Will the iPhone 8 have 3D sensing? First ask whether the supply chain is ready

Apple is launching a number of major updates to the iPhone in celebration of its 10th anniversary.

As it is rumored that the new generation of iPhone will not have the Home button, the technology of fingerprint recognition on the screen is still difficult to overcome. In addition, Apple acquired 3D sensing technology from PrimeSense in 2013, so the possibility of the new generation of iPhone using 3D sensing to enhance the accuracy of face recognition has greatly increased.

It is reported that in order to cater to the ultra-narrow bezel, the high-end OLED model of iPhone 8 will cancel the Home button and fingerprint recognition function and instead use 3D sensing technology for security identification. The supply chain is now ready for mass production.

There is also news in the market that Huawei's Mate 10, which will be launched in October, will also have 3D sensing and face recognition. Apple and Huawei are the world's second and third largest smartphone manufacturers respectively, and are expected to drive the market.

Recently, Taiwanese industry chain person @冷希Dev revealed on Weibo that in addition to iPhone 8 and Huawei Mate 10, Xiaomi is also preparing to adopt 3D sensing technology.

@冷希Dev said on Weibo that the new highlight of smartphones in the second half of the year will be 3D sensing technology, which can further improve iris recognition and facial recognition functions and make up for the shortcomings of fingerprint recognition experience in some full-screen mobile phones.

It is reported that Guangyao Technology's 3D sensing lenses have been shipped. In addition to supplying them to Apple, Huawei and Xiaomi will also adopt them. The first products to use them are likely to be Huawei Mate10 and Xiaomi MIX2 in the second half of the year.

Based on this, a new batch of iPhone 8 and Mate 10 supply chain manufacturers are expected to benefit, including American optical fiber active and passive components and laser manufacturers Lumentum, STMicroelectronics (STMicro) and Taiwan's Himax Technologies, as well as TSMC, Largan Precision and other related suppliers.

Lumentum is the manufacturer that strongly hinted that the new iPhone will use 3D sensors. STMicroelectronics also said in January this year that the newly acquired plan will bring huge revenue in the second half of the year, and it has already increased capital expenditure for this purpose.

3D optical sensing can convert optical images from the past two-dimensional to three-dimensional space. Before the mobile phone is released, the stock prices of companies in the industry chain have begun to boil. After the touch screen, Apple will cultivate a new cake of 4 to 5 billion US dollars. A rough calculation shows that a 3D optical module costs 10 to 15 US dollars, of which the surface emitting laser (VCSEL) costs about 1.5 to 2 US dollars.

3D sensing technology can further improve iris recognition and face recognition functions, and make up for the shortcomings of some full-screen fingerprint recognition experiences. In other words, 3D sensing technology can make the phone screen touch more sensitive and flexible, and can also better play the face recognition function of the phone and better perform fingerprint recognition. Therefore, 3D sensing technology will make the phone more convenient to use.

3D sensors transmit light beams that bounce off objects near the phone and are used for facial recognition or gesture control, such as waving a gesture in front of the phone to delete an email.

3D sensing requires the addition of a VCSEL infrared laser sensing module that projects light sources in addition to the camera module, driving related supply chain business opportunities.

VCSEL, the full name of which is Vertical Cavity Surface Emitting Laser, was mainly used in the short-distance optical communication industry in the past. VCSEL is also the lowest-cost laser in the field of optical communication (except LED). Compared with LED, VCSEL laser has the characteristics of high efficiency and fast response time. For this reason, VCSEL has become the best choice for 3D sensors.

3D sensing uses the VCSEL solution, and its main principle is the measurement of light flight time (ToF). In principle, a 3D sensing module must have a low-power and high-efficiency laser and a light sensing device.

At present, the technical requirements for VCSEL used in mobile phones are far lower than those for telecommunications and data centers. First, mobile phones require short distances; second, mobile phones transmit small amounts of data. VCSEL is a very mature technology product in the field of optical devices. In the future, if the 3D optical sensing market opens up, related manufacturers will benefit directly.

In the field of VCSEL, Lumentum of the United States is in a leading position. Its predecessor was JDSU, which has been the world's largest optoelectronic device company for many years. In February this year, the company's stock price rose by 35%! In Lumentum's Q2 earnings conference call, many analysts asked about the company's 3D sensing products. Lumentum executives said that the customers they are negotiating cooperation with are in the mobile communication terminal industry (author's note: who else? Apple!), and the market space for 3D sensing products will soon grow from the current US$100 million/quarter to US$1 billion (a market cake of US$4 billion a year).

