April 6, 2018

LightCounting publishes Research Note on OFC 2018

The fiber optics industry is booming and OFC 2018 attendance was up 10% from last year. Expectations for the future are high as optical connectivity is a key technology for Artificial Intelligence (AI) and 5G mobile networks. However, it remains uncertain how service providers and networks operators develop new business models and revenue streams from AI and 5G. It is clear that service providers want optical networks to have lower operating costs, and greater service flexibility, and many are exploring a move to using open networks to accomplish this. Some are starting with a limited approach, like OpenROADM, an intermediate approach, like open line systems, and some with an end to end open networking approach. All were evident at OFC 2018.

Scott Montford of AT&T presented an aggressive posture on open optical transport systems, both at a workshop and again in a Market Watch presentation, saying that AT&T was ‘working out the kinks’ of open systems this year, and moving to 100% open systems in 2019 (excluding their long haul/submarine networks). This is surely one of the most aggressive adoption schedules we have heard of from a traditional service provider.

One event that Scott mentioned several times was that AT&T was required to make “last time buys” of 40G transceivers in 2017, and with one order in the range of $40-50 million, it is clear why this gave them some major heartburn.  One stated benefit of moving to open networks is that AT&T will be able to purchase network equipment via a reverse auction each quarter, with all qualified vendors allowed to bid every quarter. Their goal is “no vendor lock-in”. Montford said that this will allow them to “cut and run” on hardware vendors if they don’t meet AT&T’s required price points, which he believes will translate into a 50% reduction in capex vs. present mode of operation.  Open systems will also allow them to upgrade capacity a span at a time vs. having to do it en masse across the entire network. In the long run, open networks will save money in opex via fewer truck rolls, and as they move away from the older Telcordia (Bellcore) OSS to newer SDN/NFV net management tools.

Vnayak Dungui of Facebook also talked about open systems in a presentation about optical technology in Facebook’s terrestrial networks. When asked over what timeframe Facebook was going to adopt open optical systems, he replied that ““Facebook doesn’t do anything over long time frames, it doesn’t believe in multi-year projects.”  Taken at face value, this comment suggests Facebook is on an adoption curve that may be as aggressive as AT&T’s. But by the same token, it also calls into question whether Facebook will be deploying the Voyager open transponder which it designed.

Several vendors announced ‘open’ products at OFC also. Juniper introduced the ACX6360 UNIVERSAL METRO ROUTER, which looks very similar to Voyager. It combines transport and router functions in a 1RU system with eight 200G pluggable coherent CFP2 ports and twenty client 100GbE QSFP28 ports. It supports full Layer 3 functionality, while Voyager is limited to Layer 2.

Hidoki Nakamura of NTT gave a presentation on a version of the Cassini white box transponder developed in conjunction with Edgecore Networks. The NTT version provides eight 200G coherent ports and sixteen 100G QSFP28 ports. The coherent line cards use a CFP2-ACO, and NTT’s new ‘TERA’ DSP that does 65Gbaud in multiple modulation formats.

Ciena announced the 8180 Coherent Networking Platform, which also looks similar to Voyager, but it is a bit more powerful. It supports for 400G wavelengths and scales to 6.4 Tb/s of packet switching, clearly designed with DCI applications in mind. The latest version of Ciena’s 6500 Reconfigurable Line System can be deployed as integrated or disaggregated system. It also reduces footprint and expands fiber capacity with L-Band support.

The subject of open networks will be explored in greater detail in LightCounting’s forthcoming ‘Cloud Report’, titled “The Impact of Cloud Services on the Telecom Industry”, which will be published by April 30th.

LightCounting clients who have subscriptions can log into https://www.LightCounting.com/Login.cfm to access the research note.

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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