June 26, 2018

LightCounting extends market coverage and pre-announces a new report on markets and technologies for 3D sensing

Three-dimensional (3D) depth sensing is generating huge excitement among suppliers of GaAs-based vertical- cavity surface- emitting lasers (VCSELs). Things reached fever pitch last fall when smartphone leader Apple unveiled the iPhone X handset which uses 3D depth sensing to power its facial recognition feature.

Figure: iPhone X launch Apple Fifth Avenue, New York


Lumentum -– the supplier of VCSELs for Apple’s 3D sensor - reported their 3D sensing revenues rocketing to $200 million for their December 2017 quarter, compared to $40 million in the prior quarter. Other vendors - including AMS, Finisar and II-VI - are scaling up their production capabilities so they can be ready to meet the anticipated demand. Finisar announced a $390 million pre-payment from Apple allowing it to more quickly ramp up a new Texas facility for manufacturing VCSELs to the tune of $100 million in quarterly revenue.

Since then, 3D depth sensing has seen increasing interest from other smartphone manufacturers. Xiaomi has unveiled the first Android phone with 3D depth sensing capabilities, and Huawei and Samsung are expected to follow suit by the end of the year. The technology could explode into new consumer markets, including home appliances and digital assistants, robots and drones, augmented/virtual reality peripherals and gaming consoles, and autonomous vehicles.

Figure: Apple iPhone X sensors


Source: Apple

Given all the fanfare, you could be forgiven for thinking that 3D depth sensing technology is new, but in fact it first came under the spotlight in November 2010, when Kinect for Microsoft’s Xbox 360 console was launched. To celebrate the launch, Microsoft took over New York’s Times Square with demos, star-studded appearances, and a choreographed dance culminating in a line of thousands of fans waiting to take home what was billed as the “future of home entertainment.”

The technology in Kinect, which included an advanced infrared camera and sensors, enabled the consumer to control the Xbox console with gesture and voice commands. Lumentum’s forerunner JDS Uniphase provided the VCSELs for Kinect. The pioneering motion sensor sold more than ten million units in just four months and became the fastest selling consumer electronics device on record. But as the years went by, sales became lackluster, Microsoft started to drop its support for the platform, and at the end of 2017 - the company announced they were discontinuing the manufacture of Kinect as a standalone device.

The Kinect offers a cautionary tale about the fickle modern consumer. Every technology has to survive the hype cycle where the expectations vastly outpace the reality. Will 3D depth sensing find a permanent home in smartphones and start shipping in the hundreds of millions of units annually?

We will delve into this question in detail in the forthcoming LightCounting report “3D depth sensing in smartphones and consumer electronics”, slated for publication in September 2018.  The report will discuss Apple’s big bet on 3D sensing, locking down the supply chain for VCSELs, Apple’s current lead over Android smartphone vendors and will that lead matter - as well as the market drivers, ecosystem, industry challenges, technologies, and specifications. It will also include a five-year forecast for the number of VCSELs sold worldwide, as well as their revenues.

The Kinect in Xbox eventually failed due to a combination of reasons. The product was expensive ($150), finicky, and suffered from noticeable latency. Kinect was also difficult to accommodate; it needed six feet of space from the sensor for solo games and eight feet for two-person gaming, along with the lateral room between players. Getting this much space was difficult especially in urban apartments and similar spaces. Its supposedly big advantage was that gaming controllers were not needed turned out to be not so significant for Microsoft’s gaming clientele; gamers do not mind them because controllers provide the necessary precision, responsiveness, and tactile feedback - that Kinect was not able to replicate.

The iPhone X which starts at $999 and is Apple’s most expensive phone ever, initially had the industry worried. The concern was that it would be too pricey, and sales would be soft. At the company’s quarterly earnings call on May 1st, CEO Tim Cook quickly dismissed those concerns; iPhone unit sales had risen 2.9% year-over-year, and the iPhone X was the top-selling Apple device every week since its launch in November 2017. In 2018, 100% of Apple phones manufactured should have front 3D depth sensing technology. And Apple will probably introduce a world-facing rear 3D sensing camera in 2019. Early reports suggest they will use Time-of-Flight technology instead of Structured Light, but since Apple won’t discuss unreleased features, nobody knows for sure.

More details will be forthcoming in LightCounting’s September study.

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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