Last year before Apple (NASDAQ:AAPL) launched the iPhone X, Rosenblatt analyst Jun Zhang argued that the iPhone maker could enjoy a yearslong lead in 3D sensing, thanks in part to Apple locking down much of the supply of vertical-cavity surface-emitting lasers (VCSELs). The VCSEL industry needs to dramatically ramp overall production capacity before it can accommodate the volumes of the broader smartphone market, and rival smartphone makers aren't expected to be able to implement 3D solutions at scale for some time. 3D sensing enables Face ID, Apple's 3D facial-recognition technology.
Beyond Wall Street analysts, it looks like even suppliers share that assessment.
Playing catch up
Reuters reports that competing Android phones probably won't be able to replicate 3D sensing until 2019, or about two years after the iPhone X's release. Even the newly released Samsung Galaxy S9 still fundamentally relies on 2D imaging for Intelligent Scan, a newer version of Samsung's facial-recognition technology.
Intelligent Scan combines 2D facial recognition with 2D iris scanning, instead of creating a 3D depth map of a user's face like Face ID. As such, Intelligent Scan is not secure enough to authenticate mobile payments, a key use case for Face ID.
Viavi, Finisar (NASDAQ:FNSR), and AMS -- all three of which are Apple suppliers -- told the outlet that bottlenecks for crucial 3D-sensing components are expected to persist until 2019, which will hold back mass adoption. Finisar is a particularly important supplier of VCSELs, scoring a massive $390 million award from Apple late last year that will be invested in VCSEL production capacity at a manufacturing facility in Sherman, Texas.
That "award" is really just a prepayment for future component orders, effectively confirming that Apple is indeed locking down as much VCSEL supply as it can in the near term, precluding rivals from getting their hands on the critical components in volume. Reuters says that "Android producers are struggling to source" VCSELs.
This is about as official as it gets
The report largely confirms what supply-chain reports and Street analysts have been saying for months, but in a somewhat more official capacity. Several supplier execs are quoted on the record saying that there's essentially no way for competing smartphone manufacturers to even obtain VCSELs and other necessary components like optical filters in the near term. These suppliers know better than anyone.
To be clear, these suppliers are in talks with Android original equipment manufacturers and will absolutely want that business when the time is right, but the execs implicitly acknowledge that their hands are tied, as near-term production is being allocated to Apple.