May 11, 2017

LightCounting publishes a research note on changes in the forecast for Silicon Photonics products

LightCounting updated projections for sales of Ethernet and DWDM transceivers in our April 2017 forecast report. This research note summarizes how these changes impact forecast for products based on Silicon Photonics (SiP) technology. Refreshed database with detailed forecast for SiP products is now available along with our report on Integrated Optical Devices, published in January 2017.

While the expected share of SiP products in the total market, shown in the Figure below, has not changed significantly, the product mix is different, however, and the success of Silicon Photonics will be more dependent on Ethernet transceivers and less on DWDM modules.

Figure: Global Sales of Optical Transceivers by Technology

LT_051117.png

Source: LightCounting Market Research

Our projection for sales of Active Optical Cables (AOCs) and Embedded Optical Modules (EOMs) have not changed since we published our AOC-EOM Report in December 2016. Demand for AOCs in early 2017 is consistent with our forecast, but the EOM market was very slow in Q1 2017. We expect that Intel will start shipping SiP-based EOMs in 2018 to support its latest supercomputer project.

EOMs and co-packaged optics/ASICs were big topics at OFC 2017. Several such discussions were standing-room-only in very large rooms, with no shortage of differing opinions. Ayar Labs announced its first product – SiP-based EOMs that will be placed right next to complex ASICs, connecting it with network interface cards. The first chip will support 3.2 terabits of capacity. The advantage of SiP-based solutions is the ability to operate at high temperatures, which is critical for EOM applications. These developments support our long term forecast for SiP-based EOMs, despite current weakness in this market.

While SiP technology has proven it can compete in terms of technical performance, it is still an open question if it can put the optical components industry onto a different trajectory, towards sustainable profitability. The success of Acacia suggests that the answer may be yes, however, Acacia’s products are not really high volume and low cost. Acacia’s leadership in DSP technology is probably the main reason for its success and SiP may be just the icing on the cake. Luxtera remains a privately held company and does not disclose its financials, but we believe the company did well in 2016, and it is probably gaining share in the PSM4 segment now, judging from the Q1 2017 earnings report of Applied Optoelectronics. Interest to SiP technology from private equity firms suggests that Luxtera is still looking for more funding. We will have to wait and see.

Our upcoming State of the Industry Report will discuss the profitability of optical communications industry supply chain and recent changes in the market landscape. This report will be published on May 25th.

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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