Feb. 21, 2019

Let’s not forget that OFC is a show. Companies attend the event to impress customers and suppliers, intimidate their competition and have fun doing it. Industry analysts add excitement by reassuring suppliers that the market is not going to crash this year. The LightCounting team will be there, celebrating 15 years in business and hosting a dinner seminar on Wednesday night, as usual. If you are a LightCounting client and have not received an invitation to this event, please email us. We also have 10 tickets reserved for guests, but you need to get on the invitation list by the end of business tomorrow.

OFC 2018 started with the acquisition of Oclaro by Lumentum. This sparked another deal or two later in the year. Should we expect more to be announced of the first day of OFC 2019 and keep the tradition going? With new II-VI Photonics and Lumentum setting up a duopoly of well diversified, vertically integrated suppliers dominating the optical components and modules market, the industry could use another vendor of similar size. The rule of three works well in other markets. It ensures stability. If one of the vendors becomes too aggressive, the other two can join forces and balance the situation.

While we have no inside knowledge, we are nominating IPG Photonics to surprise us in 2019 and become the missing #3 player. The company has had an optical communication business for many years and it acquired Menara in 2016 and Padtek submarine networks division in January 2019. IPG Photonics main business in high power fiber lasers is under an assault by Chinese rivals, so it is a good time to look for new markets. The company has deep pockets and a very ambitious CEO, which is the most important factor in pulling the trigger. This is pure speculation on the part of LightCounting, but it would be great to start the show with a bang.

We now know that OFC 2019 will feature demonstrations of 800G per wavelength optical transport solutions, according to press releases issued by Ciena and Infinera earlier this week.

Infinera announced its sixth generation Infinite Capacity Engine (ICE6), supporting a dual 800G per wavelength transport solution. Ciena’s WaveLogic 5 Extreme (WL5e) DSP technology will support an 800Gbps rate with a reach about 100 km using EDFAs, and close to 200 km using Raman amplifiers. WL5e will also support 600Gbps with a reach of 1,000 km.

One can tell that the non-linear optics is clearly having an impact as data rates reach 800G: moving from 600G to 800G reduces the reach by a factor of 10. The 100 km reach is fine for DCI applications and using 800G does offer a 20% improvement in spectral efficiency. It is an attractive solution for cases where squeezing all the bandwidth out of a single strand of fiber is a priority. It is also a solution for operators of mega datacenters planning for 800GbE or 2x400GbE inside their facilities.

The majority of cloud datacenters are just starting to plan for 400GbE. With these more conservative customers in mind, Ciena announced the WaveLogic 5 Nano (WL5n) specifically designed for small form factor pluggable 100G-400G modules. This will be a much higher volume market with applications ranging from DCI to 5G wireless backhaul to Fiber-Deep Cable networks. Infinera plans to offer ICE6+1 DSP supporting these applications, but the release date has not been set yet.

Both companies will rely heavily on internally-made 800G components, including all the optics. This is not great news for suppliers of optical components and modules. It will be hard to compete with Ciena and Infinera at 800G, but we expect a lot more competition at 600G and particularly 400G and 100G pluggable coherent modules. Merchant suppliers of DSP chips, optical components and modules are getting ready for the battle. The emerging market opportunity for merchant coherent and PAM4 DSP suppliers is a subject of a new report, which will be released by LightCounting on February 28th.

The last OFC featured numerous last-minute engineering demonstrations of 400GbE modules including a few with 100Gb/s per lambda. We expect more mature demonstrations of 200GbE and 400GbE this year, in an array of configurations, and this time they will use more than one vendor of DSP chips. The DSP vendors have been racing to develop lower-power, second-gen products that should advance interoperability between vendors.

The Ethernet Alliance will have a lot of activity in their booth, as usual. Their interactive demo will encompass 10 Gigabit Ethernet (10GbE), 25GbE, 50GbE, 100GbE and 400GbE technologies and solutions from 22 companies, ranging from interconnect providers, to switches and routers, to test and measurement equipment. In addition, the Ethernet Alliance will showcase a live 400GbE infrastructure connecting multiple booths on the show floor. Did you have any doubts about deployments of 400GbE starting in 2019?

The LightCounting Team looks forward to seeing you in San Diego. Safe travels.

About LightCounting Market Research
LightCounting -- The name alone is what sets us apart and defines us as a company. We are a leading optical communications market research company, offering semi-annual market updates, forecasts, and state-of-the-industry reports based on analysis of primary research with dozens of leading optics component, module, and system vendors, as well as service providers and cloud companies. LightCounting is the optical communications market's source for accurate, detailed and relevant information necessary for doing business in today's highly competitive environment. Register to receive our monthly newsletter: LightCounting.com or connect with us on LinkedIn and Twitter.

Interested in meeting with LightCounting at these upcoming industry events? Email us today to schedule a meeting with our team. View our recently published reports and 2019 Research Roadmap.

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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