Yole predicts that driven by consumer applications, the global VCSEL market will grow from US$978 million in 2022 to US$1.4 billion in 2028, with a compound annual growth rate of 6%.
VCSEL market growth in the next five years will still rely on smartphone applications
In the past, the VCSEL market was driven by data communications applications, and this was the first high-volume application for VCSELs. However, in November 2017, Apple released the iPhone X, which uses VCSEL for facial recognition to achieve identity recognition. This was a game changer, with mobile and consumer markets becoming the first markets for VCSELs in 2018, valued at $440 million. Other smartphone manufacturers initially followed the trend but stopped using VCSELs a few years later in favor of under-display fingerprint sensors. Apple remains one of the only companies using VCSELs. The VCSEL market for mobile and consumer applications will grow by 80% in 2022 compared to 2018. VCSEL can now be found in tablets, AR/VR headsets, vacuum robots, and smart door locks.
VCSEL revenue for data communications applications is expected to reach $232 million in 2028, growing at a CAGR of 11% from 2022 to 2028. The need for high-bandwidth and low-latency communications is driving the growth of data centers. This is related to the increased bandwidth requirements due to the use of the Internet for social networking and video streaming. Other markets are also booming: automotive applications using VCSELs in lidar and industrial applications using VCSELs in smart payment modules, especially in China.
The VCSEL ecosystem has changed dramatically since 2017. There was an oligopoly at the time, with Lumentum being the largest player and several other players also holding significant market shares. The VCSEL ecosystem is now a duopoly. Coherent holds 41% of the market share and Lumentum holds 37% of the market; these two companies are now the largest players, with a combined share of nearly 80% of the global VCSEL market. So, what happened in the meantime? At the time, Lumentum was Apple's only qualified supplier. Finisar is still in development and working hard to provide Apple with qualified products. Other players are partnering with other smartphone manufacturers or providing small VCSELs for proximity sensors. Subsequently, Coherent acquired Finisar. Lumentum lost market share to Coherent, and Sony has only recently been qualified as a VCSEL supplier for Apple's iPhone rear lidar.
At the same time, these leaders are also strengthening their positions in the optical communications market through mergers and acquisitions and vertical integration from VCSEL devices to transceiver modules. Ams-Osram will have a presence in automotive applications such as lidar or in-car sensing because of its historical position in this market. Trumpf has achieved promising results in developing long wavelength and higher performance VCSELs. They will play a role in VCSEL's main markets: data communications and consumers. Broadcom remains a significant player in VCSEL, but primarily in datacom applications.
On the technology side, one of the main focuses is the transition from 940nm VCSEL to 1380nm VCSEL to integrate sensors under the display. To achieve this, the industry has envisioned a variety of manufacturing methods. The use of dilute nitride, the transition from GaAs (gallium arsenide) to InP (indium phosphide) materials, and hybrid approaches based on the fusion of GaAs and InP materials. Each of these methods requires significant research and development, but recently Trumpf has produced promising results using a wafer fusion method based on only InP active regions.
Apple tried to use an InP-EEL-based proximity sensor in its iPhone 14 Pro version, but the cost of a proximity sensor is more than ten times that of a GaAs-VCSEL-based proximity sensor, and the module is more challenging to manufacture and assemble. In the iPhone 15, Apple returns to a GaAs VCSEL-based proximity sensor.
Although germanium has the potential to replace GaAs as a substrate, the transition from 6-inch to 8-inch manufacturing has yet to be realized. Adoption of 8-inch depends on the emergence of an application that requires large volumes that cannot be accommodated by 6-inch wafers, in addition to requiring new equipment and possibly new substrates. There is currently no such application.
Other technological advances are related to reducing the VCSEL footprint while maintaining output power and/or adding new functionality: using back-emitting VCSELs to add micro-optics on top of the VCSEL, using polarization multiplexing with two grating orientations, e.g. combined on the same device Flood illuminators and spot projectors.
Tags：