June 19, 2019

Silicon Photonics' Share of Market Increases and Startup Funding Continues

LightCounting Releases the 2019 Edition of Integrated Optical Devices Forecast and Report

The potential of photonic integration has captivated the optical communications industry for the last two decades, and it’s clear that integrated optical devices, especially those made using Silicon Photonics (SiP), are starting to win a significant share of the market. Sales of SiP-based products started to ramp in 2014 and in 2018 reached nearly $1 billion – 18% higher than in 2017. The sales are especially impressive considering that SiP products only account for one percent of transceiver shipments on a unit basis globally.

The successful development of products using silicon photonics (SiP) integration technology led to several mergers and high-value acquisitions in 2012-2018, and the majority of photonic integration startups funded over the last five years are also working on SiP technology. Apart from InnoLight, all optical components startups that made a successful exit employed SiP technology. These success stories will continue to attract investments to this area. Although 2019 is still young, Ayar Labs, Dust Photonics, Effect Photonics, Elenion, Ranovus, Rockley Photonics, and Roshmere have completed funding rounds in 2018-2019.

It is worth noting that all high value acquisitions to date were made by switch and router vendors: Cisco, Juniper and Mellanox. This is because high-end switches and routers use a lot of high-speed optics: 100G today, 200G/400G in a year or two. It is very likely that 0.8-1.6 Tbps interfaces will become a reality in 5-10 years from now. Switches and routers are likely to be first network elements requiring these high data rate modules. The optics accounts for an increasingly large share of the total cost of switches and routers and is often a key design factor for next generation products. Having SiP technology in house could provide  an edge to equipment manufacturers in terms of lowering costs and time to market.

This was one of the reasons why Cisco purchased LightWire in 2012. Cisco needed more compact and power efficient 100G transceivers than CFPs for their new core router product and they were not sure if module vendors could produce next generation CFP2 and CFP4 transceivers in time for launching the router. Developing CPAK (comparable to CFP2) modules internally was Cisco’s insurance policy back in 2012-2013. Luxtera is their insurance policy for the future.

Longer-term benefits from having SiP technology in house include a potential integration of optical connectivity with processor or switching ASICs. Reducing power consumption of mega datacenters by a factor of 100 is the right objective for SiP technology.

Given the current momentum in commercial product success and startup funding, LightCounting expects sales of SiP-based integrated optics will increase significantly over the next five years, from around $1 billion in 2019 to more than $5 billion in 2024, with Ethernet devices accounting for most of the growth.

Figure: Projected sales of SiP-based integrated optics by segment

060619 (1).png

Source: LightCounting

Despite these gains in the market and investment funding, and the rosy forecast for growing sales, however, SiP is still a relative newcomer and it’s an open question whether SiP-based products will further replace those made from more mature indium phosphide (InP) and gallium arsenide (GaAs) materials, which have dominated the market over the last decade and already enable a variety of integrated products.

LightCounting’s recent report titled Integrated Optical Devices addresses the above issues in greater detail, as well as several others. The report also includes profiles of 14 suppliers of integrated optical devices, as well as forecast breaking down the optical transceiver market by integration technology (SiP, InP, and GaAs) and by level of integration (2X, 4X, and large scale), and by market segment (WDM, Ethernet, AOC-EOM, wireless, FTTX, and FibreChannel).  More information is available at https://www.lightcounting.com/Silicon.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.

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.

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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