NanoMarkets Report

Advanced Glazing Systems Markets – 2012

Published Oct. 2012

Advanced Glazing Systems Markets—2012
According to building engineers, backed up by the evidence of infrared photography, the vast majority of energy loss in buildings is through windows. In an era of rising Page | 1 real energy prices and uncertainties about future energy supply NanoMarkets believes that a fast growing market for advanced glazing systems can be expected and that this will create profitable business opportunities for a wide variety of companies. In this new report, NanoMarkets has identified where these opportunities can be found and how much they will be worth. The report covers the full range of high-performance windows systems that provide thermal, visual and IR management using the latest materials:  In this report, firms in the windows/glazing industry will find a comprehensive product roadmap for advanced glazing systems showing how windows products will evolve from the latest generation of highly insulated windows, through the incorporation of various dynamic glass (aka smart windows) technologies, and then on to systems with embedded solar and lighting functionality. Included in the analysis in this report is an examination of some of the high performance insulated windows and dynamic glass windows products that are already on the market. Because of the huge potential addressable market for high-tech windows and the fact that they are likely to use novel materials, this report also includes a comprehensive discussion and forecast of how materials needs will change in the glazing systems market over the next eight years and how materials and chemical firms can benefit from these changes. Among the materials covered will be smart materials, photoactive materials, glasses, plastics, framing materials, sealants, gasses, desiccants, etc. NanoMarkets also believes that this report will also be of considerable interest to both the solar panel industry and the solid-state lighting industry. Firms active in these industries will learn from this report how they can tap into the expected rapid growth of advanced glazing systems. In particular, we show how new opportunities will emerge for building-integrated photovoltaics (BIPV) companies and OLED firms to make money by implanting PV and lighting layers into high-performance windows products.

This report will also bring considerable insights to corporate planners throughout the building products and construction industries as well as architects and sophisticated investors. As with all NanoMarkets reports, this report contains detailed eight-year forecasts of the markets analyzed in this report in both value ($ millions) and volume (area) terms. Forecast breakouts are by end-user type, technology, materials used and geography. In addition, the report contains a thorough analysis of the product/market strategies of the leading firms currently active in the advanced glazing space. And both giant firms—such as Alcoa, Saint-Gobain and Bayer—and the latest startups are included in the coverage.

TABLE OF CONTENTS Executive Summary E.1 Summary of Key Drivers for Advanced Glazing Systems E.2 Technology Roadmap for Advanced Glazing Systems E.2.1 The Coming Together of Advanced Glazing Systems with Smart Windows, Solar Panels and Lighting E.3 Opportunity Analysis for Advanced Glazing Systems E.3.1 Opportunities for the Windows/Glazing Sector E.3.2 Opportunities for Materials Firms E.4 Firms to Watch in the Advanced Glazing Sector E.5 Summary of Eight-Year Forecasts Chapter One Introduction 1.1 Background to this Report 1.2 Objective and Scope of this Report 1.3 Methodology and Information Sources 1.4 Plan of this Report Chapter Two: Advanced Glazing System Products and Technologies 2.1 Advance Glazing Systems and Smart Windows: Two Related But Different Opportunities 2.2 Next-Generation Thermally Insulated Windows 2.3 Dynamic Glazing Technologies 2.3.1 Dynamic Thermal Control 2.3.2 Dynamic Vision Control 2.3.3 Advanced IR Control 2.4 Future Integration Directions for Advanced Glazing Systems 2.4.1 Impact of Building-Integrated Photovoltaics (BIPV) on Smart Glazing Systems 2.4.2 Integrating Smart Lighting into Advanced Glazing Systems 2.5 Materials for Advanced Glazing Systems 2.5.1 Specialist Glasses 2.5.2 Polymers: PET and PVB 2.5.3 Sealants 2.6 Key Takeaways from this Chapter Chapter Three: Markets and Market Forecasts for Advanced Glazing Systems 3.1 Key Functional Drivers for Advanced Glazing Systems 3.1.1 HVAC Energy Savings 3.1.2 Daylighting 3.1.3 Lowering Construction Costs/Complexity and Maintenance Costs 3.1.4 Noise Reduction 3.1.5 Increased Comfort and Human Productivity 3.2 Advanced Glazing Systems in "Green" and Zero-Energy Buildings 3.2.1 Eight-Year Forecasts of Advanced Glazing Systems for Commercial Buildings 3.2.2 Eight-Year Forecasts of Advanced Glazing Systems for Industrial Buildings 3.2.3 Eight-Year Forecasts of Advanced Glazing Systems for Multi-Tenant Residential Buildings Page | 2

