Download the licensee repro here - https://github.com/lobneroO/MatFuncLighting
The opening editor scene should look like this:
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Open M_Base (not MF_Edit) and switch the "GetMaterialAttributes", which is attached to the if node, directly to output node:
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The lighting smooths out on the texture.
There's no existing public thread on this issue, so head over to Questions & Answers just mention UE-117367 in the post.