Discussing the business of smart things with Nanoleaf’s CEO

This year feels like a fraught one for the smart home. On one hand, there’s the promise of the Matter protocol arriving to help solve persistent interoperability challenges. On the other hand, we’re seeing a wave of companies shut their doors as they assess the landscape post-pandemic.

So it seemed like a good time to talk to Gimmy Chu, the CEO of Nanoleaf, a company that makes fancy, connected light panels, about the challenges and opportunities ahead for smart devices.

First up, get ready for commoditization. With the Matter protocol, Chu said we’re going to see cheap Matter-certified products flood the market. These products will have basic functionality as defined by the Matter standard, and will force existing smart home providers to up their game or fight for market share based on cost.

The good news from a consumer standpoint is that the Matter standard does enshrine basic security, so these low-cost devices are less likely to open gaping holes in your home network. Matter also provides for local control of basic devices, which means these products will work even if their parent company goes out of business.

As Chu noted, the smart home has been built on sand for years, always shifting, whereas with Matter the smart home will be built on rock, making these platforms more stable. This is a positive, but he also thinks that for consumers, Matter isn’t the flashy technology it’s being built up to be. “This is the rock and no one cares about the rock,” he said. “They care about what’s built on top of the rock.”

I tend to agree with him. Matter will make it easy to enable various devices to work together without worrying about which ecosystem the device is in. This will be helpful, but no longer as game-changing as it was when the Matter standard was announced. Especially since the bigger names in the smart home are moving from selling individual devices to packaging devices into services, such as security systems or elder-care monitoring products.

Chu attributes the jump to services as a way for companies in the smart home to fight commoditization and also provides them with recurring revenue. As I often point out, many smart home companies require some form of ongoing revenue because any connected device requires ongoing cloud and development support over its lifetime. Chu concurred, noting that while Nanoleaf doesn’t charge a subscription, the company does have a cloud so it can work with both Amazon and Google.

“Cloud support was necessary in a pre-Matter world,” he said. Indeed, it’s still unclear how much of Nanoleaf functionality will be able to move to local control if the Matter standard doesn’t support scenes and more complex lighting options. Chu said he’s trying to fight to get those more complicated options into the standard, but he doesn’t know if it will happen.

Jerome Gackel, the CEO of Eve, expressed a similar sentiment late last year. Gackel said he was hoping that some of the additional feature associated with Eve’s devices, such as energy usage monitoring on smart plugs, get incorporated into the Matter standard so that consumers who buy the devices can use them to their full extent.

But even if Chu’s hopes for full-fledged support for scenes don’t materialize at first, he’s not planning on implementing any sort of subscription plan to pay for Nanoleaf’s cloud costs. Chu said he’s aware of the pressure to look more like software companies, and build recurring revenue, that many connected hardware companies get from investors, but it’s not something he’s interested in. In his mind, as long as Nanoleaf keeps coming up with new and innovative products, the company will be fine.

As for the Matter delay, Chu wants to see a well-developed standard as opposed to one that was developed quickly. But he also seems frustrated by the wait. “We’ve held off launching products waiting for Matter,” he told me.

And when asked what those products entail, he was cagey. “We’re doing a lot with sensors,” he said.