VCSEL Market

[307 Pages Report] The VCSEL market was valued at USD 1.3 billion in 2024 and is expected to reach USD 1.9 billion by 2029, registering a CAGR of 8.1% during the forecast period.

The VCSEL market is witnessing significant growth owing to a confluence of factors propelling its expansion. One of the major factor driving  the VCSEL market growth is the rise in adoption of 3D sensing applications in smartphones such as proximity sensing and facial recognition. In smartphones, the facial recognition systems rely on VCSELs to create accurate depth maps for secure and reliable user authentication. Adding to this, the escalating demand for high-speed and efficient data transmission fuels the adoption of VCSELs in data communication applications. VCSELs with their capability to support high data rates and dense integration, are suited to meet these demands in data communication applications. Moreover, the higher market investments for VCSEL manufacturing, and expanding use of biometric security systems are expected to amplify the VCSEL market growth over the forecast timeframe.

VCSEL Market Forecast to 2029

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Market Dynamics:

Drivers: Expanding use of facial recognition and biometric security systems

The expanding use of facial recognition and biometric security systems is a significant growth driver for the VCSEL market. VCSELs are critical components in these advanced security technologies due to their ability to emit precise, coherent light which is used to create detailed 3D maps of objects and faces. As privacy and security concerns become increasingly prominent in both consumer and enterprise sectors, the demand for reliable and accurate biometric systems continues to rise, propelling the growth of the VCSEL market. Security breaches and identity theft are primary concerns for which facial recognition and biometric security systems offer robust solutions. VCSELs enable high-resolution depth sensing and accurate facial recognition. Apple’s Face ID technology, which uses VCSELs to project a structured light pattern onto the user’s face, has set a new standard for biometric security in smartphones. The Face ID uses a TrueDepth camera along with machine learning for secure authentication. The precision and reliability of VCSELs in these applications enhance user trust and drive broader adoption of biometric technologies.

The application of VCSELs in biometric security is not limited to smartphones. Access control systems in offices, airports, and other high-security environments increasingly rely on facial recognition for secure entry. In October 2023, SITA (Germany) published an article highlighting that Frankfurt Airport is now the first in Europe to offer biometric touchpoints to all airline passengers. This initiative allows passengers to use face biometrics as identification from check-in to boarding, eliminating the need to show physical documents. This seamless, frictionless passage through the airport showcases the practical applications of biometric security systems on a large scale. Implementing biometric systems at Frankfurt Airport highlights the rising demand for advanced facial recognition technology, which relies on VCSELs. As more airports and high-security environments adopt these technologies, the need for VCSELs will grow substantially.

Restraint: Limitations of semiconductor materials hampering performance

VCSELs typically rely on compound semiconductor materials namely, gallium arsenide (GaAs) and indium phosphide (InP), which have inherent material limitations that can hamper their performance. These limitations include issues related to thermal management, wavelength range, and manufacturing challenges. Thermal management is a critical factor in the performance of VCSELs. The efficiency of VCSELs can degrade significantly due to heat generation during operation, leading to thermal rollover—a condition where the output power decreases with increasing temperature. This thermal sensitivity is particularly problematic for high-power applications and dense integration in data centers, where maintaining optimal operating temperatures is challenging. Ineffective thermal management can result in reduced reliability and lifespan of the VCSELs, thereby limiting their appeal for demanding applications.

Opportunities: Rise in adoption of VCSEL into medical imaging and biomedical sensing applications

VCSELs offer unique advantages, such as precise wavelength control, high beam quality, and compact size, making them ideal for various medical and biomedical applications. As the healthcare industry continually seeks advanced technologies to improve patient accuracy and diagnostic accuracy, the adoption of VCSELs in these areas is set to expand rapidly. VCSELs offer significant advantages for medical imaging and biomedical sensing applications, particularly in pulse oximetry and tissue oximetry. Traditionally, these applications have used LEDs at specific wavelengths to measure blood oxygenation. However, VCSELs present improvements such as narrower spectral linewidth emission, smaller wavelength shifts with temperature changes, and significantly reduced power consumption, which is especially beneficial for developing wireless and home-monitoring medical devices. In optical sensing, VCSELs outperform LEDs by offering precisely chosen wavelengths less sensitive to temperature changes, faster modulation for noise reduction, and lower power consumption. This makes them ideal for wireless or implantable sensors. VCSELs are now available in wavelengths ranging from 670–980 nm and above 1,300 nm, facilitating a wide range of biomedical applications.

