Asad Said Jafar is the Chairman & CEO of Signify Pakistan Limited (formerly Philips Pakistan Limited), a position he has held since January 2009. He joined Philips in 1998 and has held senior leadership positions across various businesses and functions in Pakistan, Indonesia, Thailand, and Singapore.

Asad served as the President of Overseas Investors Chamber of Commerce and Industry (OICCI) in 2014. He is currently serving on the Board of Directors of Engro Fertilizers Limited. Previously he has served on the Board of Directors of Pakistan Institute of Corporate Governance (PICG) and Engro Polymer & Chemicals Limited.

Asad holds a bachelor’s degree in Electrical Engineering from NED University, Karachi, Pakistan, and a master’s degree in Business Administration (MBA) from the Imperial College Business School, London, UK where he studied as a Chevening scholar.

BR Research sat down with Asad and discussed the lighting market in Pakistan, the evolving trends, and Signify’s goals and ambitions going forward. Following is an edited excerpt of the conversation:

BR Research: How have things been at Signify in terms of operational performance in the last year or so?

Asad Said: Signify is the new name for Philips Lighting, and that was a global change that happened a few years ago. Signify has continued to forge new frontiers as far as lighting is concerned, and it continues to be the world leader in lighting in terms of global footprint, innovation, new products etc.

The whole purpose of the company is to unlock the extraordinary potential of light, for a better world. We cover innovative, quality lighting, products, systems, and services under our umbrella. Lighting has evolved in such a way that there are so many applications of lighting that are now possible which previously were not.

Year 2019 was a very solid year for Signify Pakistan in terms of business growth, introduction of new products and solutions and innovations. 2020 has of course been a lot more challenging because of the pandemic. We started 2020 off very strongly in the first quarter, but as the lockdown started, we also felt the pinch just as so many others did too. From Q3 onwards, we have been coming back on track very rapidly and we expect to be fully back on track in the ongoing Q4 quarter.

While the journey has been exciting, it has also been particularly challenging because there are so many things to be concerned about, most of all the safety of employees. Fortunately, Signify has incredibly early deigned a comprehensive set of guidelines and SOPs for conducting business during this pandemic.

BRR: Is there a ballpark figure as to how big is the lighting market in Pakistan What is the breakup in terms of major consumer segments?

AS: I would say the lighting market in Pakistan is somewhere in the range of USD300-400 million, as a ballpark figure, whereas the global lighting market is USD 85-90 billion. The residential segment continues to be the biggest with around 60 percent share, whereas professional lighting that includes offices, malls, stadium etc., make up for the other 40 percent.

It goes up and down a little bit, depending on the level of infrastructure development, in which case it could go up to 50-50. There is also some overlap, as sales channels primary catering domestic consumers, would also cater for buyers who could be buying for shops, offices, and other smaller projects.

BRR: The industry has evolved over the years, as the LED now takes two-third of the lighting market share in the world. Is that also the case in Pakistan?

AS: Interestingly in Pakistan, the conversion to LEDs has happened much faster than even some of the more developed countries. This also has to do with the fact that generally in Pakistan, when a new trend comes in, things tend to move quickly. Secondly, proximity to China meant the import of LED lighting grew in volume, as we saw the influx of LED lighting products in Pakistan.

LED lighting was introduced in 2006 to the world, but over the last few years, it has grown exponentially. In Pakistan, as far as new lighting projects are concerned, LED lighting certainly has more than two-thirds of the market share.

BRR: How much of a problem is the influx of second and third tier lighting products from China?

AS: Imports from China is a fact of life for most products, and our industry is no exception. China is a global manufacturing and supply hub and Signify has also invested heavily in China. The problem that happens is the influx of substandard products, where compliance to standards is routinely ignored. That is a major problem because the consumers end up buying a cheaper product based on the labeling, but eventually end up paying more money as the product does not perform the way it should.

In the consumer market, the price points and specifications are being driven down very appreciably which is a concern from the quality angle. The government has provided an incentive for conversion to LED lighting products through lower import duties. There are additional facilities, that if you do local assembling / manufacturing, tariffs are lowered on import of certain items. In that sense, smuggling/under invoicing is not the biggest issue. The bigger issue is the influx of substandard products.

BRR: Have you lost a meaningful market share to these substandard products over the years?

AS: This phenomenon of competition is nothing new. Even earlier, before the conversion to LED lighting, we saw the same with energy savers, fluorescent lamps, and tube lights. Our strategy has always been to offer products which are competitively priced and value for money in line with the brand value that Philips stands for – quality, reliability, and sustainability.

We have to continually align our own cost base and pricing according to customers’ expectations. We keep a close watch on the market and look for all kinds of opportunities to make our own operations more efficient. We have not lost market share, and based on the market share figures that we regularly track, we have seen that even during these pandemic times, by the end of this year we are likely to have gained market share.

BRR: What is the level of localization at Signify Pakistan?

AS: Over the years, globalization and technology developments have made it more feasible from a global perspective to have much larger supply centers, located in places that have the necessary ecosystems available as well. That is why Philips Lighting also invested heavily to develop these global supply centers, especially in China. Of course, this does not mean there is no manufacturing going on in other parts of the world. But the overall trend has been to move towards more centralized supply chains.

