ams: Turnkey Play for Android VCSELs

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We recently looked at the negative ramifications for VCSEL vendors supplying Apple for 3D Sensing (3DS) purposes, as the iPhone supplier has transformed the business to one, which is quite commodity-like in nature. However, there will be another category of buyers, which will not be contemplating just the purchase of VCSEL die. They are attracted more to a reference-designed, turnkey solution, which can be readily dropped into their phones. fibeReality would suspect that a fuller package of the optics and an IC could allow for meaningful differentiation, including minor refinements and customization options, and therefore, potentially higher margin generation. The Android makers appear to be leaning toward this type of offering, and a big beneficiary is expected to be ams. The impact of Apple getting a considerable lead on its competitors with 3DS should also facilitate the need for more of an integrated bundle of components.

With its large market share along with its vast engineering resources, including at the IC level, Apple has the luxury of being able to take full advantage of the individual piece-parts, which comprise the iPhone, allowing it to get the highest performance possible at the lowest unit costs. In addition, Apple’s strong financial position, its continuing success at the higher end of the smartphone space, and its rather solid reputation on its security features (including for banking transactions), not only provides even greater flexibility when it comes to budgetary expenditures, but removes much of the risk still inherent with a 3DS play.

After all, there are doubts as to whether facial recognition in the short term or augmented reality in the long term on the iPhone will ever get beyond niche status to truly become killer applications. Regarding the latter, Google’s Project Tango did not result in anything extraordinary occurring in terms of the emergence of compelling apps.

However, as we have pointed out in the past, Alphabet’s primary concern with investments is usually not to achieve wide-scale market penetration, but to ultimately support its core competency. In addition, as there is an increasing number of iPhones with 3DS, there is a high likelihood that it will be considered a mandatory feature on all smartphones.

Consequently, Apple’s competitors are in catch-up mode. A faster means for Android vendors to commercialize is with a reference design approach, such as from ams, in which the development time and expense is significantly shortened, as for example, pre-certification and testing are done in advance.

Yet, a fuller product offering from ams would hardly be unusual for a player that competes in the RFIC industry, and it would be similar to the role that Qualcomm plays in putting all the pieces together with a design kit for OEMs, whether they be for power amplifiers, radios, etc. It was also not surprising that ams’ first announced buyer of its capability came from a Chinese supplier, Xiaomi, because the cell phone companies in China have been among the largest users of Qualcomm’s QRD program, as chipset development there, at least in the past, has not been a high priority.

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]