VCSEL Industry Is Facing a Strong Transformation at All Levels. Could Apple Change the Game?1

Press Release October 8, 2020 LYON, France

VCSEL industry is facing a strong transformation at all levels. Could Apple change the game?1

OUTLINE:

• The worldwide VCSEL2 market is showing 18.3% CAGR3 between 2020 and 2025 to reach US$ 2.7 billion at the end of the period. • While 3D applications for mobile and consumer is still booming, automotive, medical and AR&VR applications are emerging. • Mobile 3D sensing will represent around 75% of overall VCSEL revenues in 2020. 3D sensing is a diversification opportunity, announces Yole Développement (Yole) in its VCSEL report. • VCSEL technology is not yet mature and could further develop in the future. • Competitive landscape: 50+ VCSEL manufacturers have been identified: more than a third of these has their HQs in the US. Lumentum is dominating the consumer market but new players are emerging. 3D sensing: leading VCSEL manufacturers are already qualified by OEMs with ams having many design wins on the Android camp. Other Chinese VCSEL suppliers are expected to emerge as other smartphone manufacturers like Oppo, Xiaomi, or Vivo could follow Huawei and establish a local supply chain.

“Globally, the VCSEL market is expected to generate more than US$1 billion revenue in 2020 and should reach US$2.7 billion in 2025 at a CAGR of 18.3%.” asserts Pierrick Boulay, Solid State Lighting and Lighting Systems within the Photonics, Sensing & Display division at Yole Développement (Yole). “In this VCSEL market, telecom and infrastructure applications, mainly datacom, are expected to generate revenue of US$277 million in 2020 and should reach US$516 million in 2025 at a CAGR of 13.2%. Other applications are not significant yet

1 Extracted from: VCSELs - Market and Technology Trends 2020 report, Yole Développement, 2020 Apple iPad Pro LiDAR Module report, System Plus Consulting, 2020 Smartphone 3D Sensing Modules Comparison 2020 report, System Plus Consulting, 2020 2 VCSEL: Vertical Cavity Surface Emitting Lasers 3 CAGR: Compound Annual Growth Rate

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but could emerge in the mid- to long-term, such as automotive applications like LiDAR or driver monitoring systems”.

In this context, Yole and System Plus Consulting investigate disruptive VCSEL technologies and related markets in depth for a while. With an impressive collection of solid-state lighting report, Yole’s analysts point out the latest innovations and underline the business opportunities. Released today, the VCSELs - Market and Technology Trends 2020 report gives detailed overview of the VCSEL technologies including the development status of GaN-based VCSELs and long wavelength VCSELs. This report provides a worldwide picture of the VCSEL industry with accurate data for each application. It details the critical steps in the manufacturing process and insights into manufacturing and associated challenges. Including market trends and forecasts, supply chain, technology trends, take away and outlook, this new technology & market report aims to deliver an in-depth understanding of the VCSEL industry. In parallel, the reverse engineering & costing company, System Plus Consulting, has delivered two related reports this year: • Apple iPad Pro LiDAR Module: this full reverse costing study has been conducted to provide insights into technology data, manufacturing cost and selling price of the rear LiDAR scanner in the iPad Pro. With this report, System Plus Consulting delivers a deep understanding of the technical choices and strategy of the leading smartphones manufacturer. • Smartphone 3D Sensing Modules Comparison 2020: this analysis is an accurate review of technologies and costs of 11 3D sensing modules found in flagship smartphones.

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With a focus on VCSELs and NIR CIS4, this report proposed by System Plus Consulting points out the strategy of each player and compares the related manufacturing costs.

What are the economic and technological challenges of the VCSELs industry? What are the market drivers? Who are the suppliers to watch? What are the latest innovations? How is the VCSEL ecosystem organized and how will it evolve?... Yole and System Plus Consulting present today their vision of the VCSELs industry.

As analyzed by Yole’s team in the new VCSELs - Market and Technology Trends 2020 report, until 2017, the VCSEL market was driven by datacom applications. Since this period, datacom has been replaced step by step, by 3D sensing as the market driver, especially since the strategic technical choice made by Apple and the implementation of the Face ID module in its iPhones. In the Apple iPad Pro LiDAR Module report from System Plus Consulting, Sylvain Hallereau Project Manager at System Plus Consulting reveal Apple’s strategy and the related supply chain: “The LiDAR uses a VCSEL coming from Lumentum. Therefore, Lumentum is in tight

collaboration with Apple and generated more than US$100 million only with Apple’s smartphones. In its LiDAR, the laser is designed to have multiple electrodes connected separately to the emitter array. A new design with mesa contact is used to enhance wafer probe testing…” Then, following the release of the iPhone X, several manufacturers have decided to follow the same path and implement 3D sensing modules in the front side of their smartphones for face recognition. Since this happened, it was expected that other Chinese smartphone manufacturers would also implement such modules on the front side. This was the case the following year, but the trend rapidly declined.

