While major global players are fiercely competing for traditional silicon chips such as AI chips and memory chips, a unique type of semiconductor has quietly become an indispensable part of our technological lives over the past few decades: compound semiconductors. Gallium arsenide (GaAs), gallium nitride (GaN), and silicon carbide (SiC) are typical examples of this type of semiconductor.

Because of their specific bandgap and band structure, these compound semiconductor materials are used in applications such as LEDs, mobile phone radio frequency communication power amplifiers (PAs), and various power devices. In recent years, with the rise of AI and smart cars, another type of chip based on compound semiconductors, called VCSEL (Vertical Cavity Surface Emitting Laser), has gained significant attention, and domestic manufacturers such as Eagle Semiconductor have entered this field.

It is worth mentioning that the evolution from LEDs to VCSELs and other compound semiconductor chips reveals another hidden curve in the rise of China's semiconductor industry.

In the era of intelligence, VCSELs are taking center stage

In an exchange with Semiconductor Industry Observer, Bian Difei, founder of Eagle Semiconductor, stated that since the late 1990s, the technology industry has undergone multiple transformations. Looking at these technological waves, a common characteristic emerges: hardware must come first, followed by commercialization. During this period, the technology industry has also exhibited another characteristic: we have shifted from the information age to the intelligent age.

The information age, in my view, refers to the internet, which, driven by chip manufacturers like Intel and major telecommunications companies, revolutionized the way humans accessed information for millennia since the late 20th century. The richness of information provided by this era is unprecedented.

In recent years, the rise of intelligent vehicles, coupled with the AI boom ignited by ChatGPT, has ushered in a new dimension of technological development. An intelligent age characterized by artificial intelligence is rapidly approaching, prompting Bian Difei, who has worked with "light" for the past thirty years, to reflect on this.

Bian Difei pointed out that in the intelligent age, computing power + perception = algorithm + scenario and parameter extraction, creating new business opportunities. "The essence of computing power is computation, storage, and transmission. Computation and storage are things that require large amounts of capital, even state-owned enterprises, leaving little opportunity for ordinary entrepreneurs. Therefore, what's left for us is transmission," Bian Difei continued.

"Based on these judgments, we founded Eagle Semiconductor and chose the VCSEL (Vertical-Cavity Surface-Emitting Laser) track—a technology that combines sensing and transmission, possessing a greater strategic depth advantage," Bian Difei told Semiconductor Industry Observer.

About VCSEL

VCSEL is a semiconductor-based laser diode. Unlike traditional edge-emitting lasers, VCSELs emit laser beams vertically. From a manufacturing perspective, VCSELs are created by depositing optical films on both the top and bottom surfaces of a chip to form a resonant cavity. Because the optical resonant cavity is perpendicular to the substrate, it enables laser emission perpendicular to the chip surface. This technology is said to offer advantages such as low threshold current, stable single-wavelength operation, high-frequency modulation capability, easy two-dimensional integration, no cavity surface threshold damage, and low manufacturing cost.

In previous years, VCSELs remained relatively unknown, but their popularity exploded after Apple introduced Face ID, which used VCSELs, into the iPhone X in 2017.

Data shows that data communication was the earliest industrial application to integrate VCSELs, primarily due to their low power consumption and price advantage over EELs, giving them a dominant position in short-range data communication. Later, driven by the development of data centers and the widespread adoption of the internet, the VCSEL market and production boomed in the 2000s, subsequently experiencing steady growth.

In 2014, nearly 20 years after its initial application in data communication, VCSELs began entering the smartphone market, primarily for proximity sensing and integration with sensors for autofocus. Then, as mentioned above, the introduction of Face ID finally brought VCSELs into the spotlight. In recent years, the rise of artificial intelligence and smart cars has ignited demand for optical modules and LiDAR, bringing VCSELs, the unsung heroes behind these products, into the spotlight.

According to Yole's forecast, the VCSEL market is expected to reach $1.4 billion by 2028. At that time, data centers, smart cars, and even empathic intelligence will all drive huge demand for VCSEL applications. It is foreseeable that an era belonging to VCSELs is dawning.

From imitation and following to keeping pace

We must acknowledge that, like many chips, VCSELs were historically monopolized by overseas giants. Companies like Broadcom, Lumentum, and Coherent were leaders in this field. However, unlike in the past, the main applications of VCSELs—optical modules and LiDAR—are now dominated by Chinese manufacturers. Even in end-user applications (data centers and smart cars), Chinese manufacturers hold a leading position globally.

Under these circumstances, building a domestic VCSEL supply chain is imperative. Bian Difei also believes that it's time for China's semiconductor industry to move from imitation and following to keeping pace.

"Through years of effort, China's industry has moved from passively following in the era of electrification/internal combustion engines to catching up in the information age. Now, in the era of intelligentization, Chinese hard-tech entrepreneurs have the opportunity to achieve their 'original mission'," said Bian Difei. As a second-time entrepreneur, he demonstrated ample confidence and determination, and possessed sufficient resources.

As he mentioned, 20 years ago, when he co-founded HC SemiTek to work on LEDs, the entire industry was controlled by overseas giants such as Nichia, Cree, Seoul Semiconductor, and Osram. However, the meteoric rise of Chinese LED manufacturers like HC SemiTek has changed this landscape, disrupting the lighting industry in China and globally.

