InP Wafer, Epiwafer and Device Market 2021: Photonics and RF Applications

Abbreviations and definitions 2

Table of contents 5

Report methodology 6

About the authors 7

Companies cited in this report 8

What we got right, What we got wrong 9

Comparison with Yole’s previous forecasts 13

What’s new? 15

Executive Summary 20

1) Context 24

• Scope of the report
• InP substrates and applications
• Driving applications for InP wafers
• 2021 InP technology positioning

2) Market forecasts 71

• Wafer, Epiwafer, bare-die market and forecasts
• Telecom
• Datacom
• Automotive
• Wearables
• 3D sensing
• Other applications: medical, industrial, etc.
• RF
• InP bare-die market split by technology
• InP wafer market, split by wafer size
• InP wafer ASP
• InP epiwafer ASP

3) Market trends 89

• Market segmentation
• InP industry: development timeline
• Overview of InP application markets
• Overview of technology and economic requirements per application

4) Market shares and supply chain 188

• InP supply chain and business models for photonics and RF applications
• Main players and the landscape
• Mapping of key wafer and epiwafer players in different geographical regions
• InP bare-die market shares
• Open InP epiwafer market shares
• InP wafer market shares
• Company profiles: II-V, Lumentum, LandMark, Sumitomo, AXT, InPact, DenseLight, Smart Photonics

5) InP technology trends 215

• Devices
• InP-based device overview: photonics, integrated SiPh and PIC and RF devices
• Epitaxy
• Epitaxial growth methods
• Focus on DFB epitaxial growth
• Discussion of epitaxy requirements
• Wafer
• InP crystal growth methods
• Wafer finishing
• Substrate size and types

6) Outlook 286

• Takeaways

7) Appendix 291

NEW InP OPPORTUNITIES IN THE EMERGING SENSING APPLICATIONS

The unique properties of InP photonic devices give them a key advantage in the emission and detection at the 13xxnm and 15xxnm wavelengths. Based on the well-established telecom & datacom industry, we are likely to see attractive sensing applications creating new opportunities and a second wave for InP photonic devices. With Apple’s interest in working with Rockley Photonics to develop silicon photonic (SiPh) modules that can measure healthcare biological parameters for wearable consumer applications, we expect an initial slight market penetration of InP in 2022, followed by a significant increase to $255M in 2026 with a CAGR2022-2026 (Compound Annual Growth Rate) of 112%. For LiDAR applications, InP could be promising, enabling eye safety at higher wavelengths. Players such as Volvo, ZF, Continental, Daimler, etc. are interested in adopting InP-based LiDAR.

For smartphones, OLED displays are transparent at wavelengths in the range of 13xx to 15xxnm. OEMs interested in removing the camera notch on mobile phone screens and integrating the 3D-sensing modules under OLED displays are considering moving to InP EELs, replacing the current GaAs VCSELs. Even though this trend is currently in an early R&D phase, we see strong interest from several players, such as ams, Infineon, STMicroelectronics, and several laser manufacturers and sensor players.

As an indispensable building block for highspeed and long-range optical transceivers, InP laser diodes remain the best choice for telecom & datacom photonic applications. However, following the COVID-19 outbreak and the USChina trade tensions, telecom infrastructure deployment was disrupted, resulting in a minor InP market slowdown in 2020. Nevertheless, the requirement for more data transfer at higher speed in datacom is increasing, with technology migrating to single InP lasers targeting state-of-the- art 100 Gbps output, making them preferable in 400Gbps and 800Gbps transceivers. Driven by high volume adoption of high data rate lasers, the datacom bare die market reached around $963M in 2020 and is expected to be worth $3.1B in 2026 at a 22% CAGR2020-2026. Meanwhile, the cyclic InP telecom market will continue its growth thanks to 5G deployment and will see an increase from $1.1B in 2020 to $1.7B in 2026 at a CAGR2020-2026 of 7%.

This report provides an overview of the InP wafer and epiwafer market volumes and sizes, a forecast for the RF and photonics markets, as well as a bare die analysis of the photonics market. Yole Développement (Yole) addresses the COVID-19 and trade tension impact on the InP markets.

MERGERS & ACQUISITIONS (M&A): A DYNAMIC MARKET FOR PLAYERS TO GAIN SHARE AND OPPORTUNITIES FOR NEW PLAYERS TO ENTER THE InP INDUSTRY

The InP industry is fragmented, with numerous players at the device level. Two American players lead the InP market: II-VI and Lumentum. Both have increased their market share and strengthened their position thanks to strategic M&A. II-VI acquired Finisar in 2019, and Lumentum acquired Oclaro in 2018. II-VI and Lumentum both have vertically integrated business models: they generate revenues at bare die, device, and module-level (II-VI also offers epiwafer products). Their combined bare die market share is around 30%. Major Chinese players like Hisense and Accelink are in the global top five and are increasing their share of the market, taking advantage of the US-China trade tensions and the massive 5G transceiver deployment in Asia.

