Nov. 30, 2017

LightCounting releases updated report titled “Next-Generation Access Optics”

Global FTTx and wireless markets will consume almost 100 million optical devices in 2017, worth some $1.3 billion in revenue to components makers. This is a 22% decline from the last year, which was expected. The decline in demand for optics is related to completion of LTE upgrades in many countries and a pause in FTTH deployments in China. LightCounting expects this market to recover in 2018 and grow steadily in the next 5 years, as shown in figure below. Chinese service providers are expected to accelerate FTTH deployments in 2018 in order to meet the government target of 200 million new ONU ports to be installed over 2016-2018. Sales of 10G PON and optics for 5G wireless infrastructure will lead the market growth in 2019-2022.

Figure: Sales of optical components for access networks, 2012-2022

LT_113017.png

In the FTTx segment, GPON has the largest annual shipment volume today, but will decline over the forecast period, as the biggest deployments are ending now. 10G-PON has already displaced GPON for current and future deployments of OLTs in China and we expect other countries and operators will follow suit, with a few notable exceptions. [Verizon will begin deploying NG-PON2 next year, albeit for business customers only.]  As 10G-PON optics cost considerably more than GPON, this product shift will boost component sales, even as the total volumes will decline gradually.

The wireless market story is similar, with peak deployment behind us already. Unit shipments will decline, as in FTTx, while sales will benefit from a shift from 10G to 25G (grey and WDM) optics which will be needed for 5G fronthaul. Smaller volumes of 50G (again both grey and WDM varieties) will add disproportionately to revenues given their high prices compared to slower speed devices.

The 2017 edition of this report contains a variety of new content that was not included in the 2016 version.  Some of the more notable additions are:

  • 5G network deployment timing and network requirements have been clarified as the 3GPP has progressed work significantly over the past year
  • The new eCPRI standard for 5G fronthaul, published in August 2017, is discussed in the report and we have more clarity on its impact on fronthaul bandwidth requirements
  • Optics used in cable TV networks are discussed, since the adoption of fiber deep architectures is increasing demand for optical transceivers in this market segment. 
  • A tutorial on cable TV networks has been added, as Appendix C, complementing the ones on FTTx and mobile fronthaul that first appeared in previous editions of the report (Appendices A and B respectively)

In the forecast and forecast spreadsheet, the most notable changes are:

  • 25G WDM and 50G WDM transceivers have been added to the mobile fronthaul forecast, based on a clearer understanding of 5G fronthaul requirements and the role that WDM transport will play in addressing them
  • A 50 Gbps category has been added to the mobile backhaul forecast, reflecting new information on China Mobile’s 5G transport network architecture

LightCounting’s “Next-Generation Access Optics” report is an update of its 2016 report of the same name. Written by LightCounting Principal Analyst John Lively, this report gives LightCounting’s outlook on future optical access networks, including architectures, service provider deployment strategies and trends, component requirements, and the products needed. Leading vendors of access components are profiled, and historical transceiver shipment trends are explained. Acronyms, and pictorial guides to mobile fronthaul, FTTx, and cable TV networks are included as well. A detailed Excel spreadsheet accompanies the report, providing a five-year forecast of fronthaul, backhaul, and FTTx optics shipments, prices, and revenues, broken down by speeds, reaches, and colors.

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

3D Sensing

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.


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