Over the last several years, Signify Pakistan became much more of a company that markets and sells products, in addition to providing other value-added services, such as turnkey projects, lighting design, consultancy. However, in the last few years, we have seen more and more local manufacturing in Pakistan where the government has incentivized this by reducing import tariff on certain raw materials and components.

We have moved into localization in a very structured way through a couple of our co-makers, who carry out local assembly for us. For a part of our product portfolio we have now shifted from finished goods imports to locally assembled products, especially over the last two years. That is the roadmap we want to pursue for the future as well. You would appreciate that the sheer variety and breadth of lighting portfolio is huge, and it does not make sense to localize everything, because volumes are also important. There are also some specialized solutions which are manufactured in certain factories. But by and large, localization is an important component of our strategy in Pakistan.

BRR: Could we say that the baseload of Signify Pakistan’s volume is now assembled within Pakistan?

AS: If you take the consumer channel where we sell different variants of LEDs lights we have moved towards local assembly for a part of the portfolio and in 2021, we plan to cover some other fast runners as well. By next year, our level of localization especially for the fast-moving LED lighting products will cover a major part of our volume. We have also started local assembly for some fast runners of the professional portfolio as well and this will also be further expanded going forward.

BRR: Is the increased focus towards localization primarily a result of changes in duty structure?

AS: When most of our local competitors have moved into locally assembled products from previously importing finished goods from China, it makes business sense for us to also localize and also take advantage of certain facilities that are now possible, in terms of reduced import tariffs on key components.

The other big advantage of localization is that it makes us more agile and flexible to respond to customers’ requirements and changing market conditions.

Within this whole area of local assembly, it is especially important that not only components of the right specifications and quality are used, but also the local assembling facility is managed professionally. We have taken the localization path very structurally, ensuring that we have the right co-maker to do that - with the right processes, capabilities and professionalism – we have appointed Alsons group as our key co-maker for local assembly of LED lighting products. Our own manufacturing teams working in the factories from where these products & components are sourced are fully involved in making sure the right processes and quality systems & testing methodology are followed at the co-makers facility.

BRR: Is there any sort of difference in quality or durability that may have crept in because of increased level of localization? The biggest example in Pakistan is that of the automobile industry, where we continue to see a massive quality difference between locally assembled and imported vehicles.

AS: There are so many players that are now assembling products locally and with varying degrees of quality and adherence to specifications. But in the case of Signify, there is absolutely no difference in the lighting products assembled locally or the ones we import directly from our factories in terms of specifications, components, assembly process, testing methodology and quality & performance standards.

The process checks and testing that takes place in at various stages during and post-assembly ensure that there is no difference in terms of quality, specifications, and durability. We are very particular that regular checks and audits are done, and a very stringent mechanism of feedback is in place.

We provide quality, energy-efficient LED lighting that’s both comfortable for the eyes and energy efficient, helping consumers to reduce their carbon footprint.

BRR: What is the fastest growing lighting segment at Signify Pakistan?

AS: We categorize lighting into two broad channels, consumer and professional. The professional channel is further sub-divided into segments like office and industry, public, retail and hospitality. The consumer channel serves consumers either for their residential needs or smaller contractors that may be buying for small offices and other commercial projects.

As far as the professional segment is concerned, this closely reflects the growth in the overall infrastructure and the economic growth in the country and can vary significantly from year to year. If you have a large project or a series of projects, our professional lighting business could outpace the consumer channel growth. The consumer channel growth is generally more on the steady side.

The growth on the professional side has been more subdued this year, largely because of the pandemic and the general slowdown in economy. Over the last four to five years, we have grown well in both channels. In the consumer channel, the growth has been largely through capturing market share by introducing new and innovative products and finding new areas to grow.

We now see demand picking up again. On the professional side, we see strong growth coming from the construction sector as evidenced by sharp surge in cement sales as well. We also see focus on development of sports facilities across the country that creates a demand for arena lighting products for stadia. We also see projects such as housing colonies and shopping malls, which bodes well for the future business outlook. The consumer channel was impacted drastically during the Covid-19 lock down period, but this is also gradually coming back on track now.

Additionally, as the lighting market transforms, we see a number of attractive growth opportunities for Pakistani market which includes agriculture, solar, 3D printing, and Lifi.

Our lighting horticulture, fish, and other animals is expanding as we respond to the need to help feed a growing world population. Horticultural lighting can enable plant growth all year round with better growth predictability, quality, and yield. Growers benefit from market-leading products and more than 150 light recipes.

Solar-powered lighting is a safe and sustainable technology – for professionals and consumers. Solar lighting can even be used with control systems and our hybrid solar/grid systems have huge potential for northernly latitude countries where, for example, solar-powered streetlights can lessen dependence on the grid during peak times.

3D Printing enables us to serve customers quickly and allows them to tailor existing designs or for us to create bespoke designs. This form of manufacturing enables us to use recyclable and recycled materials and the ability to print on demand means less inventory.

BRR: The current government might be a bit different than the previous one in terms of priorities on infrastructure development. Does that change your outlook on the sales mix?