Sensing applications targeting the mass consumer and automotive markets are attracting new players. Yole has identified several players interested in entering this market: a) Vertically integrated InP players with the know-how and an already established structure, as they can easily switch to sensing applications as soon as the market becomes bigger (e.g., II-VI and Lumentum); b) GaAs players with foundry capabilities could leverage the existing GaAs tools to switch to similar InP processes (e.g., ams and Trumpf); and c) emerging foundries or companies already working on InPbased solutions. In the last category, we witnessed an increase in private investments and SPACs in the last year. These include, in Q4-2020, Luminar, a start-up that makes LiDAR sensors for cars, raised $590M and went public, then acquired the exclusive InGaAs chip manufacturer OptoGration; in Q2-2021, Aeva, a LiDAR start-up, went public with an initial valuation of $1.7B; and in Q2-2021, Rockley Photonics announced its intention to go public at an initial valuation of $1.2B with an Apple supported project for smartwatches.

This report presents an overview of the InP industry covering wafer, epiwafer, and IDM players.

MOVEMENTS IN THE VALUE CHAIN: OPPORTUNITIES AT THE DEVICE LEVEL TO ADD MORE FUNCTIONALITY WHILE WAFER AND EPIWAFER REMAIN CONCENTRATED

The bare die market shows a significant growth rate of 25% year-on-year (YoY) in 2020, compared to the single-digit YoY at wafer and epiwafer markets. The increasing demand for higher data rates contributes to higher $/Gbps at the laser level. Due to the diversified needs, the ecosystem at the device level is highly fragmented. Moreover, we identified more than 30 foundries supplied by only a few leading companies, mainly Sumitomo and AXT with more than 80% combined market share at the wafer level, and Landmark, with 67% of the market at the epiwafer level. This is very well correlated with the cost chart, where the processing cost at the foundry level is more than 67% of the total cost. A complete analysis of price and cost in value are detailed in the report.

A mainstream feature of InP lasers is their distributed feedback (DFB) structure. The complex etching and regrowth lead to yield losses and higher costs compared to GaAs lasers. InP is mainly processed on 3″ and 4″ platforms with a much lower wafer volume compared to GaAs’s 6”. These factors also make InP a technology to target high-end, high-margin, and niche applications.

Yole Développement’s InP report will answer numerous questions facing this industry. How can InP enter the consumer market? What does Yole expect for the overall InP market trend?

Acacia, Accelink, Aixtron, Amazon, Apple, Alibaba, AOI, AXT, Broadcom, Cengol, Ciena, Cisco, Coherent, Daimler, DenseLight, DXT Shenzen, Duet Microelectronics, Elbana, Ericsson, Emcore, Epic, Facebook, FBH, Finisar, GCS, Google, Hamamatsu, Hisense Broadband, Huawei, II-VI, Imec, Infinera, Innolight, Intel, IntelliEPI, IQE, InPact, InPhi, JX Nippon, Keysight, LandMark, Low Noise Factory, Luminar, Lumentum, Macom, Masimo, Microsoft, Mitsubishi Electric, MindSemi, Modulight, Northrop Grumman, NTT, Qorvo, Sanan IC, Sensors Unlimited, Severs, Skyworks, Smart Photonics, Sony, Source Photonics, Sumitomo Electric, Rockley, Teledyne, TrueLight, Veeco, Vertilas, Volvo, VPEC, Wafer Technologies, Win Semiconductor, Xenics, Yunnan Germanium, ZTE and more.

Key features of the report:

• Yole Développement’s deep understanding of InP penetration in different applications, including telecom, datacom, wearables, automotive LiDAR, 3D sensing, medical and high-speed RF
• Market projections for bare die InP devices in all applicative photonics markets
• State-of-the-art InP-based photonics and RF devices
• Overview of the InP industrial landscape, from wafer, epitaxy, and design to device processing
• Discussion of InP market dynamics
• Status of InP wafer and epi growth technology
• Technical description and analysis of challenges of InP wafer and epi growth technology, InP RF and photonics devices
• Key players market shares and analysis
• Wafer and epiwafer suppliers - Market shares
• Device price breakdown and analysis
• Wafer, epiwafer, and bare die market size and market forecast through 2026, in $M and units

Objectives of the report:

• Provide a clear understanding of the InP industry, covering markets from wafers and epiwafers to bare dies – with sales in units and $M
• Analyze the market drivers and bottlenecks of the InP industry by studying InP adoption for different end-applications and supply chains
• Assess the status and trends of InP device technology
• Describe the industry landscape and market dynamics
• Discussion of recent investments, M&A, and the competitive advantages of key players