3.2.4 Eight-Year Forecasts of Advanced Glazing Systems for Single-Family Residential Buildings 3.3 Eight-Year Forecasts of Advanced Glazing Systems by Technology 3.3.1 Next-Generation Thermally Insulated Windows 3.3.2 Dynamic Glazing Technologies 3.3.3 Multi-functional Advanced Glazing Systems 3.4 Eight-Year Forecasts by Geographical Region 3.5 Summary of Eight-Year Forecasts of Advanced Glazing System Markets 3.6 Eight-Year Forecasts of Materials for Advanced Glazing Systems 3.7 Key Takeaways from this Chapter

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Chapter One: Introduction
1.1 Background to this Report
According to building engineers, backed up by the evidence of infrared photography, the vast majority of energy loss in buildings is through windows. This general point has been understood Page | 4 th for a long time; the first double-glazed window was designed in the 19 Century. Double-glazed windows were widely adopted in the 1950s and 1960s and these older types of systems are now so widely used that they could never reasonably be called "advanced" glazing systems; they are far too close to being ubiquitous.

1.1.1 Why Double Glazing Isn't Boring Anymore
Double glazing shipments worldwide are worth billions of dollars annually. But growth of this traditional business is slow (this is especially so given the woes of the construction industry) and one would never identify it as an opportunity per se; that is, no one would suggest that "double glazing" is a business that people should jump into as a way of making big money. It has been at least 30 years since someone could seriously make such a claim. In one trade press article that NanoMarkets retrieved as part of the research for this report, the double glazing industry was portrayed as "boring," which seems to NanoMarkets to be a fairly reasonable characterization of the glazing industry considered as a whole. But in the past few years—perhaps as long as five years—there are signs that the double-glazing business has started to become much less boring. What we are seeing—or at least beginning to see—is this sector begin to clearly transcend the "double glazing" name or even the (more general) "insulated glazing" name. There seems to be a new business emerging that is more deserving of the name "advanced glazing systems," a name that seems to capture the sense of novel technologies playing an important role. What has happened here seems to us to be much more than a shift in industry semantics brought about by changing times and marketing approaches. Instead, we are talking a real shift in direction brought about by changing demand patterns and novel technologies. Such a change is surely deserving of a new name; so surely the "advanced glazing systems" epithet is a good one to use.

1.1.2 On Demand, Technology and Advanced Glazing Systems
On the demand side of the equation, the changes that we are talking about are pretty much common knowledge. For a number of reasons, energy has become more valuable and therefore ways of conserving energy themselves have a higher value:  Advanced glazing systems seem to be a way to conserve energy and in a high-priced energy environment they take on growing commercial significance and appear to address larger markets Although related in part to the growing cost of energy mentioned above, NanoMarkets believes that the market for advanced glazing systems is also getting a boost from a more general societal environment in developed countries where a significant part of the population is concerned about "environmentalism," in a general sense.

