The quietest potential vendors of VCSEL dies for next-generation smartphones and other consumer-related solutions, Broadcom and Philips Photonics, should not only be ruled out, but ought to be strongly considered given their learning curve with such devices, and their greater amount of experience to scaling up to the tremendously higher quantities compared with the three perceived leaders, Lumentum Holdings, Finisar, and II-VI. The assumption in the market that has been made is that Broadcom cannot reach the margins levels it would desire at this point in time, but that could all change if Lumentum does not remain a viable long-term player (and actually there is some other analysis, which points to this possibility), the probably safe betting that II-VI never makes this space a primary concern, and if Finisar at the end of the day, decides to stick to its traditional knitting. Like Finisar, Philips knew that it was foolhardy not to make an initial jump beyond four-inch wafers to the six-inches, but in talking with the latter at ECOC 2017, it knows that it too must eventually move to the bigger size. Although it has to be taken in the context of a competitor, Philips had no problem believing that Lumentum could easily be struggling with those larger wafers, despite farming out the production to Win Semi.
Broadcom is apparently no stranger to selling VCSEL dies even to other module vendors (when it was still in that business further up the food chain), and has probably been the leading supplier of VCSEL-based mice for position sensing for laptop computers.
Obviously, Broadcom has also been a vendor with a track record of shipping other components in huge volume for Apple’s iPhone, and thoroughly understands how the game is played there. However, we believe there may be some scuttlebutt that perhaps an arrangement between Foxconn Interconnect Technology and the original Avago) may be subject to change, which would not necessarily make sense to us because our impression has been that earlier transaction was signed and sealed.
Royal Philips, which owns Philips Photonics, provides tools, accessories, etc. for the smartphone market. Philips purchased ULM Photonics in 2006, which has been involved with R&D activity on VCSELs for two decades.
Phillips has also been a big supplier of position sensing devices for computers. Moreover, there has been a report that the Philips VCSELs have found their way already into the iPhone X. Furthermore, the manufacturer offers VCSELs for industrial, datacom, and infrared applications, and such diversification can help to keep yields high.
Yet, we suspect that Broadcom’s cost could be much lower than Philips with its production in Asia. In addition, Philips’ reliance on funding from European government entities always has the potential to slow down its progress. In fact, we would give the edge to Broadcom over Philips (if the former decides to enter the 3D-sensing space) in the overall smartphone market because it is ruthless when it comes to getting market share and in making sure its gross margins remain at a high level.
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[written by Mark Lutkowitz]