AS: I think we will start to see the impact of incentives that have been offered to the construction industry in the coming days, and some of the impact is already visible. The trend of housing colonies is on the rise across the country, and that brings up interesting opportunities for us.

BRR: Is the smart lighting and the Internet of Things concept getting any traction in Pakistan?

AS: At Signify, connected lighting is a key priority for us, in March 2018, we launched Interact – our professional connected lighting software and systems brand. Interact brings together connected lighting systems, and the data those systems collect, with intelligent building, smart city, and other IoT technologies. It enables data to be collected via sensors embedded in luminaires. Its Application Program Interface (API) enables the integration of connected lighting with other management systems and offer data-enabled services.

For instance, in the context of road lighting, our solution called ‘Interact City’ enables us to bring the entire network of the city’s road light under this platform, and through IoT every light of point can be programmed and monitored, and you can plan out maintenance routines accordingly. Likewise, we have similar solutions for shopping malls, industries, and offices. These solutions make the lighting system flexibly, programmable and enhance the level of flexibility and energy efficiency. Applications for shopping malls for example can make use of sensors to provide data to gauge occupancy and movement of shoppers.

On the consumer side, our connected home lighting solution has been around for some time, and we call this Philips Hue and we have recently introduced another connected home lighting solution called Wiz. On the question of whether it is finding traction, it is still early days, but we are making efforts to bring this knowledge to end users as well as to designers and consultants to help them understand the amazing possibilities that are now available through connected lighting. Connected lighting can also drive down the energy load very significantly.

Another area is Ultraviolet (UV-C) lighting, UV-C is an invisible light, spanning in the range of 200-280nm. It has powerful germicidal properties, breaking down the DNA and/or RNA of viruses, bacteria, spores and molds in air, water, or surface, rendering them harmless. UV-C lighting can play a vital role in disinfecting air, surfaces, and objects in schools, (food) retail, industry, offices, public spaces, and hospitals, providing people a virus-free space. Philips has more than 35-years’ experience in UV-C lighting and strong applications experience.

To meet the growing demand for disinfection, we are stepping up our efforts in UV-C lighting by expanding our portfolio with a broad range of end products for professional applications. Products include battens, luminaries, carts, and cabinets to disinfect air, surface, and objects. They are applicable for a wide range of applications such as retail, offices, schools, public transport, and the food industry.

Research conducted by Boston University confirms the effectiveness of Philips UV-C lighting on de-activating SARS-COV-2, the virus that causes Covid-19. Research test shows that more than 99 percent of the virus was de-activated in 6 seconds.

In Pakistan, we are spending time to update and inform our end users, consultants, architects, and designers so that they understand that this solution is now available. We have come out with consumer-oriented UV-C solutions as well, in addition to variety of professional UV-C lighting products for use in hospitals, schools, offices, shopping malls, public transportation and other areas.

BRR: Is the disinfecting solution pricier than other available solutions around?

AS: For the UV-C lighting-based products, we do not see many other products in the market yet. There have been a lot of studies carried out which suggest that if UV-C is used to disinfect a place, it actually saves money compared to using conventional chemical disinfectants, and the level of disinfection will also be more thorough using UV-C. We have recently introduced the UV-C upper air disinfection solution, which does not require you vacate the space that is being disinfected using UV-C lighting.

BRR: Does Signify also offer any services to compliment the solutions being provided?

AS: We offer different services such as lighting design lighting audits, maintenance, and turnkey projects as part of our services portfolio. This is an area that we would like to develop further in the future. There are examples existing globally where lighting as service is also offered.

BRR: Do you work closely with the government and the relevant institutions on the idea of efficiency?

AS: Over the years, we have been working in a consultative sense with various government bodies to provide our inputs. A lot of the transition towards LED lighting from conventional bulbs also happened because we had worked very closely with consultants. We see it as part of our responsibility to bring the knowledge about available solutions and the impact lighting can make on the energy saving front. When the government was thinking of energy demand side management initiatives back in 2010-2011, we provided our inputs to them as well.

With National Energy Efficiency and Conservation Authority (NEECA) as well, we have active collaboration and we fully support their efforts to promote energy efficiency and install performance standards.

We also track a lot of global data on the impact of energy efficiency and the carbon footprint. Signify is now a carbon neutral company globally, in line with our sustainability commitment.

BRR: Given your vantage point of heading reputable impact associations such as the OICCI, how do you see Pakistan moving in the right direction in terms of policymaking and economic transition?

AS: Overall, business confidence has gone down in some ways, as you may have seen with the surveys that the OICCI conducts periodically. What I do see personally, is a sense on the part of the government to improve things. There are incentives being offered to industries, but a lot still needs to be done, especially in terms of resolution of issues which have a stronger linkage with what the industry requires.

From the OICCI platform, we regularly engage with the decision makers and present our ideas on how to improve things. In all fairness, this has been a difficult year with the Covid-19 crisis being extremely high on the list of priorities requiring time and attention. There is definitely a sense that there is a need to improve the ease of doing business and a quicker resolution of various issues of foreign investors. Overall, things this year have been tough, but there certainly is some progress.