Advanced glazing systems stand to benefit from this meme because they can be marketed as meeting the psychological needs associated with "environmentalism," and because (more objectively) they fit round with the growing number of building codes and standards that have emerged/are emerging built around environmentalist and energy saving needs. Page | 5

These new demand patterns that NanoMarkets has identified are accompanied by important technological developments too. As we have suggested above, the new highly insulated glazing systems that were described at the beginning of this account are sufficiently different from more conventional windows product to consider them a new kind of product. But the likely technological evolution of advanced glazing systems, NanoMarkets believes, seems likely to go well beyond simply a radical performance improvement to include a much higher level of functionality for advanced glazing systems. These new directions will succeed, NanoMarkets believes, because they are very much in tune with the demand patterns we have already explained. Among the technological patterns in the advanced glazing systems business are the ones that are discussed below. Incorporation of smart windows concepts into advanced glazing systems: In this context smart windows are usually referred to as "dynamic glazing." And a shift to dynamic glazing is already beginning to be noticeable, at least in the sense that this idea is receiving a lot of attention in glazing industry trade magazines and at high-profile trade shows. Apart from the fact that not many construction firms and architects have yet been sold on advanced glazing systems, this technology is not all that mature. However, dynamic glazing technologies are improving and add a new dimension of both thermal and lighting control to the advanced glazing concept. BIPV integration into advanced glazing systems: Similarly drawing on the latest developments and materials used in BIPV and incorporating them into advanced glazing systems seems like an intelligent product design move for the future. BIPV could power dynamic glazing or be used as a more general power source for the building thereby better enabling zero-energy buildings. The building owner, manager or occupant would also benefit from the economies of integration implicit in this kind of integration. One might think that BIPV integration into advanced glazing systems might occur before the incorporation of dynamic glass. BIPV glass is a relatively mature technology that is being supported by stable firms, some of which are quite large. Nonetheless, NanoMarkets has yet to see much commercial activity in this space, beyond some stirring in the BIPV community. Lighting integration into advanced glazing systems: A similar trend is possible for lighting; that is to say in the future we may see lighting built into windows, which might, for example, become panel lights at night and more conventional windows during the day. More complex arrangements that let in some light while artificial lighting is also used are also possible. And, of course, the lighting involved in such arrangements could be on the inside or outside of the building or both.

Of all the possible technological trends that we discuss here, this suggestion is probably the most speculative, because the technology to accomplish it is not really with us yet. OLEDs—given better encapsulation—may serve quite well in the future in an advanced glazing system into which lighting has been built, but the technology has some way to go before it could work well in a commercial window/lighting panel such as that described above. Building management systems and advanced glazing systems: Although it seems unlikely to happen fast, we also believe that some money will be made along the way by integrating active glazing systems into building energy management systems of various kinds:  Building energy management systems have been around for years, but have never really taken off to the degree that was once anticipated. However, there are some recent signs that this may be beginning to change under much the same influences that we have identified for advanced glazing systems themselves. If active/smart glazing systems begin to take off in the marketplace, then it is reasonable to assume that building management systems will quickly be interfaced to them. Lighting management systems—sometimes called smart lighting systems—are another type of control system that may be interfaced to active glazing systems where lighting is an emphasized functionality of such systems. Page | 6

We have yet to see any real trends towards building energy or lighting management systems incorporating the management of active glazing systems, but this would seem to be inevitable if advanced glazing systems of this kind start to be widely used.

1.1.3 Who Will Profit from Advanced Glazing Systems Market
In other words, what NanoMarkets believes is going to happen over the next few years is that advanced glazing will take on more functionalities and that in doing so, "advanced glazing" as a product category will come to overlap with a number of other product categories and markets. In Exhibit 1-1 we summarize the opportunities available to various players in the advanced glazing space.

Exhibit 1-1: Opportunities Available to Major Players in the Advanced Glazing Systems Type of Firm Opportunity Conventional window suppliers Materials suppliers Opportunity to generate new business revenues in a down market. Highly insulated windows seems like the most immediate opportunities Page | 7 Novel technologies that form part of advanced glazing systems evolution need a broad range of new materials ranging from metals to smart materials of various kinds. If advanced glazing systems take off as expected, high volumes of these newer materials can be expected to be consumed It makes sense for firms in the SSL and solar panel industry to keep a "watching brief" on the advanced glazing sector, since their products may ultimately be incorporated into advanced glazing systems. However, this opportunity is not an immediate one Advanced glazing systems may be used as one component of market strategy designed to sell potential owners and occupants on the idea that particular buildings are energy efficient and have good daylighting

