Intense price competition in the blue LED market has urged Taiwanese manufacturers to transform their business models, among these include Arima Optoelectronics (Arima), which is one of the leading companies in the Greater China region to give up blue (InGaN) LEDs, reported UDN.

The Taiwanese LED manufacturer is betting on red (AlInGaP) LEDs instead, and is prioritizing iris recognition chips plus stage lighting.

Arima is a Taiwanese LED brand with a long history in the industry, at its height the company had 30 to 40 MOCVDs, and it’s AlInGaP and blue LED production capacity was second to Epistar. Yet, the entry of Chinese manufacturers significantly raised blue LED production, leading to oversupply situations that drove down chip prices.  Blue LED market conditions led to Arima’s decision to exit the blue LED industry and enter AlInGaP LED production instead.

The company’s AlInGaP LED products include red, yellow and orange lights. Red LEDs have become the main source for market demands, and its high revenue and low volume of MOCVD equipment resulted in Arima’s move to allocate all its resources to develop IR LEDs in the 810 nm, 850 nm and 940 nm wavelengths to turnaround its revenues.

Iris recognition devices tend to use 810 nanometer wavelength IR LEDs, for instance IR LEDs are used for iris recognition in Samsung’s flagship Galaxy Note 7 smartphone. This represents Samsung overcame certain software and hardware issues and even though Samsung is still testing market responses to iris recognition, it will become a main feature in future mobile payments. It will only be a matter of time before iris recognition becomes a standard spec in smartphones, even though Samsung is a pioneer in the field, Chinese manufacturers can catch up in a very short period. Once the product becomes widespread in the market, Arima Optoelectronics has the shipment capacity, and its distributors are currently sending company product samples to Samsung, LG and Chinese brands.

As for 850 and 940 nanometer wavelength IR LED products can be found in security applications, surveillance cameras and automated controller sensors. For automotive night vision applications, the 940 nanometer wavelength IR LEDs outperform 850 nanometer LEDs, and can greatly reduce light interference. AlInGaP LED product portfolio are not targeted for large volume markets or standardized products, but Arima Opto analyzed there are few independent AlInGaP LED manufacturers. There are no red LED manufacturers in China, and even Toshiba that was manufacturing the LED chips in small volumes left the market. Even the world’s second largest LED chip manufacturer Osram does not possess large AlInGaP LED production capacity, and has mainly been focused on developing systems.

Moreover, AlInGaP LEDs largest application sector is still in automotive and LED displays, making it a market where clients have high loyalty levels, since they rarely change suppliers. Supply and demand is also relatively more stable in the AlInGaP LED industry, which were factors cited by Arima behind their decision to fully convert to red LEDs.

Arima currently has more than 10 MOCVDs under operation, which have all been converted to AlInGaP LED production. The company’s revenues in July dropped to NT $12.36 million compared to the month below following the MOCVDs depreciation and amortization calculations, but compared to the same period in 2015, the company’s revenue had rebounded. As the company returns back track, its operations have been adjusted so the accumulated revenues for the first seven months of 2016 rose 30% to NT $90.55 million. Arima’s annual revenue target is to reach NT $200 million.