3D depth sensing in smartphones puts VCSEL arrays into spotlight
LightCounting releases new report on VCSEL arrays for 3D depth sensing
2017 proved to be a pivotal year for manufacturers of VCSEL arrays. The incredible success of the iPhone X, which incorporated face recognition technology employing VCSEL arrays for illumination, opened a whole new segment in the VCSEL market. Sales of VCSEL arrays for the iPhone X exceeded $200 million in 2017 comparable to the revenues generated by VCSEL suppliers from the global optical communications market.
Expectations are high for sales of VCSEL arrays in 2018, as all new iPhone models announced by Apple include face recognition. The demand for VCSEL arrays is expected to skyrocket in the last three months of the year and we estimate that revenues from this new application will reach $600 million in 2018 almost double the size of the communications VCSELs market. The figure below shows the size of the total market with the image of iPhoneX being roughly proportional to sales of VCSEL arrays for Apple’s products. Xiaomi started offering face recognition option on their new phones in 2018, and we expect all leading suppliers to start offering this technology next year, contributing to the market growth in 2019-2023.
Figure: Sales of VCSELs and VCSEL arrays into datacom and 3D depth sensing applications.
The most staggering numbers related to the new 3D sensing market are units of VCSEL arrays shipped in 2017, and particularly the number of single VCSEL emitters on these arrays. The first figure reaches into tens of millions and the second into billions. Lumentum mentioned that in the last quarter of 2017, the company shipped more VCSELs in the last couple of months of the year than in the 40 years since they were invented.
The only reason that the optical communications market for VCSELs is comparable to 3D sensing in terms of revenue is the very low pricing of VCSEL arrays made for 3D sensing. The actual pricing is confidential, but our report includes estimates on the average selling prices (ASPs) of products in these two market segments. ASPs for VCSELs and VCSEL arrays sold into the optical communications market will gradually increase in 2019-2023, because of the increasing market share of VCSEL arrays used in 100GbE, 200GbE and 400GbE transceivers. Prices of VCSEL arrays used in 3D sensing will decline sharply in 2019 as new suppliers enter this market.
Lumentum remains the only supplier shipping these products to Apple in 2018, while II-VI Photonics, AMS and Finisar are expanding their production capacity to be able to ship such products in high enough volume to allow competitive prices. A number of suppliers in Asia are planning to enter the VCSEL array market in 2019, putting additional pressure on pricing in 2020 - 2023.
Being the only supplier of VCSEL arrays to Apple, Lumentum reported record profits in Q4 2017, demonstrating that high volumes make VCSEL manufacturing profitable despite low prices. However, Lumentum has invested heavily in development of this technology in the past and first expected to generate profits in 2010 from selling VCSEL arrays to Microsoft for gesture recognition in Kinect, a video game motion controller. Despite the power of Microsoft’s marketing machine, this product failed due to lackluster performance. The VCSEL arrays worked fine, but the application was too challenging.
It took another seven years before Lumentum’s products were chosen by Apple. This time the technology worked well; consumers liked the simplicity and safety enabled by face recognition. Some of Apple’s customers probably never even activated this option on their smartphones, but they still paid extra for the latest iPhone X, unable to resist an urge to own the best phones on the market. The iPhone X quickly became Apple’s best-selling model.
The 3D depth sensing market is already changing the fortunes of some optical component players. When Lumentum announced its agreement to acquire Oclaro for $1.8 billion in March 2018, its chief executive said the combination would create “a leader in 3D depth sensing”, with increased scale allowing them to allocate more resources to the technology. Indeed, it was Lumentum’s success as a supplier of 3D sensors to Apple that gave it the power to acquire one of its rivals.
This new report analyzes the business opportunity for suppliers of vertical-cavity surface-emitting laser (VCSEL) arrays for applications in 3D depth sensing for smartphone applications. It reviews different 3D sensing technologies and the VCSEL arrays required to support them. It offers an analysis of the leading VCSEL arrays vendors and discusses future developments in the supply chain.
The report offers historical data on shipments of VCSEL arrays for 3D depth sensing in 2017-2018 and a forecast for 2019-2023 sorted into several product categories. It also presents historical data and a forecast for shipments of VCSELs and VCSEL arrays for applications in optical communications. The database, published along with the report, offers units shipment, average selling prices and revenues for many different VCSEL product categories.
