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Though VCSEL (vertical cavity surface-emitting lasers) have existed for 20+ years, they were relatively unknown until Apple used three of them in the iPhoneX to enable its 3D sensing and facial recognition functions (it is worth noting that in 2016 and 2017, Lenovo and Asus both implemented similar functionalities in their phones).

Now, on the heels of its appearance in the iPhone X, VCSEL is a super-hot market that’s driving the growth and market value of MOCVD equipment and epi-house, along with companies providing testing, packaging, and ceramics…and of course, VCSEL manufacturers themselves. The enclosed article, based on Yole Développement’s (Yole) latest report on VCSEL applications and technology trends, is an indispensable resource for understanding what to expect from VCSEL applications in the next five years.

VCSEL are components that have long been used in data communications (datacom). In fact, for almost 20 years datacom was the only VCSEL application that generated substantial volume. VCSEL’s sweet spot is in short-distance data communication due to their low power consumption and competitive price, compared to edge-emitting lasers (EELs). Driven by the development of data centers, the VCSEL market and production boomed in the 2000s with the internet’s exponential growth. The market then grew steadily as new applications for VCSyoEL emerged, i.e. laser printers and optical mice, but these weren’t strong growth drivers.

Then the smartphone changed everything…

Important date #1: four years ago - in 2014, VCSEL started to be integrated in smartphones for proximity sensing. STMicroelectronics in particular was developing such applications with its innovative time of flight technology, making proximity sensors very small and affordable while offering low consumption and high reliability.
Important date #2: 2017 - last year, Apple introduced VCSEL for 3D sensing/facial recognition in the front of the phone. This move subsequently generated huge interest in VCSEL from players across the supply chain (MOCVD reactors, epitaxy, foundries, device makers, module, system, etc.). VCSEL integration increased tension throughout the supply chain - partly because Apple’s iPhone used a large portion of its suppliers’ existing capacity, and also because new business opportunities were emerging practically overnight for players at all points of the supply chain. As a result, leading VCSEL players are moving from datacom to the consumer market, and we see the entry of new players like Epistar and Sanan, which are currently in the validation phase with potential customers.
VCSEL manufacturing is difficult and there is a lengthy period between R&D and production before the process is optimized. Not surprisingly, we have observed many recent M&As (II-VI, Lumentum, ams, Osram) and we anticipate further moves. Also, there will be plenty of investment in MOCVD reactors to meet growing demand. All of these the market trends, technology changes, and expected investments are described in Yole’s new report.
VCSEL market volume is expected to grow from 652M units in 2017 to more than 3.3B units in 2023, at a 31% CAGR. This also means a $3.1B market for VCSELs in mobile phones in 2023 - a gigantic increase from last year’s total market (all applications) of $330M.

Right now only a few companies are truly in volume production for devices used in consumer-focused applications: Lumentum and ams are two of these firms. Many others are working hard in order to be ready for the next wave of design wins, especially after Xiaomi and Oppo announced the integration of such features in their next mobile phones. On the applications side, front-facing 3D sensors will hold the biggest market share for the next three years, but after this period we can certainly expect to see VCSEL in rear-facing 3D sensor modules, once the applications start.
On the production side (and as mentioned above), VCSEL manufacturing is still challenging - especially the epitaxy step, which is critical for the remaining manufacturing process steps and which determines the overall manufacturing yield. Manufacturing is especially critical for the consumer market, as players must move to 6” wafer production to meet volume and price demands. Manufacturing in 6” wafer is hard; epitaxy uniformity is more difficult compared to 3” or 4” manufacturing. Consequently, we see considerable investment in metrology equipment to enable better control of the manufacturing process.
As mentioned earlier, the VCSEL boom is likely to trigger interest in the technology at many industry levels, including OEMs, integrators, device manufacturers, epi houses, foundries, and equipment/material suppliers. Keeping up with this booming demand will necessitate more than 100 new MOCVD reactors, a fact that is sure to please companies that supply this equipment: namely, Aixtron, Veeco, and Taiyo Nippon Sanso.
On the applications side, this is just the beginning. In the future, other applications like LiDAR could implement VCSEL and generate high volume. 3D sensing should also be implemented on the smartphone’s rear side, enabling new applications for furniture and clothing. Also of note is the large variety of VCSEL that will eventually be required. VCSEL for datacom are quite small, and manufacturing on 3” or 4” wafer is enough. But for consumer and automotive applications there is a need for VCSEL arrays that can reach 70mm² (i.e. for LiDAR), which will undoubtedly increase manufacturing complexity and device cost.

This new Yole report presents an in-depth analysis of the VCSEL industry, highlighting supply chain trends and key players. This report also analyzes VCSEL market size: broken down by application, segment, and the related MOCVD reactor market. Moreover, a detailed overview of the VCSEL IP landscape is included too.

Source: Yole Développement

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