Solar panel firms and SSL firms

Architects and construction firms

© NanoMarkets 2012
Conventional window manufacturers and suppliers: All of the developments leading to new kinds of glazing systems are likely to benefit firms involved in the conventional windows industry and this is especially important at a time when the construction industry is in a slump worldwide. Today, fast growing opportunities for building products are not that easy to find. The important issue here is whether conventional windows firms are able to capture high margins on advanced glazing systems and whether volumes are sufficient to make a significant difference to these firms' bottom lines. We don't know the answer to that yet for sure, nor do we know how well such firms will evolve their product strategies from the latest generation of highly insulated windows, through the incorporation of various dynamic glass (a.k.a. smart windows) technologies, and then on to systems with embedded solar and lighting functionality. Materials suppliers: Since the competitive stance of the advanced glazing systems and the products that it supplies depends heavily on new materials, NanoMarkets sees the emergence of a distinct advanced glazing systems market as being important to a broad range of materialsoriented firms. These firms are expected to include:  Metals companies that are involved in creating value-added products for window frames. Another group that will benefit will be firms that can supply improved, glass, gases, sealants, plastics, framing materials, desiccants, etc.; materials that are used in conventional glazing systems, but possibly of a new and improved kind. However, we think that it will not just be the traditional suppliers of windows materials that will benefit from the rise of advanced glazing products. Companies that manufacture active materials that are not usually used in advanced glazing systems—materials such as PV absorbers layer material, electrochromic materials, etc. These will be used in advanced glazing systems that provide functionality well beyond what one normally

associate with windows. While this trend has yet to have much impact we think that it will be an important revenue producer in the next two to three years. Solar panel and solid-state lighting firms: NanoMarkets also believes that increasingly the kind of advanced glazing systems that we have discussed above will become of growing interest to both the solar panel industry and (a bit later) to the solid-state lighting industry. Firms active in Page | 8 these industries will have the opportunity to tap into the expected rapid growth of advanced glazing systems. In particular, in this area, it seems likely that new opportunities will emerge for BIPV companies and OLED firms to make money by implanting PV and lighting layers into highperformance windows products. Service provider beneficiaries: Service provider firms that NanoMarkets expects to see benefit from the appearance on the market of more advanced glazing system products include construction firms and architects. Both of these groups could use of advanced glazing systems to market buildings to future owners, managers and occupants. Energy efficiency and enhanced comfort are proven winners in marketing to these groups.

1.2 Objective and Scope of this Report
The goal of this report is to quantify and analyze the market opportunity for advanced glazing systems over the next eight years, and it builds on industry analysis that NanoMarkets has carried out in other building products markets such as BIPV and solid-state lighting where "sustainability" and energy efficiency are key. NanoMarkets has been covering such markets for around six years now. "Advanced glazing systems" is a concept that does not have a strict definition, although we note that it is sometimes construed fairly narrowly to include just highly insulated glazing units (IGUs). However, in this report, we have taken the term to mean something broader than that and to include (1) active glazing products and (2) futuristic multi-functional windows, in our definition. Item (2) is something of a catch-all category since most of the products that logically belong in this category do not yet exist. Within each of these categories, we have examined what differing product and materials strategies would mean for the scale and evolution of market opportunities. With regard to end-user markets, those that we discuss most extensively are commercial and industrial buildings, especially the latter. Most of the windows systems we consider here are highperformance and high-priced systems that are designed for large buildings, so this is where most of the revenues in the advanced glazing systems market are likely to be earned in the next eight years. In fact, it is specifically the commercial sector that is likely to see most of advanced glazing systems market, because industrial buildings often have a minimal number of windows; sometimes none at all. This is not to say that NanoMarkets sees no opportunities for advanced glazing systems in the residential sector and we do include some discussion on residential markets, especially multitenant residential buildings which have important business characteristics in common with commercial buildings from the perspective of a glazing provider Several issues are not the focus of the report:  We do not have much to say about the windows industry as a whole. As a highly mature sector, it operates under entirely different economics than the markets that are the main

