The 2020 Consumer Electronics Show was absolutely crawling with companies hawking lidar. Short for light radar (yes, really), this powerful type of sensor generates a three-dimensional pointcloud of its surroundings. Experts and industry insiders not named Elon Musk see it as a key technology for self-driving cars. There are dozens of companies developing lidar technology, and each insists that its sensor is a cut above the rest.

But while every lidar is above-average in the halls of CES, things are starting to look different in the real world. At least one segment of the market—custom robots for warehouses, mines, and other industrial sites—is starting to buy lidar sensors in significant volume. Another segment—low-end lidars used in car driver-assistance systems—is poised to become a big market in the next couple of years.

For this piece I asked both lidar company officials and independent experts to help me understand the state of the lidar market. They told me that Velodyne—the company that invented modern three-dimensional lidar more than a decade ago—continues to dominate the industry.

But Velodyne is facing growing competition from newer firms. One company in particular—Ouster—has begun shipping aggressively priced alternatives to Velodyne's flagship products. While these products might not quite match Velodyne's performance, they're good enough and cheap enough to pose a serious threat to Velodyne's dominance.

The big battles in the lidar market are still in the future. A lot of lidar sales so far have come outside of the automotive industry, but experts expect carmakers to be the biggest customers for lidar. In the next few years, we're going to see a number of carmakers make their first bulk lidar purchases—buying thousands of low-cost lidar sensors to improve their advanced driver assistance systems (ADAS). A number of lidar companies are positioning themselves to win these deals, and some are pairing up with traditional "tier 1" automotive suppliers to improve their odds.

The industry's biggest prize may be supplying more powerful lidar sensors for use in fully self-driving vehicles. Many companies are angling to serve this market, but those sales are still quite a way off because fully self-driving technology isn't yet ready for prime time.

Spinning mechanical lidar still dominates in robotics

Velodyne invented the modern three-dimensional lidar industry more than a decade ago, and it continues to be an industry leader. Its original lidar had 64 lasers, stacked vertically, that were spun around to give a 360-degree view of the surroundings. Velodyne has since introduced variations on this basic design, including a high-end 128-laser design and cheaper models with 32 or 16 lasers.

Velodyne's top-of-the-line lidar units traditionally cost $75,000 or more. Until recently, people who needed high-performance lidar had little choice but to pay up. But in the last couple of years, a startup called Ouster has started to give Velodyne some much-needed competition.

The classic Velodyne lidar had 64 individually packaged lasers inside, each paired with an individual light sensor to detect return flashes. This complex design contributed to the units' high price. By contrast, Ouster uses semiconductor-based technology to pack 64 lasers onto a single chip, with 64 detectors packed on a second chip. This reduces the cost of Ouster's lidar in much the same way that the microchip revolution enabled the creation of cheap personal computers in the 1970s.

The result: in 2018 Ouster was able to offer its first lidar sensor, a 64-laser unit called the OS-1, for just $12,000. That was dramatically cheaper than Velodyne was charging for its 64-laser models at the time. Since then, Ouster has expanded its product line. The company's products now range from a low-end 16-laser unit for $3,500 to a long-range unit with 128 lasers for $24,000.

"The fact that you can get a 64-channel spinning lidar for $12,000 was unheard of," said John Williams. "When we realized it existed, we were surprised."

Williams is the chief technology officer at Kudan , a company that makes software to help robots track their own location (a problem known as SLAM in the robotics world). Kudan customers build robotic products like low-speed shuttle buses, warehouse supply carts , autonomous forklifts, and so forth. Kudan's software needs to work with a variety of sensors, including cameras and lidar, so Williams has good visibility into which lidar sensors robotics companies are using in the real world.

Williams told Ars that most of his clients are still buying Velodyne lidars. But "Ouster is the up-and-comer in terms of disrupting the market," Williams said. "In terms of accuracy and noise," Ouster sensors are "not quite as good as Velodyne," Williams said. But they're dramatically cheaper, and that matters to many Kudan clients. Clients who wouldn't have considered buying lidar at Velodyne prices reconsidered once Ouster introduced a 64-laser unit for $12,000.

When I asked Velodyne executive Rick Tewell about Velodyne's prices, he insisted that they were "extremely competitive." But he wouldn't give me specific numbers, and he didn't seriously dispute that Ouster's high-end lidars were cheaper than comparable offerings from Velodyne.

Velodyne also faces competition from some Chinese companies that Velodyne dismisses as copycat vendors. Like Ouster, these companies offer Velodyne-like sensors at low prices. But Velodyne says that unlike Ouster, these companies simply copied Velodyne's design. Indeed, Velodyne sued two of those vendors—RoboSense and Hesai—for patent infringement last August.

In recent years, there has been no shortage of hype about the potential of solid-state lidar—lidar that's fixed in place rather than spinning 360 degrees. There are dozens of companies working on lidar sensors, and most of them are solid-state designs. Yet they don't seem to be getting much use in the real world—at least not in the commercial robotics market. Williams told Ars that "we haven't come across solid state in the wild yet."

That's partly because a number of solid-state companies haven't actually started shipping products to the general public yet. It's also partly because some lidar companies are focused on large-volume sales to carmakers, not one-off sales to smaller robotics companies.

But it's also because spinning lidar has some unique advantages. Most obviously, a single spinning lidar sensor offers 360-degree coverage around a vehicle. To achieve similar coverage with a fixed lidar system you need multiple sensors distributed around the vehicle. That means higher costs and power consumption.