3D Sensing for Self-Driving Cars Reaches the Peak of Inflated Expectations
LightCounting releases a new report addressing illumination in smartphones and automotive lidarIn 2019, the market for VCSEL (vertical cavity surface-emitting laser) illumination in smartphones will exceed $1.0 billion – now nearly triple the size of the market for communications VCSELs. That’s quite remarkable for a market that didn’t exist three years ago.3D sensing in smartphones felt like an overnight sensation, but the technology foundations were laid down years ago with Microsoft’s Kinect – a motion-sensing peripheral for gamers released in 2010 but discontinued in 2017 after lackluster sales. Lumentum supplied lasers to the Kinect almost a decade before the iPhone opportunity emerged; the company was ready to profit from the iPhone X opportunity when Apple decided to launch 3D sensing for facial recognition in September 2017.
Figure: 3D depth-sensing meets the Gartner Hype Cycle
Source: Gartner with edits by LightCounting
If all technologies follow the Gartner Hype Cycle, shown in the Figure above, then 3D sensing in smartphones is now moving up the slope of enlightenment. Android brands raced to add 3D sensing to their flagship phones in 2018 – the Xiaomi Mi8 Explorer and Oppo Find X phones were first – although these only sold in single digit million quantities. Huawei also brought out new phones with 3D sensing, but the ongoing U.S. export ban on the Chinese company must be hurting the company’s traction outside China. Apple continues to dominate the market as all new iPhones released by Apple since 2017 have included 3D sensing on the front of the phone. Apple is expected to introduce 3D sensing for ‘world-facing’ applications in 2020, which adds another laser chip to every phone.
Last year illumination for lidars were not included in our market forecast since LightCounting considered it unlikely that lidar would penetrate the consumer market to any great extent over the forecast period. All indicators now point to a market for lidar illumination ramping up in 2022 and beyond. Optical components firms are now shipping prototypes and samples of VCSELs, edge emitters and coherent lasers to customers developing next-generation lidar systems – many of them building on their expertise in illumination for optical communications and smartphones.
As was the case with smartphones, the foundations for lidar technology were laid down much earlier – in this case with the DARPA Challenge 2007, where the winning vehicle used a 64-laser lidar system from Velodyne Acoustics (now Velodyne Lidar). Lidar is considered by the majority of the industry to be an essential part of the sensor suite required for autonomous driving, helping the vehicle to navigate through the environment and detect obstacles in its path. The first commercial deployments have begun. In Germany, lidar on the Audi A8 enables the car to drive itself for limited periods under specific conditions. In Phoenix, Arizona, you can hail a ride in a Waymo robotaxi.
Investor enthusiasm for lidar is undeniable with nearly half a billion dollars invested in lidar start-ups in 2019 according to our analysis of publicly available investment data. Notable deals include $60 million for U.S. company Ouster in March, Israel’s Innoviz Technologies Series C round of $132 million in the same month, and $100 million for U.S.-based Luminar Technologies in July. Interestingly, these examples illustrate the variety of lidar approaches: each company is building a different type of lidar based on a different wavelength: 850nm for Ouster, 905nm for Innoviz and 1550nm in the case of Luminar. There’s an open technology battle and they can’t all be winners.
The automotive lidar market seems to be close to the peak of ‘inflated expectations’. It’s easy to understand why. The automotive industry is enormous, with nearly 100 million vehicles (including trucks) produced annually. Players like Baidu, GM Cruise and Waymo are backed by deep corporate pockets, and new entrants like Aurora and Pony.ai are attracting hundreds of millions in investment. Intel’s $15.3 billion purchase of Mobileye in 2017 was also directed at autonomous driving. Sensor company AMS is in a $4.8 billion battle to acquire German semiconductor lighting firm Osram with its eye firmly on lidar.
However, signs indicate that the descent into the trough of disillusionment could have already begun. Waymo has yet to roll out its robotaxi services more widely – and this summer admitted that its vehicles needed more testing in the rain. GM Cruise has delayed launch of commercial services for self-driving cars beyond 2019 and is reluctant to commit to a new timescale, with its CEO Dan Ammann observing that safety is paramount; automotive is not an industry where you can “move fast and break things” he said. A casualty of the slow pace was optical phased array lidar developer Oryx Vision, which closed its doors in August and started to hand money back to investors.
While lidar is being deployed commercially today, prices are not conducive to mass production, and there are open questions around regulation, safety, ethics and consumer acceptance. Do local laws prohibit self-driving cars? Will they really be safer than humans? Who is responsible for a crash? LightCounting remains skeptical about the pace of adoption of autonomous vehicles, but will be watching the market closely and with optimism.
More information on the report is available at: https://www.lightcounting.com/Sensing.cfm.