows, NanoMarkets sees the major growth in this sector coming from

thermochromic and photochromic smart windows, active smart windows/technologies that

allow users to control the energy savings and convenience benefits on-demand. There are also

challenges in this segment, however:

Applying these coatings on existing windows


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The uniformity of performance across various windows on a building, since they depend

on either the temperature on the glass surface or the sunlight on the glass surface.

There are several types of electrochromic technologies including Polymer Dispersed Liquid

Crystal (PDLC) and Suspended Particle Device (SPD) systems and vacuum glass coated with

multilayer electrochromic coatings. Each has its advantages and disadvantages. Polymer

dispersed liquid crystal (PDLC) technology has, however, emerged as the clear winner in the

smart windows market at this time.

Active, on-demand smart windows provide a broad range of benefits such as energy

conservation, privacy, and convenience. They also offer future opportunities to smart glass and

window manufacturers for enhancing functionality and energy conservation benefits through

integration of organic light emitting diode (OLED) displays and building integrated photovoltaics

(BIPV) into the windows.

Several firms and research institutions are aggressively investing in improving the technology or

the manufacturing process to make smart windows more commercially viable. Given the pace

at which advances are being achieved, it is certain that the active smart window market is

poised for significant growth.

NanoMarkets believes that the key to success for smart windows growth is to integrate the

smart glass into the window frame and the smart window into a building. In this way, the

technology can be easily operated and its efficiency and benefits be maximized. With that

recognition, the trend today is to offer more complete functional materials that glass

manufacturers can easily integrate into their glass. At the same time, glass manufacturers are

moving towards a turn-key smart glass that can be seamlessly integrated into window frames.

Such trends towards easy integration may lead to unique market dynamics in the smart

windows market.

1.1.3 Geographic Regions for Growth and Target Markets

Although the green building and energy conservation movements are driving the awareness of

smart windows in many markets, ironically, the majority of growth in smart windows demand

has been driven by the use of PDLC-based smart glass in interior privacy applications in hotels

and offices. A majority of this growth is coming from new and retrofit construction in emerging

Asian and Middle Eastern economies such as in China, Hong Kong, Singapore, Saudi Arabia, and

Abu Dhabi.


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From the perspective of smart windows makers, much will depend on the revival of commercial

construction in the medium-term future, and for now—unfortunately—the indicators seem to

point in more than one direction. Credit markets still seem wary to finance construction, but in

some cases there are local factors that are counteracting this resistance. For example, Brazil is

gearing up for two major international events in the next eight years—soccer's World Cup and

the summer Olympics—which should bring a boom to the economy in general, and to

construction in particular.

Because smart windows can be most easily cost-justified in commercial and industrial buildings,

the health of these sectors is of primary concern to smart windows makers. In addition, we see

moderate growth, especially in the retrofit market, due to government incentives for replacing

old windows with more energy efficient windows. But new installations in residential homes

are much harder to gauge. Conditions seem to be in place for a revival of construction in the

medium-term in the U.S., Germany and Japan (although there are also dampening effects), but

everybody is wary about a housing bust in the all-important Chinese construction market.

1.2 Objectives and Scope of This Report

This report identifies and quantifies the opportunities, challenges, and prospects for growth in

the smart windows market. Specifically, it analyzes smart window technologies, geographic

regions with high growth potential, supply chain dynamics, and their impact on smart windows

market growth; the dominant firms that will have the greatest impact on the growth of the

market; other growth drivers; and our eight-year forecast for the smart windows market.

For the purposes of this report, smart windows include any window that has functionality

applied to it either in a retrofit way or built-in manner that enables energy conservation,

privacy, and/or convenience to the user.

We are principally concerned with the smart windows and materials/coatings themselves, but

we will also consider and discuss the ancillary materials that are used in assembling smart

windows. We will also discuss the manufacturing technologies and scale that will have impact

on the growth of the smart windows market.

This report analyzes the use of and opportunities for smart windows in architectural,

transportation, and other applications. This analysis is carried out taking consideration of the

forces that shape smart coatings markets and those that shape construction and transportation

markets. We also include an assessment of each of the types of smart coatings technologies

that are likely to gain significant penetration into windows markets and the unique aspects of

their use in windows.


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While one of the major goals of the report is to provide detailed forecasts for the smart

windows market, the continued uncertainty on a global economic scale and in construction

markets in particular increases the uncertainty of such forecasts and predictions.

For example, the OLED market was predicted to be a multibillion dollar market by 2012. Due

Economic turmoil and competition from incumbent LCD technologies has, however, resulted in

significantly slower growth for OLEDs.

This report is international in scope. The forecasts are worldwide and there has been no

geographic selectivity in the firms covered or interviewed in the collection of information for

this report. We do, however, focus our global discussion on certain countries in different

regions which we think are significant growth drivers for the smart windows.

1.3 Methodology of this Report

The information in this report comes from a variety of sources, but principally comes from

primary sources, including interviews of entrepreneurs, business owners, business

development and marketing managers, and technologists involved with various aspects of the

smart coatings and smart windows markets and emerging electronic technologies such as

OLED.

Secondary research for this report was also taken from information available on the World

Wide Web, commercial and government databases, trade press articles, technical literature,

information learned at technical conferences and trade shows, and SEC filings and other

corporate literature.

In addition, some of the data for this report comes from other NanoMarkets reports including

"Smart Coatings Market 2011" (February 2011) and "Smart Windows Market 2011" (February

2011). Whenever information has been used from an earlier report, we have reinvestigated,

reanalyzed, and reconsidered it in light of the current market status.

The forecasting approach in this report is explained in detail in Chapter Four, but the basic

approach taken here is to identify and quantify the underlying addressable markets, various

smart window technology penetrations in those market, and how other market elements such

as, for example, the commercial and residential construction industry, may impact smart

window growth. We also evaluate the stated plans of the key firms in the market in our

forecasting analysis.


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1.4 Plan of this Report

In Chapter Two, we examine the key market drivers for the smart coatings/smart window

markets. We also discuss which of the specific segments (residential, commercial, and

institutional) within the building market will have the most impact on the growth of the market

in the coming years.

In Chapter Three, we explore smart window functional materials, technologies, and firms in the

market. We also evaluate the supply chain and the potential impact of market dynamics on the

structure of the industry and the supply chain going forward. In Chapter Four we present our

eight-year forecasts for the smart windows markets.

Documents

Smart Windows Markets, Exec Summary