Challenge: Managing intellectual property rights and patent issues

VCSEL technology, being highly specialized and innovative, is subject to numerous patents and intellectual property protections. Navigating the complex landscape of IP rights can hinder the development, production, and commercialization of VCSELs, impacting market growth and competition. The VCSEL market is characterized by a dense web of patents held by various companies and research institutions. These patents cover a wide range of aspects, from the fundamental design and manufacturing processes of VCSELs to specific applications and integration methods.

Fear of patent infringement can stifle innovation and collaboration. Companies may be reluctant to explore new applications for VCSEL technology or share knowledge due to the risk of legal repercussions. In April 2023, Ouster Inc. (US) filed a patent infringement lawsuit against rival Hesai Group (China), seeking to ban US imports of Hesai’s products. Ouster accused Hesai of infringing five US patents co-invented by Ouster’s CEO, Angus Pacala, and is requesting the US International Trade Commission (ITC) to issue a limited exclusion order and cease-and-desist order. Both companies sell digital lidar sensors for automotive and industrial markets, with Hesai’s “AT128” sensors utilizing 905 nm VCSELs. Ouster has also filed a complaint in the US District Court, Delaware, seeking an injunction and monetary damages. This lawsuit between Ouster and Hesai exemplifies the complexities and high stakes involved in navigating the IP landscape. These challenges include high costs of licensing and litigation, potential inhibition of innovation, and difficulties in collaboration. Strategic IP management and collaborative agreements could help mitigate these challenges, fostering a more dynamic and competitive market environment for VCSEL technology.

VCSEL Ecosystem

Multimode segment to hold major market share during the forecast period.

The multimode VCSEL segment to hold high market share during the forecast period. Multimode VCSELs are capable of supporting high data transmission rates over short distances. This makes them ideal for applications in data centers, which require rapid and efficient data transfer between servers and storage systems. In data center environments, optical transceivers are incorporated with multimode VCSELs for data transfer applications. Transceivers with multimode VCSELs are ideally suited for short-reach connectivity in data centers, spanning artificial intelligence (AI), high-performance computing (HPC), and networking applications. Companies emphasize developing technically advanced multimode VCSELs to cater to growing demand from next-gen AI networking applications. In March 2024, Coherent Corp. (US) announced developments in its multimode VCSELs by improving the bandwidth, paving its way for the adoption of next-generation optical interconnects that will operate at 200 Gbps per lane and thereby enabling optical transceivers with 1.6 Tbps capacity. The company has developed lithographic aperture multimode VCSELs that help to achieve a device bandwidth of approximately 45 GHz suitable for AI networking applications across data center environments. Such innovative product launches will foster the multimode VCSEL segment growth over the forecast period.

Near-infrared (NIR) segment account for the largest share of the VCSEL market for during the forecast period

The near-infrared (NIR) VCSEL segment hold high market share during forecast period. The growth is primarily driven by its adoption in smartphones for 3D sensing applications such as gesture and facial recognition, as well as automotive in-cabin sensing. The NIR VCSEL with 850 nm wavelength is a preferred solution incorporated by smartphone manufacturers. Large smartphone manufacturers such as Apple, Inc. (US), OPPO (China), Huawei Technologies Co., Ltd. (China), Samsung (South Korea), and Xiaomi (China) are increasingly integrating these technologies, driving significant demand for NIR VCSELs. NIR VCSELs are also incorporated into automotive for cockpit monitoring and advanced in-cabin sensing applications. Companies emphasize developing NIR VCSELs to cater to automotive use cases and stay competitive. In June 2023, ams-OSRAM AG (Austria) launched a new AEC-Q102 certified NIR VCSEL through its TARA2000-AUT-SAFE family of VCSELs. The new VCSEL generates a tightly controlled beam of infrared (IR) light at a peak wavelength of 940 nm and is suitable for applications such as driver monitoring, gesture sensing, and in-cabin monitoring.

