Sept. 26, 2017

LightCounting releases a research note on CIOE and ECOC

ECOC 2017 was held in Gothenburg, Sweden. It is a more compact and focused event in comparison with OFC, and offers an excellent opportunity to catch up with optics suppliers half a year after OFC and to revisit the key issues faced by the industry. Looking at these issues under the sun of Northern Europe instead of Southern California provides for a different viewing angle. Hard core travelers, attending CIOE in the tropical heat of Shenzhen, get a preview of demos from Chinese suppliers and an increasing number of western vendors two weeks ahead of ECOC. LightCounting’s team attended both of the events and this research note offers a summary of our findings.

Demand for 100GbE optics continues to exceed expectations, but we could clearly see more signs of concern rather than excitement among the suppliers. Many of them have invested heavily to increase their production capacity, but price pressure raises concerns about profitability as supply shortages ease.

Defining a clear strategy for next-generation products is critical, but few customers offer consistent and realistic targets. The next two years will test management resolve, R&D talent and production skill, defining the next wave of leading vendors. It will also be a test for different products, technologies and manufacturing methods. It seems that the industry will try a variety of approaches in search of the 2 or 3 solutions that work the best.

Finding a shortcut to low cost and power efficient 400GbE transceivers remains a priority for operators of mega data centers and suppliers of switches and routers. Cisco reinforced their commitment to achieve this goal by uniting more than 20 leading vendors into a new 100GLambda MSA, announced a week before ECOC. The key objectives include single wavelength 100GbE modules based on 100Gb/s PAM4 technology as well as 400G-FR4 and potentially 400G-LR4 modules, supplementing solutions set in IEEE standards for FR8 and LR8, that were enabled by 50G per wavelength PAM4 components.

The CWDM8 MSA announced on the first day of ECOC proposes to use 50G per wavelength NRZ optics, reflecting supplier’s concerns related to new PAM4 modulation. The industry has yet to learn how to manufacture PAM4 optics in volume and at low cost. Just like many other transitions, it is proving to be more difficult than expected. Even testing PAM4 modules is completely different and presents a learning curve to suppliers as well as their customers. However, PAM4 was selected as the future proof strategy by all leading suppliers and very few of them joined the CWDM8 MSA.

Google remains committed to deploying 200GbE optics and Amazon seems to be taking a closer look at these products. Arista, Cisco, Facebook and Microsoftdo not want to hear anything about it. These companies are not willing to expend resources on transitioning to 200GbE, if 400GbE is just around the corner. Pushing suppliers to their limits, controlling the supply of key components, investing in innovation and, if necessary, even making optics internally seems to be their preferred approach.

Suppliers of optical components and modules are making a lot of progress in developing 200GbE and 400GbE solutions for mega data center applications. Their customers will always want more, prioritizing low cost and power consumption, but there is no magic in technology development. It takes a lot of work to make progress and that takes time.

“Optical and electronic components for 100G per wavelength transceivers are becoming available, but making them work together will be the next challenge for suppliers.” – mentioned one of the industry experts at ECOC.

LightCounting has been increasing projections for 100GbE and higher speed modules every six months. Our new forecast (to be released along with our “High-Speed Ethernet Optics Report” on September 29th) will continue this trend. Higher expectations for the market justify more investments from the established players and attract a lot more interest from new comers. It is no surprise that every product design, technology and business model will be tested by the market. There is no better way to find the best solution.

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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