focus of this report. In particular, we don't have that much to say about the conventional double-glazing industry, beyond acknowledging that this is the industry from which the highly insulated glazing units that are discussed in this report are emerging.  Much of this report is taken up with discussions of how certain new energy-efficiency technologies will be integrated into glazing systems over the next decade. However, Page | 9 these technologies—BIPV, OLEDs, building management systems, and so on—are not discussed in any depth. NanoMarkets has other reports that look into these technologies and in these reports, NanoMarkets pulls out the full range of opportunities related to them.

This report is worldwide in its scope. However, throughout this report, we discuss the differences among regional and national markets.  In particular, we have given some emphasis to European markets for advanced glazing systems, since the rules, regulations and building codes in Europe are very friendly to the kinds of products considered in this report. Other reasons for focusing to some extent on regional or national differences is that regulatory factors and conditions in the construction industry can vary quite a lot from place to place, not to mention taste/architectural factors of importance to the windows business. Obviously, space does not allow full coverage of matters as complex as regulation and national construction markets. Rather, we try to point out the impact of general trends in important/regions and countries.

As with all novel building technologies, the economics of including advanced glazing systems are better with new construction than with retrofits, we discuss both opportunities in the main body of this report. We also assess the current strategies of firms already pursuing the advanced glazing systems as well as likely entrants. And as with all NanoMarkets reports, this report contains granular eight-year forecasts in both square meters and dollar terms of advanced glazing systems markets, with breakouts by end user, type of product and type of advanced glazing technology.

1.3 Methodology and Information Sources
The information for this work is derived from a variety of sources, but comes from both primary and secondary sources:  As far as the former goes, NanoMarkets has carried out extensive interviewing of business development managers and technologists involved with most of the products and markets considered in this report. In particular, NanoMarkets has an ongoing program of interviewing executives in the general area of efficient and environmentally friendly lighting and building materials As with other NanoMarkets reports, we have also drawn on important secondary resources for information. These include technical literature, relevant company Web sites, trade journals, government resources, and various collateral items from trade shows and conferences.

Some of the material in this report has also been taken from earlier NanoMarkets reports, including our reports on PV, BIPV, smart windows and (to a limited extent) we have also taken it from some of our OLED lighting and glass industry reports, in other words from NanoMarkets reports that address advanced building materials in one form or another. However, where information has been used from an earlier report, it has been reinvestigated, reanalyzed, and reconsidered in light of current developments and Page | 10 updated accordingly.

The forecasting approach taken in this report is explained in more detail in Chapter Three, but the basic approach taken here is to identify and quantify the underlying needs and markets that are served by BIPV walling products; consider the specifics of the applications and the types of products available or under development; and assess the competitive landscape to determine the suitability and likely volume of each of the BIPV types over the next eight years. The stated plans of the key firms in the advanced glazing systems market are of course of special interest, although NanoMarkets critically considers these claims in light of all available data.

1.4 Plan of this Report
This report is divided into four chapters. The Executive Summary above is intended to set out in detail where NanoMarkets believes the main opportunities for revenue generation are in the general area of advanced glazing systems. Meanwhile, this Chapter—as its title suggests—is intended to introduce the topic of advanced glazing systems markets and what it might have in store. In Chapter Two we take an in-depth look at the evolution of advanced glazing systems technology and products and how these are being shaped—and are shaping—market demand. This chapter also focuses on how technologies being developed in the context of other markets—especially smart windows, lighting and solar panels—are transforming the windows business. In Chapter Three we examine in depth the markets for advanced glazing systems and the key drivers in each of these markets. Also included in this Chapter are market forecasts in volume and value terms and breakouts by type of advanced glazing product and type of application.

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