[News] Coherent’s UK Fab Faces Sale, Indicating Apple’s VCSEL Supply Chain Changes

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According to Daily Telegraph, Coherent’s fab located in Newton Aycliffe, County Durham, Northern England, is facing potential sale or closure as Apple ceased a supply agreement. Currently, the plant is under review, which might turn out to be sold. Coherent has issued a last-time-buy notice to its customers.

The UK fab primarily manufactured III-V compound semiconductor RF microelectronics and optoelectronic devices for communications, aerospace and defense sectors. The collaboration between the plant and Apple involved Face ID feature in iPhones.

However, Apple had put an end to the related key product supply contract with Coherent in late fiscal 2023. In its latest financial report, Coherent noted a significant decline in sales of VCSEL products for 3D sensing in Apple’s iPhones, which had a remarkable impact on the company’s overall revenue.

It’s worth noting that Coherent’s fab laid off over 100 employees in April 2023, retaining around 250. Later, Coherent indicated in the last-time-buy notice that Apple’s termination of the supply agreement further placed the ongoing viability of the business in doubt. A strategic review is undertaken, with potential new technologies or a sale as options under consideration. It remains to be seen if the UK government will weigh in to broker a sale to an acceptable buyer.

• Apple’s Supply Chain Changes with the Evolution of VCSEL Technologies

Likewise, another optical and photonics device manufacturer, Lumentum, has fallen into a similar situation. Per foreign media reports in March 2024, Lumentum would dismiss 750 staffs, which accounts for 10% of its global workforce at the time.

Lumentum is a core supplier of VCSEL lasers for Apple’s iPhone 14 Pro series. However, Ming-Chi Kuo, renowned Apple analyst, revealed in early 2023 that Sony would replace Lumentum in design, and become the exclusive supplier of VCSEL products for the LiDAR scanner in the iPhone 15 Pro series. This variation implies a reduced market share for Lumentum in the VCSEL segment of iPhone.

Indeed, Apple has consistently updated its technologies in smartphones, resulting in corresponding structural and design adjustments and changes in its supplier lineup.

TrendForce’s latest research report, “2024 Infrared Sensing Application Market and Branding Strategies,” shows iPhone 15 Pro adopts Sony’s stacked structure technology, which integrates the VCSEL, driver IC, SPAD, and ISP (ASIC Chip) in a stacked structure. This approach significantly reduces system size while achieving high-speed response and high output power, providing better LiDAR scanning performance at the same power level, extending battery lifespan, and enhancing camera and augmented reality capabilities.

Furthermore, TrendForce’s survey reveals that Apple plans to introduce MetaLens technology in 2024 to reduce the size of emitting components, and to adopt under-display 3D sensing technology in 2027 to increase the display screen ratio. Under-display 3D sensing uses short-wave infrared VCSEL (SWIR VCSEL) to reduce interference from sunlight and ambient light and minimize the occurrence of white spots. Noticeably, 1,130nm VCSEL has achieved a PCE (Photoelectric Conversion Efficiency) of over 30%, and currently, ams OSRAM’s 1,130nm VCSEL can already deliver superior performance, enabling it to come out on top in the market.

Thereby, it is evident that the continuous evolution of Apple’s iPhone 3D sensing solutions has caused striking changes in the VCSEL ecosystem. With new manufacturers like Sony entering the supply chain, Coherent and Lumentum are suffering a gradual decline in their market shares.

• More Opportunities Emerge amid the Overwhelming Trend of AI

While consumer electronics remain a crucial market for VCSEL technology, the global AI wave is driving its increasing importance in data center, optical communication, and automotive LiDAR, which will position VCSEL as a vital support for implementing AI functionalities. For example, VCSEL is a perfect fit for short-distance optical interconnections in data center, underpinning the operation of cloud and edge computing infrastructure integral to AI computing.

Currently, photonics manufacturers are already gearing up to develop higher-performance VCSEL technology to meet potential demands in high-growth application areas such as AI, high-performance computing (HPC), networking, and automotive LiDAR. In this context, VCSEL market demand and market size are expected to enjoy ongoing growth, presenting more opportunities for related manufacturers and infusing new vigour into their business growth.

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(Photo credit: Apple)