3D sensing in smartphones is pushing the VCSEL industry

According to the report, there were more than 3.3 billion units in 2023 with a 31% CAGR between 2017 and 2023. This explosion is changing the future of all players of the VCSELs supply chain including: OEMs , integrators, device manufacturers, epi houses, foundries, equipment and material suppliers.

The report from by Yole, presents an in-depth analysis of the VCSEL industry with its supply chain and competitive landscape. It exposes a comprehensive review of the main VCSEL applications including in-depth analysis of the consumer and automotive landscapes with 3D sensing, LiDAR and gas sensing.

Under this report, Yole details VCSEL device market size, broken down by application and segment, and the related MOCVD reactor market. In addition, Yole’s analysts bring to light a significant overview of the VCSEL IP landscape. VCSEL manufacturing processes, associated challenges, recent trends and player positioning are also well analysed.

Driven by the development of data centres, the VCSEL market and production boomed in the 2000s with the internet’s popularity, and then grew steadily. Some new applications for VCSEL emerged, like laser printers and optical mice, but weren’t strong growth drivers. 

It was only in 2014 that VCSELs started to make their way into high volume consumer smartphones. But this coupling with sensors for proximity sensing and autofocus functions was only the beginning of the VCSEL success story.

Pierrick Boulay, Technology & Market Analyst at Yole, explained: “In 2017 Apple released the iPhone X, with a 3D sensing function based on this technology. The iPhone X integrates three different VCSEL dies for the proximity sensor and the Face ID module, and made the VCSEL market explode in 2017, propelling overall revenue to about $330m.” 

Good iPhone X sales have now triggered the interest of other smartphone brands in this breakthrough 3D sensing function. Less than one year after the release of Apple’s flagship, its competitors are now following the same trend and starting to integrate 3D sensing technologies. Xiaomi and Oppo were the quickest on the draw, with the Xiaomi Mi8 and the Oppo Find X models presented in the second quarter of 2018. Other leading smartphone players like Huawei, Vivo or Samsung are also expected to integrate VCSELs into their flagship models by 2019.

In this context, the explosion of VCSEL demand initiated in 2017 will persist for the next five years, potentially multiplying the business opportunity more than tenfold. During that time, the technology might also find some new growth drivers into some other high volume applications such as automotive Light Detection and Ranging (LiDAR) or gas sensors. 

VCSEL market volume is expected to grow from 652 million units in 2017 to more than 3.3 billion units in 2023. This booming trend is likely to trigger interest in VCSEL technology at many industry levels, including OEMs, integrators, device manufacturers, epi houses, foundries, equipment and material suppliers. To be able to follow this booming demand, more than 100 MOCVD reactors will be needed, which is likely to please companies that supply this equipment, such as Aixtron, Veeco and Taiyo Nippon Sanso. 

Yole expects therefore strong investment and proliferation in the VCSEL industry with the entry of several new players, mostly from the LED industry, whose technology is similar. Since 2016, Yole analysts’ have already seen some M&A, like ams’ acquisition of Princeton Optronics and Osram’s deal for Vixar and investment in manufacturing expansion or supply chain reinforcement, like Apple investing US$390 million in Finisar. Yole expects the bulk of these investments to occur in the coming years. 

Once VCSEL hype reaches its peak, Yole also expects a necessary consolidation phase with more M&A occurring at all level of the supply chain and to support different strategies: 

• Vertical integration - from system to module and/or from module to component.
• Application diversification - from datacom to sensing.
• Business diversification - from LED or EEL devices to VCSELs.