Feb. 28, 2019

LightCounting has published a new report and forecast, focused on integrated circuits used in optical transceivers. One of the main conclusions of our analysis is that, after several years of stagnant growth, the market for optical interface IC chipsets is heading into a high-growth period, with a CAGR of 24% from 2019-2023. Sales of coherent DSP chips for DWDM optical interfaces and PAM4 DSPs for Ethernet transceivers will account for most of the revenue growth in this market, as can be seen in this chart.

LightTrends 022819

Source: LightCounting  

Coherent DSP sales grew rapidly in 2015-2016, but excess inventory accumulated by customers in 2017 and the ZTE shutdown in 2018 put a damper on growth in more recent years. Suppliers reported improving demand for coherent DSPs in late 2018, with ZTE back in business and sales of new 200G CFP2 DCO and 600G board mounted modules beginning. Guidance for the first quarter of 2019 was strong as well.

The first sales of PAM4 DSPs for applications in Ethernet transceivers started in 2018. Demand for PAM4 DSPs used in 200GbE and 400GbE transceivers is expected to be very strong in 2019, as key customers start deployments of these modules in mega datacenters. The use of 400GbE optics on core routers will also contribute to market growth in 2019.

Although coherent DSPs were well ahead of PAM4 chips in sales in 2018, we expect that the gap will shrink in 2020-2023, as PAM4 shipments reach 10x higher volumes than coherent DSPs.
Coherent DSPs will maintain the lead in revenues, however, since PAM4 chips will be used to address cost sensitive markets, and price declines will be much steeper than for coherent DSPs.

Competition between coherent and PAM4-based products will be the most intense in the 40 km reach 100GbE and 400GbE applications. The 100GbE ColorZ module developed by Inphi for interconnecting Microsoft’s datacenters was the first PAM4-based solution with 40km reach. Longer reach 100GbE coherent competition is getting a boost via the IEEE standards being developed for coherent 40km and 80 km transceivers.

Our new report and the accompanying forecast spreadsheet provide additional analysis of the IC chipset opportunity related to optical transceivers, and was developed in consultation with and with assistance from many different communications IC manufacturers. We look forward to discussing this new topic with clients, and look forward to your feedback.

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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