Based on this accumulated experience and current opportunities, Bian Difei, with years of experience in the LED industry, led the startup team at Eagle Semiconductor on a new journey.

In a sense, LEDs and VCSELs are actually related. This is partly because both are light sources, and the giants in these fields overlap. In my opinion, another reason is that both use the same substrate material—gallium arsenide. This allows experience from the former to be applied to the development of the latter.

However, we must also acknowledge that VCSELs remain a high-barrier-to-entry industry. For example, building an IDM-style factory can deter many potential entrants. Guojin Securities stated in a report that globally, all optical chip manufacturers adopt the IDM model. This is mainly because optoelectronic devices follow the characteristics of specialized processes; the value of a device does not solely depend on process improvements. Laser chips need to achieve the unique functions of optical devices through process platforms, placing greater emphasis on the maturity and stability of the process.

Bian Difei also emphasized, "Doing VCSEL IDM is extremely difficult." He further pointed out, "Chinese companies haven't yet achieved large-scale commercialization; the key is that China hasn't formed a complete ecosystem."

Leveraging its international team with 25 years of experience, Eagle Semiconductor is building a domestic VCSEL production capacity and optical chip innovation center in Zhejiang. The company also adopts the IDM model, having built an automotive-grade laboratory and a 6-inch gallium arsenide fully automated production line, creating a next-generation optical interconnect technology industrial platform to accelerate the industrialization of innovative achievements.

"We have actually surpassed foreign companies in some areas, but there is still a gap in overall strength. However, in some very vertical areas, I think we have begun to have originality," said Bian Difei. He predicts that in some key parameters, Eagle Semiconductor will catch up with international leading levels in about a year.

It is these plans and progress that give Eagle Semiconductor the confidence to weather economic cycles.

AI infrastructure development is in a "Warring States period," but we are moving forward steadily

Undoubtedly, we are now in the era of AI infrastructure. Nvidia's market capitalization soared from hundreds of billions of dollars to five trillion dollars in the past few years, demonstrating the allure of this market. An IDC report previously predicted that total spending on server and storage infrastructure will reach $758 billion by 2029.

As we all know, one of the biggest winners behind this wave is undoubtedly computing power companies like Nvidia and AMD. In addition, "transmission capacity," represented by data transmission, also plays a crucial role, as evidenced by Broadcom's meteoric rise over the past few years. Statistics show that Broadcom's market capitalization has surged by 900% in the past five years, and has also increased by 75% so far this year. This achievement is primarily attributed to their outstanding performance in interconnectivity and switching.

Examining the changes in the entire terminal market, we can see that this trend is related to the industry's current state, where models are becoming increasingly larger, computing power demands are skyrocketing, but single-chip performance growth is too slow. Therefore, in addition to vigorously developing chips, the industry has seen much discussion surrounding Scale Up, Scale Out, and supernodes. With the frequent emergence of concepts like optical modules, LPO, CPO, and Google OCS, the industry is exploring more interconnectivity solutions.

Bian Difei also frankly stated that the current AI infrastructure market is changing too rapidly, with constant talk of "bubble" and "involution." As a key supplier in the industry chain, maintaining a clear-headed judgment in this situation is a crucial responsibility for him as the leader. Especially in such a rapidly changing era, clear understanding and resolute execution are essential.

Bian Difei believes that from the perspective of the overall industry scale and capacity, there is no bubble; the industry is just beginning. "Company operations require simultaneous technological research and market research, and these two must be coupled to efficiently judge and validate technological routes," Bian Difei pointed out.

It is this positive mindset that has helped Eagle Semiconductor maintain its composure amidst market fluctuations. From 2022 to 2025, the company led the national key R&D project on 100G VCSELs, enabling China to achieve a complete breakthrough from original technology to production capacity, solving a bottleneck problem, and realizing the first mass production of 100G VCSELs in China. This success has also garnered recognition from customers in the optical module and LiDAR industries, demonstrating the foresight and strength of the Eagle Semiconductor team.

Thanks to its own IDM (Integrated Device Manufacturer) factory model, Eagle Semiconductor can not only respond quickly to industry changes in terms of production capacity without relying on overseas technology, but also provide strong support for product development in the face of technological demands and changes.

Facing the future demands for system engineering innovation and scalability in applications such as artificial intelligence, robotics, and intelligent vehicles, Eagle Semiconductor is proactively investing in the R&D of next-generation transmission and sensing technologies.

In the future, semiconductors will no longer be developed independently by individual chip manufacturers, but rather through collaborative design by multiple vendors—a very clear trend. This is a large ecosystem that requires the collaboration of different players.

During discussions with semiconductor industry observers, Bian Difei repeatedly emphasized that Eagle Semiconductor aspires to play a significant role in the "optical interconnect" and "optical sensing" markets. In my view, this is not only Bian Difei's personal goal, but also Eagle Semiconductor's mission as a representative of China's hard technology strength: to help Chinese companies seize the initiative in the era of intelligent technology, to let the world know that Chinese chips are no longer followers, and to open a new chapter for China's semiconductor industry.

"This is the mission of our generation," Bian Difei stated firmly.

Source: Semiconductor Industry Observation

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