3DS VCSEL Race to the Bottom/Potpourri

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Even as engineering capital and talent are being pulled out of the traditional optical transceiver space (once more, it is difficult to blame these vendors as the hyperscalers have massacred margins on lower data rates), and especially used in going after Apple’s business, exploitation of optical component vendors remains alive and well, despite all of the hard work by them. In the same way, it has been standard operating procedure for other big users, such as Cisco Systems, to expose technology, as fully as feasible. Apple makes a typical chip specification sheet, including for the six-inch VCSEL devices, increasingly thorough to the point that it resembles a set of instructions on its construction. Such methods, which often lead to a race to the bottom for componentry companies, along with Apple often being able to get a premium for its products, have been a powerful combination. In this article, fibeReality also makes an assortment of other points related to the overall 3D Sensing (3DS) space.

So, Apple requires each of the suppliers to tell it exactly all of the process control structures in manufacturing the VCSEL wafer. Whenever it conveys a message to a particular player that it wants something accomplished in a different way, the meaning is that it needs to be done in the same manner as the rest of the competitors.

Typically, Apple may only make very minor alterations on even higher-end gear designed by other firms, including changing the location of a few bolts on characterization equipment. It will then say that it has ownership of the solution, perhaps in a white paper, which will be sent to any of its other suppliers of the same type of gear.

At the opposite extreme, Apple has been frequently successful in demanding a premium for its own products with its emphasis on building better and cooler mousetraps. In fact, even when Moore’s Law still existed for semiconductors, it did not always apply to MACs getting more competitive on price as much as with PCs in the market.

On what may be viewed as amusing to some people, we have heard the joke told by Finisar personnel, especially relating to Apple’s public broadcast of its partially disingenuous message on their association. It goes something to the effect that a father takes one of his offspring, who is considered the town tramp, to a party, and after he announced that the kid was getting married in front of everybody, he then says to his kid to remember that the tramp designation is still in place.

Concerning other odds and ends:

· Microsoft thought that the Dot Projector (DP) technology from PrimeSense was so important that in its typical manner, it decided it was going to kill the latter, and make a new version for itself. (Instead, PrimeSense went off on its own, there was an early DP version, and just before Google placed a huge order, Apple dove in, and bought the company.)

· While we are aware of the speculation that II-VI’s purchase of Finisar was about taking out a 3DS competitor, just the apparent importance of the Sherman, TX plant alone to Apple, negates that conjecture.

· With the volume for potentially new applications being large, the square millimeter usage of high-power VCSELs should increase dramatically. (Nevertheless, given that the barriers to entry for RFIC fabs are relatively low, a capacity glut can hardly be ruled out.)

· While it has probably never been out of the question that VCSELs could be deployed somewhere in the world in automobiles, we believe that widespread installations of these devices for this application, which have been the dream for a long period of time, cannot be realized.

· With obviously Broadcom as a major supplier to Apple’s iPhones, the matter of security being such a big issue for the latter on its VCSEL IP, regarding Taiwan, is a demonstration of how seriously this chip expertise means to the customer, concerning future R&D efforts on new products.

As always, fibeReality does not recommend any securities, and this writer does not invest in any companies being analyzed by us.  

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[written by Mark Lutkowitz]