Gallium Arsenide (GaAs) segment account for the largest share of the VCSEL market for during the forecast period

The GaAs segment hold high market share during forecast timeframe. The high market share is attributed to its material properties, i.e., superior electron mobility and direct bandgap, making it highly suitable for VCSEL manufacturing. These exceptional properties enhance the performance and efficiency of VCSELs, particularly in high-speed data transmission and optical communication applications. Companies are extensively focusing on volume manufacturing of VCSELs to stay competitive. For instance, in January 2023, TRUMPF (Germany) developed a new industrial production platform to expand its portfolio of GaAs-based VCSELs, covering the 760 nm to 1,300 nm range for near-infrared (NIR) applications. This new platform offers greater flexibility in the longer wavelength spectrum while maintaining the compactness, robustness, and cost-effectiveness of GaAs light sources. Such investments by market players are expected to fuel market growth over the forecast period.

Sensing segment account for the largest share of the VCSEL market for during the forecast period

The sensing segment to hold high market share during the forecast period. VCSELs are widely used in advanced sensing applications such as facial recognition, gesture recognition, proximity sensing, and 3D depth sensing, all of which have become integral features in modern consumer electronics such as smartphones, tablets, and wearables. The rapid adoption of these devices globally has significantly fueled the demand for VCSEL-based sensors. In January 2023, Lumentum Operations LLC (US) announced they had shipped over one billion VCSEL arrays for 3D sensing applications. These arrays are used in facial recognition and augmented reality (AR) applications. Lumentum's achievement of shipping over one billion VCSEL arrays for 3D sensing applications underscores the rapid growth and increasing demand for VCSEL technology in sensing applications, particularly smartphones. The adoption of VCSELs in facial recognition, augmented reality (AR), and other advanced applications has been a significant driver of this growth.

10.1 to 25 Gbps segment account for the largest share of the VCSEL market during the forecast period

The market for VCSELs with a data rate of 10.1 to 25 Gbps hold high market share during forecast period. The high market share is driven by the ability of these VCSELs to transmit data at high speeds over short to medium distances, making them ideal for interconnects within and between servers. The VCSELs operating within the 10.1 to 25 Gbps range serve as a bridge between standard and high-speed data communication requirements. These devices are suitable for environments where moderate to high-speed data transfer is necessary, such as high-performance computing (HPC) clusters, telecommunications, and enterprise data centers. The key features of VCSELs in this category include improved thermal stability, enhanced modulation speeds, and higher power output compared to the lower segment. These improvements allow for longer reach and higher data throughput, meeting the demands of more data-intensive applications, thus fueling the segment growth.

Consumer electronics segment account for the largest share of the VCSEL market during the forecast period

The market for consumer electronics accounted for a high market share during the forecast period. Consumer electronics industries are increasingly seeking smarter components that improve device performance and illumination quality. Major smartphone manufacturers such as Apple Inc. (US), Huawei Technologies Co., Ltd. (China), SAMSUNG (South Korea), and Xiaomi (China) have already integrated VCSELs into their devices. Many smartphone companies are also adopting 3D sensing technology, and more are likely to follow this trend. VCSELs are crucial for facial and gesture recognition in smartphones and are also used in time-of-flight (ToF) rear cameras to enhance image quality. Additionally, the growing popularity of AR/VR devices, which rely on VCSELs, is anticipated to drive further growth in this segment as these technologies become more widely adopted. Companies are also developing VCSELs with features such as polarization-controlled light, offering advantages in applications such as OLED screens and virtual/augmented reality. This is expected to further fuel the VCSEL market growth over the forecast period.

