VCSEL technologies and devices were available for more than two decades without much ado, and over the last 10 years have enjoyed a stable market linked to Datacom and low added-value optical detection. And then suddenly, bam! Everything changed in 2017 with the implementation of VCSELs for face recognition and 3D sensing in the Apple iPhone X.
A year later, almost every major OEM (Xiaomi, Oppo, Vivo, and Huawei in Q4-2018) had followed Apple’s lead, and today face recognition (with more than 10 mobile phones implementing it) is becoming a de facto feature in high-end mobile phones, specifically for the biometrics that have replaced the fingerprint sensor. Samsung is the lone holdout, offering a new version of the fingerprint sensor with under-display sensing, but time will tell if the Korean company eventually follows the others and pursues front 3D sensing.
Also notable is the recent emergence of a rear 3D camera based on the time of flight (ToF) principle, which is driven by photography applications (i.e. the bokeh effect). Samsung and several Chinese mobile phone makers have decided to implement such functions in their high-end phones, thus increasing the available market for VCSELs and opening the way to more complex devices and different specifications for the VCSEL itself. In fact, today you can find mobile phones with up to four VCSEL devices: for proximity sensing, illumination, dot projection, and photography enhancement.
The total VCSEL value per smartphone will not be multiplied by four! According to the most recent Yole Développement report, VCSELs – Market and Technology Trends 2019, this value is expected to stabilize as functions using VCSEL increase (proximity sensor, face recognition, and rear 3D sensing). (proximity sensor, face recognition, and rear 3D sensing). Also, VCSEL cost is decreasing extremely fast, with a short learning curve for companies along the VCSEL supply chain (substrates, epi layers, and device manufacturing, along with packaging integration).
The rapid decrease of VCSEL manufacturing cost is not black magic – rather, it is the result of increasing experience and capex investment. The transition from 4” to 6” is starting to be implemented at multiple suppliers, resulting in a cost reduction of 20% for the same level of process maturity. Also, better yield is expected with the latest generation of MOCVD reactor, but this will only be possible after a long learning period and the accumulation of deep know-how concerning VCSEL manufacturing. This is clearly not a turnkey solution process: months, even years of cumulated experience is needed in order to have good specifications for devices, and also a good yield. This fact will be illustrated by how long it takes the competition to release devices that can compete with the first devices Lumentum delivered to Apple for the iPhone X.
Apple’s competitors have developed their own version of the front 3D sensing feature, using a structured light principle with decent accuracy. But now, certain competitors are implementing other technologies too: for example, LG using a front ToF camera for face recognition. This will certainly lead to better accuracy and a potentially simpler module architecture. Following the first ToF design win earlier this year, we have also seen the emergence of ToF-based solutions on the rear side, already implemented by Oppo, Huawei, and now Samsung. Samsung’s announcement about implementing a new feature in middle-end smartphones was orchestrated, according to Yole’s analysis in the VCSELs – Market and Technology Trends 2019 report, to gauge user reaction to the rear and the potential applications beyond the enhanced photography functions: applications like VR/AR, and the integration of 3D-oriented applications.
Beyond consumer applications, industrial (driven by the implementation of LiDAR for robotic systems in industrial environments) is another very active segment that is driving a large CAGR, with a market expected to be almost 3x larger in the next five years. LiDAR in automotive will also be an application area for VCSELs, but in the longer-term.
In total, VCSELs will reach $3.5B in 2024, with a combined growth of more than 30%.
On the M&A side, there have been several relevant acquisitions: Epiworks by II-VI, Princeton Optronics by ams, Philips Photonics by Trumpf, and Vixar by Osram. More M&A could come in the future, but these should be much more specialized in one domain/application, i.e. medical/automotive/datacom. In fact, most of the main VCSEL manufacturers have already been acquired!
The other big investment is linked to capex and the extension of fabs along the supply chain. Examples include IQE’s new dedicated plant in Wales, ams’ investment in its Singapore fab, Finisar’s investment (supported by Apple), and a green field project from San’An and other IDMs/foundries.
Now that they are key components in several mega trends, VCSEL growth is here to stay!
About the author:
Jean-Christophe Eloy is President and CEO of the Yole Développement company. Created in 1998, the market research & strategy consulting company has grown to become a group of companies providing marketing, technology and strategy consulting, media in addition to corporate finance services. His mission is to oversee the strategic direction of Yole Group of Companies.
With System Plus Consulting, Blumorpho, PISEO, KnowMade and Yole Développement, Yole Group of Companies has developed a unique understanding of technologies to accurately evaluate markets, applications, solutions and strategies.
With more than 70 analysts, including PhD and MBA qualified industry veterans, the group collects information, identifies trends, challenges, emerging markets, and competitive environments and then turns that information into results to give a complete picture of the industry’s landscape.
All year long, Jean-Christophe builds deep relationships with leading semiconductor companies, discussing and sharing information across his global network. His aim is to get a comprehensive understanding of their strengths and guide their success.
New functionalities in smartphone and automotive are boosting the VCSEL market.
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