Total Optical Transceiver Sales Posted Just a 3% Drop in 2018, Successfully Defying Market Volatility
LightCounting releases Quarterly Market Updated (QMU) report analyzing the supply chain of the global optical communications industry in 2018
Demand for optics was jittery in 2018, but the quarterly sales of optical transceivers were steady during the year, as shown in the figure below. Volatility in demand for datacom and telecom products were “out of phase,” reducing fluctuations in the total sales. A decline in the telecom segment was compensated by strong demand for Ethernet optics in the first half of the year. Sales of telecom products picked up in H2 2018, just in time to offset lower sales of the datacom products. Detailed data on quarterly shipments and pricing of more than 100 categories of optical transceivers, AOCs, EOMs and WSS modules is included in the QMU database released along with the report.
It should be noted that demand for WSS modules, EDFAs, pump lasers and passive components, not included in the chart above, were strong in 2018. These modules are usually deployed in the early stages of network upgrades, so this is a leading indicator of strong demand for telecom transceivers in 2019-2020. Sales of 25G optics for wireless fronthaul and new DWDM transponders picked up sharply in the end of 2018 and this trend should continue this year.
China Mobile disclosed 2019 capex plans earlier today, projecting 10% lower spending, as shown in the figure below. However, this excludes spending on 5G infrastructure, loosely defined in a pink dashed rectangle, sized at around $22 Billion RMB – adding 15% to the capex. China Telecom and China Unicom plan to increase their capex in 2019 by 4% and 29%, respectively, with 10-15% of the total to be spent on 5G infrastructures. All this adds up to 38 billion RMB in 2019 – just a few percent of more than 1 trillion RMB to be spent on 5G in 2020-2025, but it is a start.
Source: China Mobile
Google recently disclosed plans to spend $13 billion on construction of data centers in 2019. This is very good news for suppliers of 100GbE transceivers that reported sharp declines in Q4 2018 revenues. Facebook’s new F16 datacenter network design, released at the Open Compute summit last week, also suggests that a lot more 100GbE connectivity will be needed in the future.
Detailed data on the sharp drop in shipments and pricing of SR4 and CWDM4 100GbE transceivers is included in the QMU database, available now. An updated forecast for sales of these products in 2019 will be released in the High-Speed Ethernet Optics report to be published next week.
The QMU report also includes performance metrics and commentary for top-tier telecom and internet service providers, network and datacom equipment makers, optical component and semiconductor IC vendors. More information on the report is available at: https://www.lightcounting.com/marketupdate.cfm.
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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
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.