The Unchartered Territory: Innovation and Optical Networks 2.0
Lightcounting Releases a research note on Huawei Analyst Summit held in April 2019
Huawei’s 16th annual analyst summit, held in Shenzhen last week, was designed to impress and it definitely delivered. It was hard not to be impressed by a record number of 750 attendees, security screening at the entrance to the venue for keynote presentations by top management, and more importantly by the company’s very ambitious plans for the future.
Huawei’s ambitions extend far beyond dominating the global market for telecom networking equipment, challenging Apple and Samsung in the market for smartphones or Cisco in enterprise networks. The new goal is to become the global leader in technological innovation and bring new disruptive technologies to the market. The company’s Innovation 2.0 strategy prioritizes vision-driven innovation rather than customer-driven.
A question on the security of networking infrastructure came up during the Q&A session after the keynote presentations and Ken Hu, Huawei’s rotating Chairman, handled it very well. He stated that the security of communications infrastructure is a complex technical challenge that requires a coordinated, systematic approach for finding a solution. He pointed to the danger of making these concerns into a political issue and making decisions based of feelings rather than facts.
During his keynote presentation, Mr. Hu commented that new standards for network security have to be developed and verification mechanisms have to be agreed on by all vendors. He pointed out that Huawei and the European Union are taking a lead in this process and he expects that other vendors and countries will join.
5G is coming sooner than expected
Huawei reported a 20% increase in revenues for 2018, but their carrier business segment sales declined by 1.3% last year. The company expects this segment to return to growth in 2019, driven by new investments in 5G infrastructure.
Hr. Hu commented that Huawei is involved in the construction of forty 5G networks as of April 2019. Six of those networks are in the Asia Pacific region, ten are in the Middle East, and 23 are in Europe.
5G deployments will have a direct impact of demand for optical transceivers in 2019 and China Mobile will be the primary user of them. Many of these modules will be manufactured by Huawei. LightCounting’s latest forecast for 25G and 50G wireless fronthaul and midhaul transceiver sales of merchant suppliers, will be released in the end of April as part of Optical Communications Market Forecast Report.
Optical networking 2.0
Huawei’s strategy for optical networking includes continuing improvements in fiber bandwidth utilization, optimizing product performance while reducing power consumption and transitioning from reactive to predictive network operation and management. AI is expected to play a critical role in network management in the future, but current capabilities include relatively basic functions, such as latency maps and fault diagnostics.
Huawei’s latest oDSP technology (OptiXtreme) supports 200G DWDM CFP modules, using G6 chips, and 600G DWDM modules, equipped with H6 chips. Next generation G7 and H7 oDSP chips (based on 7nm technology) will be available in H2 2019 and H1 2020, respectively. The first one will enable lower power consumption pluggable modules and the second one will be used for data rates up to 800G per wavelength, as shown in Figure.
Figure: Evolution of oDSP technology at Huawei
Improvements in fiber bandwidth utilization include transition to higher data rates, enabled by new optimized digital signal processing (oDSP) chips and offering more DWDM channels by extending the operating spectral range to a 50% wider “Super C” band. Network operation across the Super C band is enabled by internally made EDFA amplifiers and widely tunable lasers, which helps to add 50% more spectrum in to current fiber comparing with traditional C band.
The increasing number of optical components and modules manufactured by Huawei internally is not good news for merchant suppliers of these products. LightCounting accounted for this trend in forecasts for DWDM transponders and the forthcoming Market Forecast Report will address the impact of Huawei’s internal capabilities on the global market for tunable lasers and WSS modules as well.
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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.