The company said that the work in the past six months has given Lumentum strong confidence in the product, and the company has been able to make plans for long-term projects. The future product form will be different from the TOSA in the past optical communication industry, and no packaging is required, so the gross profit margin will be higher than the past products (the gross profit margin can be greatly improved, getting rid of the low gross profit situation that the communication industry has always had in the past).

In China, local company Accelink Technologies ranks fifth in the world in this field.

Currently, Accelink Technologies has the ability to mass-produce 1G and small-batch 10G VCSELs, with an annual output of more than 40 million self-made chips.

Although VCSEL is a mature technology product, it is chip-level after all, which requires a very high learning and growth curve. Currently, only Accelink Technologies and O-Net can provide chip-level products in China.

If Apple introduces 3D sensing in its new phone, it must also be equipped with infrared modules and VCSEL optical components to realize facial recognition. The new Apple will use the camera and infrared transmitter and receiver modules to capture object information and combine it with the image taken by the lens into a 2D image, and then construct a 3D image with the 3D sensing module and VCSEL components.

The newly added IR transmitting module has its sensor produced by TSMC, and the back-end is packaged and tested by Precision Materials. Since the IR captured image needs to be combined with the camera module image, it is expected that Largan and Yujing Optoelectronics will upgrade their products accordingly and are expected to benefit simultaneously.

The OLED version of iPhone 8 will be equipped with a front camera with 3D sensing technology. It is expected that most of Asia's leading lens and camera module manufacturers will benefit from the growth trend of 3D sensing cameras.

First-tier suppliers are actively developing 3D sensing businesses, or through strategic alliances, vertical and horizontal integration and consolidating their positions. It is expected that the Android phone camp will follow suit and introduce 3D sensing functions. Demand will explode in 2018, including Win Semiconductors, Largan Precision, Sunny Optical, Yujing Optical, O-Film, Qtech, Xinju, etc., will benefit.

The 3D sensing technology that the OLED iPhone 8 will be equipped with includes a camera module with a built-in receiver and a transmitter module (on the front of the phone). The camera module is supplied by Largan and Yujing Optical.

Next year, 3D sensing on the back of the phone will launch new applications (AR), which will require more lenses. Apple may also upgrade 3D depth sensing technology (on the back of the phone) to improve the user experience of AR/games/3D computing. The Android camp will soon follow suit, and more camera lenses will be needed on both the front and back of the phone.

In February this year, Qtech announced that it might buy out the private placement shares of Xinju. Xinju issued 57 million new shares, and Qtech would acquire up to 36% of the shares, with the goal of entering the AR, VR, and automotive fields of related camera lenses that Xinju has developed.

Xinju is the main supplier of Microsoft Kinect 3D sensing cameras, and has also made many achievements in gaming cameras/laptop camera lenses. Qtech is the third largest CCM manufacturer in China, with a solid relationship with many Chinese mobile phone brands and stable production capacity.

Win Semiconductors believes that this year mobile phone brand customers will begin to use vertical cavity surface emitting laser (VCSEL) technology and regard it as a major application. Currently, Win Semiconductors has contracts with several IDMs, and mass-produced products will eventually be shipped by a single IDM. Fubon Investment Consulting believes that it will be Lumentum.

The unit price and gross profit margin of VCSEL products are higher than those of mobile phone power amplifiers, and the time required from production to shipment is also longer, although the production equipment is roughly the same as that of power amplifiers, and no additional equipment needs to be purchased. Win Semiconductors believes that the chip size of the VCSEL matrix should be much larger than that used in VCSEL sensors. The selected chip size is related to the number of matrices. Preliminary estimates show that it is reasonable for a 6-inch wafer to produce about 20,000 to 40,000 chips. Win Semiconductors previously estimated that VCSEL products will begin mass production at the end of the second quarter.

According to forecasts, the 3D sensing module on the back of the iPhone in 2018 will have a built-in high-power VCSEL matrix, which will require an additional camera module equipped with an infrared receiver. It is expected that the Android camp will follow suit and this design will also become a major application for AR games next year.

The 3D sensing function of the OLED version of iPhone 8 mainly involves structured light (light coding) technology developed by PrimeSense and time-of-flight (TOF) technology (already used in iPhone 7). The supply chain situation is complicated by the fact that many different suppliers can provide it.