4 NIR CIS: Near Infra-Red CMOS Image Sensors

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“3D sensing modules moved from the front side to the world facing side, mainly for photography applications”, comments Pierrick Boulay from Yole. “This can be explained by several factors, including the cost of 3D sensing modules, the intellectual property around structured light solutions, and the competition with under-display fingerprint solutions that were more accessible to mid-price smartphones.” For sure, this transition from the front side to the world facing side has an important consequence for the VCSEL market. It was expected that front 3D modules would use structured light solutions with two VCSELs. World facing 3D modules use ToF solutions with only one VCSEL. In this dynamic context, mobile and consumer applications are expected to generate revenue of US$0.8 billion in 2020. This should reach US$2.1 billion in 2025 at a CAGR of 20.1%.

Since the adoption of VCSEL solutions for 3D sensing modules in smartphones, Apple is consuming the majority of VCSELs produced by Lumentum. In 2017, 41 million units were implemented in iPhones and in 2020, more than 325 million of VCSEL are expected to be used in iPhones. “This number represents more than 2/3 of the total VCSEL consumption for mobile 3D sensing,” points out Yole’s analyst, Pierrick Boulay. “Lumentum, as the main supplier of Apple’s VCSELs, is clearly leading the mobile and consumer market with 68% of the market in 2020.”

Behind Lumentum, ams and Trumpf are completing the podium with market shares of 15% and 7% respectively. The Smartphone 3D Sensing Modules Comparison 2020 from System Plus Consulting offers a comprehensive overview of the technical choices made by the leading smartphones companies. It also includes a relevant cost comparison of 3D sensing modules in flagship smartphones including Apple, Huawei, Samsung, Xiaomi and Oppo, with a focus on VCSELs and NIR CIS. According to Taha Ayari, Technology & Cost Analyst from System Plus Consulting: “The integration of the VCSELs and NIR CIS in smartphones is shown, and the analysis are based on

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full teardowns of these components to reveal the technological choices made by the different manufacturers. Also, the report assesses the various supply chain participants”. The supply chain is also strongly impacted by following political decision and the trade war between US and China. In May 2019, the US ban Huawei. Lumentum stops supplying Huawei and Huawei must find a new provider of VCSELs. This ban severely damaged Huawei’s supply chain. Huawei had no choice but to build its own supply chain. This is the rise of Vertilite. Other Chinese VCSEL suppliers are expected to emerge as other smartphone manufacturers like Oppo, Xiaomi, or Vivo could follow this trend and develop a local ecosystem to secure their supply chain.

All year long, Yole Développement and System Plus Consulting publish numerous solid-state lighting reports. In addition, experts realize various key presentations and organize key conferences. In this regard, do not miss the Smartphone Camera Trends – Webcast on October 8th. Registration on i-Micronews. Note: a recorded version will be available after the event. Register right now to receive the URL link. Make sure to be aware of the latest news coming from the industry and get an overview of our activities, including interviews with leading companies and more on i-Micronews. Stay tuned!

Press contacts

Sandrine Leroy, Director, Public Relations, [email protected] Marion Barrier, Assistant, Public Relations, [email protected] Le Quartz, 75 Cours Emile Zola – 69100 Villeurbanne – Lyon – France – +33472830189 www.yole.fr- www.i-micronews.com – LinkedIn – Twitter