VCSEL market in Asia Pacific is expected to grow at high CAGR during the forecast period

The Asia Pacific VCSEL market is expected to grow at high rate during the forecast period. The market growth is credited to a large consumer electronics manufacturing industry in major economies such as China, South Korea, and Japan. China is one of the biggest consumer electronics manufacturers and the biggest consumer electronics consumer in the region, followed by South Korea, a key country for manufacturing portable consumer devices. The region has a strong presence of smartphone manufacturers such as SAMSUNG (South Korea), Xiaomi (China), OPPO (China), and Huawei Technologies, Co., Ltd. (China) that are already implementing VCSELs in their smartphones. Adding to this, the region has led the adoption of 5G communication technology. The VCSELs play a crucial role in developing and deploying 5G networks by providing high-speed data transmission and improving the performance of optical fiber communications. The VCSELs are highly incorporated into 5G infrastructure solutions, including optical transceivers, telecom servers, and wireless infrastructure that enhances the backhaul connectivity, which is vital for the seamless functioning of 5G networks. According to a June 2024 press release by the Ministry of Industry and Information Technology (MIIT), China, there were more than 3.8 million 5G base stations across China as of May 2024. The proliferation of 5G base station infrastructure will further fuel the VCSEL market growth across Asia Pacific.

VCSEL Market by Region

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Key Market Players

Major vendors in the VCSEL companies are Coherent Corp. (US), Lumentum Operations LLC (US), ams-OSRAM AG (Austria), TRUMPF (Germany), Broadcom (US), MKS Instruments (US), Santec Holdings Corporation (Japan), Leonardo Electronics US, Inc. (US), VERTILAS GmbH (Germany), and Vertilite (China). Apart from this,  Sony Semiconductor Solutions Corporation (Japan), Alight Technologies (Denmark), Teledyne FLIR LLC (US), Inneos LLC (US), IQE PLC (UK), Thorlabs, Inc. (US), TT Electronics (UK), Ushio America, Inc. (US), WIN Semiconductors (Taiwan), Frankfurt Laser Company (Germany), Inphenix, Inc. (US), Bandwidth10 (US), Zhejiang RaySea Technology Co., Ltd. (China), Wuhan Qianmu Laser Co., Ltd. (China), OCTLIGHT (Denmark), Sanan IC (China), and Brightlaser Ltd. (Hong Kong) are among a few emerging companies in the VCSEL market.

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Scope of the Report

VCSEL Market Highlights

This research report categorizes the VCSEL market based on Type, Wavelength, Material, Application, Data Rate, Industry, and Region.

Recent Developments

• In March 2024, Coherent Corp. (US) announced a significant advancement in VCSEL technology, enhancing bandwidth to support next-generation optical interconnects at 200 Gbps per lane, enabling 1.6 Tbps optical transceivers. This breakthrough involved lithographic-aperture VCSELs, a significant improvement over the current oxide-aperture VCSELs limited to 100G per lane and 27 GHz bandwidth. The new VCSELs would offer smaller, more reproducible, and reliable apertures.
• In January 2024, Coherent Corp. (US) introduced a new illumination module platform for short- and mid-range LiDAR aimed at enhancing automotive safety and robotic vision in industrial applications. It supported advanced driver assistance systems (ADAS) and depth sensing in robots, offering up to 30 meters of depth sensing in bright daylight with over 30% power conversion efficiency.
• In January 2024, TRUMPF (Germany) developed its latest TruHeat VCSEL laser heating systems for surface heating and e-mobility applications. These systems offered efficient, controllable heat treatment optimized for thermal design with multi-junction VCSEL arrays. The 980 nm wavelength enhanced drying efficiency for battery electrode materials.
• In September 2023, Coherent Corp. (US) and Windstream Intellectual Property Services, LLC (US) extended their partnership to include 100G services at the network edge, using Coherent’s new 100G QSFP28 0 dBm digital coherent optics (DCO) transceiver. This extension aimed to address the growing data traffic demands from enterprise and cloud networks, particularly with the emergence of artificial intelligence (AI) and mackine learning (ML) applications.
• In September 2023, Metalenz, Inc. (US) and Vertilite (China) announced the Starlight projector at the CIOE tradeshow in Shenzhen, China. This compact, high-performance, low-cost structured light projector combined Metalenz’s “Orion 18K” meta-optic with Vertilite’s “Dolphin” VCSEL. It generated ~18,000 pseudorandom dots at 940 nm, ideal for 3D sensing applications such as smartphone face authentication, contactless access control, security, gesture recognition, obstacle avoidance, and automotive in-cabin monitoring.

Key Questions Addressed in the Report:

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