The 3D sensing module (structured light) consists of a transmitter module (Tx) and a receiver module (Rx).

1. Tx module supply chain

VCSEL suppliers Lumentum and IIVI are already in the supply chain; Philips Photonics and Finisar are also expected to join. Lumentum's foundry is Win Semiconductors, and its wafer-level optical elements (WLO) and diffractive optical elements (DOE) suppliers are Heptagon and Himax; sensor suppliers include Austrian Microelectronics (AMS), TSMC, and Precision Materials for packaging.

2. Rx module supply chain

The supply chain of Rx modules includes Largan and Yujing Optical for lenses, STMicroelectronics for infrared shadow sensors, Viavi for filters, Tongxin Electronics for wafer reconstruction, and LG Innotek for module assembly and active calibration.

A few days ago, Barron's reported that Apple has pre-ordered 150 million optical filters from Viavi for 3D sensing. Many Chinese 3D sensing module suppliers have chosen Viavi as their only optical filter supplier.

Recently, Ming-Chi Kuo, an analyst from KGI Securities, and Mark Gurman from Bloomberg mentioned that the new iPhone 8 will abandon Touch ID and adopt a new biometric technology - facial scanning. The 3D sensing module on the front of the phone scans the user's face and records the facial depth data points, which is said to be more secure than Touch ID. The report from Barron's further confirmed the existence of the 3D sensing module in the iPhone 8, but still could not prove whether Touch ID would stay or go.

It is reported that companies including Win Semiconductors, which provides VCSEL foundry services, Largan Precision, which produces 3D lenses, Tonghsing Electronics, which has rich experience in wafer reconstruction, TSMC and Precision Materials, which provide wafer processing/packaging for sensors, and Chroma, which provides VCSEL testing equipment, are also expected to benefit.

As for the Android camp, Sunny Optical, which produces 3D sensing camera modules, and Linkwin Optoelectronics, which provides laser end packaging, are also promising.

Not all industry colleagues are optimistic about the iPhone 8's plan to be equipped with a 3D sensor to enable facial recognition.

Needham & Co. claimed that Apple's 3D sensing technology has not reached a mature commercial stage, so it may be delayed until 2018. Once this news came out, it became a big deal. You know, Apple's market value comes to a large extent from the innovative features of iPhone products. Although investors care more about the profits of Apple's content services, they, like consumers, also care about the changes in Apple's hardware.

Truly Holdings Chief Operating Officer James Wong and other senior executives believe that 3D sensing technology is not achievable with current manufacturing processes.

The Wall Street Journal once pointed out that the old version of 3D sensors purchased by Apple was in serious shortage, and the new version had a lot of problems. Even if equipped with 3D sensing technology, the corresponding problems would cause the iPhone to take more detours in sales.

In fact, in terms of technology maturity, 3D sensing technology has been around for a long time, but once it comes to product implementation and vertical applications, there are still loopholes. No matter what kind of technology it is, it takes time to settle, and this is especially true for 3D sensing, which involves personal information and property security.

Compared with 3D sensing, the low yield of fingerprint sensors is a bigger problem. In order to increase the screen-to-body ratio of the iPhone, Apple plans to build fingerprint sensors under the screen glass, but the new design obviously poses a challenge to the production line. Cowen analyst Timothy Arcuri found in a field visit that the problem of low fingerprint sensor yield has not been overcome by suppliers, and Apple does not seem to plan to find new suppliers for assistance.

Therefore, Apple currently has three possible solutions:

1. Simply remove the fingerprint sensor and replace it with facial/iris recognition, but this may affect the Apple Pay payment function, so the possibility is lower.

2. Like Samsung's Galaxy S8, the fingerprint sensor has been moved to the back of the phone, but the position has been adjusted to the most convenient place.

3. Delayed production and delayed release.

In fact, it is not that important whether there is 3D sensing or not. In March 2016, I saw a project that added a 3D sensor function to the laptop camera position to unlock the laptop directly when it is turned on. However, now the machine's image recognition, key information extraction, calculation and return, the entire process takes much longer than we directly type in an 8-digit password.

Therefore, 3D sensing technology is currently only suitable for products that require high security, and civilian consumer products should only incorporate it after relevant algorithms are updated.

Source | Sohu Technology, IT Home, Tiger Sniff

Exclusively compiled by Xinshiye

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