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About our analysts As part of the Photonics, Sensing & Display division at Yole Développement (Yole), Pierrick Boulay works as Market and Technology Analyst in the fields of Solid State Lighting and Lighting Systems to carry out technical, economic and marketing analysis. Pierrick has authored several reports and custom analysis dedicated to topics such as general lighting, automotive lighting, LiDAR, IR LEDs, UV LEDs and VCSELs. Prior to Yole, Pierrick has worked in several companies where he developed his knowledge on general lighting and on automotive lighting. In the past, he has mostly worked in R&D department for LED lighting applications. Pierrick holds a master degree in Electronics (ESEO – Angers, France). Sylvain Hallereau has been Project Manager at System Plus Consulting since 2000. He is in charge of costing analyses for Integrated Circuits, Power semiconductors and LEDs. He has significant experience in the modeling of manufacturing costs for electronics components. Taha Ayari is involved in analyzing compound semiconductor devices with dedicated technical, costing and pricing analysis. He has a deep knowledge in epitaxy techniques, materials characterizations as well as devices microfabrication. Nicolas Radufe is in charge of physical analysis at System Plus Consulting. He has a deep knowledge in chemical and physical analyses. He previously worked in microelectronics R&D for CEA/LETI in Grenoble and for STMicroelectronics in Crolles. About the report VCSELs - Market and Technology Trends 2020 The VCSEL market is growing but still evolving. Changes are happening at design, manufacturing, supply chain and application levels. – Performed by Yole Développement Companies cited: Accelink, Aixtron, Alight, ams, Anadigics, Apple, Arima Lasers Corporation, Asus, Audi, Avago, AWSC, Beam Express, Blackmore, Bosch, Broadcom, Cable solutions, Canon, Changelight, Continental, Device Innovation, Egismos Technology Corporation, Emcore, Epistar, EpiWorks, Excelitas, Finetech, Finisar, FLIR, Foxconn, Fuji Xerox, Fujitsu, Global Communication Semiconductor, Google, Hamamatsu, Hella, Heptagon, Himax, HLJ, Honeywell, Honor, HTC, Huawei, Ibeo, iHealth, II-VI, Infineon, Infinera, Inneos, Innoluce, Innoviz, Intel, IntelliEPI, IQE, JDSU, Journal of Semiconductors, Kaiam, Koito, Landmark Opto, Lasermate, Lasertel, Laytec, LeddarTech, Lenovo, LG, Lumentum, Luminar, LuxNet, Magneti Marelli, Mantis Vision, Masimo, Namuga, Oclaro, Oculus, OmniVision, OnePlus, Oppo, Optek Technology, Optical Society of America, Optovue, Optowell, Orbbec, Osram, Oxford Instruments, Palomar Technologies, Philips Photonics, Picolight, pmd, POET Technologies, Primesense, Princeton Optronics, QSI, Quanergy, Rasirc, RayCan, Realsense, Riber, Ricoh, Robosense, Samsung, Sanan, Santec Corporation, SCAT, Seiko Epson, Seminex, SensL, Shiraz University, Sick, SinoSemic, SoftKinetic, Sony Corporation, Stanley, STMicroelectronics, Sumitomo Chemicals, Sunny Optical Technology, Suoer, Taiyo Nippon Sanso, Tetravue, Texas Advanced Optoelectronic Solutions, Thorlabs, TriLumina, TrueLight Corporation, Tyson Technology, Ulm Photonics, Ultra Communication, US Lasers Inc., Ushio, Veeco, Velodyne, Vertically Integrated Systems, Vertilas, Vertilite, Viavi, Vivo, Vixar, VPEC, Wavetek, Win Semiconductor, Xiaomi, Zephyr Photonics, ZF, and more… Apple iPad Pro LiDAR Module The first 3D direct Time-of-Flight (dToF) CMOS image sensor from Sony with dedicated Lumentum VCSEL. – Performed by System Plus Consulting Smartphone 3D Sensing Modules Comparison 2020 Technical choices and cost comparison of 3D sensing modules in flagship smartphones including Apple, Huawei, Samsung, Xiaomi and Oppo, with a focus on VCSELs and NIR CIS. – Performed by System Plus Consulting

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• 3D Imaging & Sensing 2020 • GaAs Wafer and Epiwafer Market: RF, Photonics, LED, Display and PV Applications 2020 • InP Wafer and Epiwafer Market – Photonic and RF Applications

About Yole Développement Founded in 1998, Yole Développement (Yole) has grown to become a group of companies providing marketing, technology and strategy consulting, media and corporate finance services, reverse engineering and reverse costing services and well as IP and patent analysis. With a strong focus on emerging applications using silicon and/or micro manufacturing, the Yole group of companies has expanded to include more than 80 collaborators worldwide… More

About System Plus Consulting System Plus Consulting specializes in the cost analysis of electronics, from semiconductor devices to electronic systems. Created more than 20 years ago, System Plus Consulting has developed a complete range of services, costing tools and reports to deliver in-depth production cost studies and estimate the objective selling price of a product… More

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