March 28, 2019

It is an exciting time for the industry: shipments of 100GbE modules exceeded 7 million units in 2018, deployments of new 2x200GbE products have already started, and the first volume shipments of 4x100GbE DR4 (400G-DR4) transceivers are about to start. Yet, it does not feel like a party for suppliers. Vendors are scrambling to maintain decent profitability after pricing continued to decline in 2018. Some of the 100GbE demand disappeared in the second half of 2018 as buyers had problems with inventory buildup. The development of new products requires a lot of investment, but customers are unlikely to purchase these modules until the pricing is “right”. All options are on the table for the next round of upgrades: continue with 100GbE, switch to 200GbE, 2x200GbE and 4x100GbE with breakouts.

Google started deployments in 2x200GbE transceivers in 2018 and we expect that demand for these products will peak in 2022, as Googles starts to transition to 2x400GbE modules. The forecast for 400GbE includes 4x100GbE DR4 modules selected by Amazon. These DR4 modules will be deployed in a breakout configuration with DR1 modules on the opposite side of the link. Effectively, each fiber will be carrying 100GbE traffic, aggregated into a DR4 module on one side. Deployments of true 400GbE transceivers will be limited in 2019-2021 to upper levels of switching in mega-datacenters and core routers. Implementation of high-radix configurations in leaf and spine networks using 400GbE connectivity will be challenging until switching ASICs reach 51 Tbps capacity, probably by 2022-2023.

Facebook publicly stated their intent to stay with 100GbE optics for now and use 200GbE or 400GbE transceivers in the next upgrade cycle in 2021-2022. Facebook’s new F16 datacenter network architecture, shown in Figure 1, will require 3-4 times more optical connections compared to their previous design (F4). The first implementation of F16 topology will rely on 100GbE CWDM4 transceivers, boosting demand for these modules in 2020-2022.

Facebook is already the largest consumer of 100GbE CWDM4 modules. They use a sub-spec version of CWDM4 transceivers with 500 meter reach instead of 2 km, also known as CWDM4-OCP (for Open Compute Project). The latest forecast database includes sub-spec CWDM4 modules as a separate category. Segmenting the sub-spec products also helped us to refine the market data collected for 2018, resulting in higher than previously reported sales.

Figure 1: F16 Datacenter Network Architecture

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Source: Facebook

Figure 2 shows the changes in our forecast for all 100GbE optical transceivers, comparing data published in September 2018 with the latest forecast (March 2019). The revision upward of 2018 sales is mostly related to separation of sub-spec CWDM4 transceivers from the full spec version, adjusting pricing for these products and adding volumes to account for new suppliers of 100GbE products that are not yet sharing sales data with LightCounting.

Facebook’s latest F16 network design and their plan to continue using 100GbE connectivity resulted in a significant upward revision of the forecast for 100G CWDM4-OCP modules, boosting projections for the total sales of 100GbE transceivers in 2020-2024.

The bad news is that the outlook for 2019 is pretty flat. Several suppliers reported slower than expected sales of 100GbE products in the second half of 2018 and it seems that softness in this demand will extend into the first half of 2019. This softness is most likely related to limited supply of 12.8 Tb ASIC chips such as the Tomahawk 3, which Facebook is using in their new Minipack switches. Once these issues are resolved, the demand for CWDM4 is expected to skyrocket in the second half of 2019 and make a real difference to the market in 2020-2022. Sales of sub-spec CWDM4 modules are projected to peak in 2022, as Facebook starts transition to 200GbE connectivity.

The revised forecast for sub-spec CWDM4 transceivers added an extra $1.2 billion to the total sales of 100GbE products in 2023. Increased projections for DR1 modules, used in combination with DR4, added another $680 million to the 2023 forecast.

Figure 2: Changes to 100GbE Forecast

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Source: LightCounting

LightCounting’s High-Speed Ethernet Optics report offers a comprehensive forecast with more than 50 product categories, including 10GbE, 25GbE, 40GbE, 50GbE, 100GbE, 200GbE, 2x200GbE and 400GbE transceivers, sorted by reach and form factors. It provides a summary of technical challenges faced by high-speed transceiver suppliers, including a review of the latest products and technologies introduced by leading suppliers. The report is based on confidential sales information and on detailed analysis of publicly available data released by leading component and equipment manufacturers along with considerable input from industry experts.

More information on the report, including table of content and database template, is available at: https://www.lightcounting.com/Ethernet.cfm

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.

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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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