Apple Tuesday introduced its iPhone X, and the Street is fascinated with the implications of “augmented reality,” including both “Face ID,” the feature that unlocks the phone, and the various applications that use the rear camera, for things like new kinds of video games.
Among those pondering Apple’s augmented reality is Rosenblatt Securities’s Jun Zhang, who today argues that Apple has something of a lock on the technology, which may create some barriers to competitors building phones using Alphabet’s Google’s Android software.
Zhang, who rates Apple shares Neutral, speculates on the chips in both the front-facing camera of the iPhone X, the so-called TrueDepth camera, and also what may be in the rear camera of both the iPhone X and the iPhone 8, the cheaper iPhone that was announced on Tuesday as well.
Collectively, these chips and functions are referred to as “3-D sensing.”
Zhang goes through several details of the “flood illuminator” and the “dot projector” components in the TrueDepth camera, which he expects to be supplied by Lumentum, Finisar and II-VI. He then writes “We also believe Apple has an exclusive agreement with Lumentum, Finisar, and II-VI on VCSEL+DOE structured lights and 100-300 VCSEL array formats,” referring to the chips involved.
“This makes it difficult for Android smartphones to replicate Apple’s 3D sensing model,” asserts Zhang.
In addition to the TrueDepth camera, Zhang thinks that the rear camera contains a “Time of Flight depth sensor” provided by ST Micro to make possible augmented reality applications: “We still believe STMicro has a depth sensor in the rear cameras of the iPhone 8 Plus and X models as we believe that is where high-power VCSEL lasers and IIVI is used.”
“Our industry research suggests that STM supplied an upgraded version of the depth sensor to Apple this year […] In our view, the ToF depth sensor is enough to support the AR camera combined with ARKit.”
It all comes down to patents, Zhang believes, which may be an obstacle to Android copying Apple’s work:
Our research suggests that smartphone OEMs’ interest in 3D sensing has increased following the iPhone X announcement. For Android, we believe Orbbec is the matured 3D sensing solution, although perfor- mance is far below Apple. Nonetheless we expect Chinese OEMs to adopt this solution in the first half of 2018. However, because Apple has some patents in 3D sensing, we note that it has become increasingly diffi- cult for other players to develop the 3D sensing solutions with a similar combination of perfor- mance+accuracy+power consumption. We expect adoption ramp to be in late-2018. Our industry research suggests that many 3D sensing model suppliers are waiting for Lumentum’s small packaging of the edge emitter laser solution.
Of note, Zhang also addresses what some believe was a failure of the Face ID function during the demonstration on Tuesday. Although Apple executive Craig Federighi appeared to struggle on stage to have the phone recognize him, Zhang writes that Face ID improves over time:
Investors were disappointed to see the Face ID demo fail on the first attempt on stage, but according to our understanding, the system has a self-learning function where the more a user uses Face ID, the more accurate the readings become. Overall, we are not concerned regarding this first time mishap.
For a different perspective on the Android prospects, see today’s post about the upgrade of Qualcomm (QCOM) from Northland‘s Tom Sepenzis. Sepenzis thinks Qualcomm and Himax will have a promising business supplying the Android camp with an alternative approach to 3-D sensing.