BluGlass (ASX:BLG): Building a bright future

 

BluGlass (ASX:BLG)

We spoke with BluGlass CEO Jim Haden and NED Jean-Michel Pelaprat, both laser industry veterans, about the massive opportunity for blue lasers, the key drivers in this industry and BLG’s recent progress.

We also talked about what investors should expect from BLG in the next 12 to 18 months in terms of commercialisation.

Full transcription below.

 

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Transcription

 

Marc: Good morning, and welcome to Pitt Street Research. Today, we’re joined by Jim Haden. We last spoke in February. Welcome back, Jim.

Jim: Yeah, thank you, Marc. Nice to be here.

Marc: And Jean-Michel Pelaprat. That’s I understand the right pronunciation.

Jean-Michel: This is a perfect pronunciation. Thank you.

Marc: So, you’re an industry veteran. You founded Nuburu a little while ago. So, the leader in blue lasers. So, it’s fair to say we’ve got a massive amount of experience here in the laser arena, so to speak. So, to just kick it off my first question for you, Jim, you published the quarterly results just now, today, following a very big year for the company. Can you just talk us through sort of say the last six months when we spoke last, what’s happened? What sort of progress has been made?

Jim: Okay. Yeah. So, when we spoke last, we talked about introducing our first suite of products at Photonics West. And those range from 405 nanometers, 420 nanometers, and 450 nanometers. Since that time, we’ve continued to work with the customers that wanted to order products from us and those were in various markets. The markets that we’ve talked about in industrial markets, quantum science, and quantum physics type of products and applications.

Those would be things like quantum sensing, that sensing magnetic pulses and so forth that could move robotics and so forth. We’ve also worked with national labs that want to put it in, like, quantum clocks and those types of applications. It’s been pretty exciting. We even have engaged with some in the biotech industry where they would like to use it for maybe bacterial mitigation, or some other types of medical applications, surgical, and so forth.

It’s been good progress as well in continuing to move those products forward. We’ve made significant improvements in our power conversion efficiency, especially in the blue wavelengths. And so, it’s been a two-pronged approach where we’re doing continuous improvements, and then also quantum step improvements in our products.

Marc: Right. It never ceases to amaze me how many applications there are for this sort of product, right? It’s massive. So, if we zoom out a little bit, Jean-Michel, can you talk a little bit…you’ve got vast experience in this space over the…what is it, 37 years?

Jean-Michel: More than 30 years, close to 40 years.

Marc: Where do you see this industry headed? Right now, it’s $25 billion in market size, I guess, but where do you see this headed? What’s the next big thing for laser?

Jean-Michel: Yeah. I think the underlying thing is that lasers is really an essential and ubiquitous technology. They’re used into many applications from let’s say material processing to medical applications, to biotech in aerospace. And to your question, the laser market is predicted to be around 25 billion in 2025.

But what’s more interesting is within the laser market, the actually visible in particular blue gallium nitride segment, which is really when we say blue is from the violet to blue to a green laser is a fast-growing segment. A few years ago, it was very, you know, very, very small. And it is predicted to be about 10% of the 25 billion, so about $2.5 billion, U.S. dollars of market or segment.

And the recent leaps in performances of the gallium nitride are driving a myriad of applications. For instance, in the industry, the driving material processing into key market segments, but also 3D printing robotics. In scientific application a myriad of applications. But a couple to mention are quantum computing, quantum sensing, but also medical biotech, you know, defense, and of course, the display market where they have been there for quite some time already.

So, in all those markets, we see a rapid adoption and penetration, that adoption, in those segments much faster than any other segments. And it’s interesting to note that each of those applications are underpinning the key megatrends that we see worldwide. Number one is the electrification of the world, where we talk about immobility, battery manufacturing, but also the digitalization of the world, and all the vast electronics packaging consuming, and also the sustainability.

It’s interesting to see that blue lasers generate, at the system level, and manufacturing a very efficient process. So, it is actually very green, if I may say that, you know, system. So, that’s really what this is about.

Marc: All right. And so, if you look at sort of traditional sort of infrared red laser, where does the benefit come in for blue laser? What are the advantages over sort of its traditional products, something like that?

Jean-Michel: So, if I could say the value proposition of blue is actually quite simple. It lies or hinges on two factors. If you look at blue lights or blue lasers, the absorption of blue light into materials, particular metals, is much higher than it is in infrared lasers, the [inaudible 00:05:29] lasers. For instance, in copper, it is 14 times higher. If you look at gold is 60 times, aluminum is 3 to 4 times depending of the alloy, and so on and so forth. And that translate in major gain in processing of those materials.

The second aspect is that, and based on physics, is that blue laser can focus on a tighter spot. It’s proportional to the wavelength than the infrared. So, if you look at the features specifically to blue laser, it provides enormous application performance and value that translate into speed of processing that is not 20% more. We’re talking about 3 times, 10 times faster, the quality and the sustainability of the processing.

Marc: Right. So, Jim, if we then look at BluGlass, given this sort of environment and the benefits of blue laser, what’s BluGlass’s strategy, and how does that differ from the competition at this stage?

Jim: Our strategy is to obviously take advantage of these features of the visible wavelengths, and be in markets where we believe that the blue is going to win. And it’s basically a two-pronged approach. There are existing markets that blue can start to consume from the infrared lasers that are already out there doing process, but there’s also markets that are being enabled by these wavelengths and they’re not, you know, being addressed and can’t be addressed by infrared.

And so, that is the market that we’re getting the most traction in right now, is with companies that can’t get it either from our big competitors or they can’t get it from IR because it doesn’t work in their applications. And many of those, as we mentioned, are in the quantum areas and also in biotech.

There’s, Jean-Michel mentioned, the absorption of visible light in metals and so forth, but in organic materials, you know, the visible light interacts with organic materials very differently than IR light, and it’s very good for mitigation of bacteria, especially when things like antibiotics are becoming less and less effective against antibiotics. But you know, violet light, they don’t like it. So, it’s very good at killing them. And also then we could extend that into viruses as well. So, there’s a myriad of applications in the biotech as well.

Marc: Right. So, can we zoom in maybe Jean-Michel on specifically the customers, or the consumers I should say, of these sorts of products and the systems?

Jean-Michel: Yeah. So, the consumers or the end users are very similar to the traditional laser market. They ranges from OEM, you know, to system integrators to actually end users in all the segments. So, there’s a range of supply if you want to there, to the automotive industry and their tiers. That’s why they’re system integrators working for the automotive manufacturers but also for defense. System integrators or end users in the medical market, and also the defense, which is quite interesting. And there are a number of the markets, but again, they ranges from end users system integrators in OEMs.

Marc: Right, okay. So, if you look at all these end users and the OEMs, and sort of all these steps in the middle, and the many application areas it’s massive, right? You mentioned quantum, for instance, various applications there, robotics, electrification. How come there is only, I think in addition to BluGlass sort of, you know, three more or less, three other players in this space? Why aren’t there more companies doing, you know, addressing the need in this market at the moment?

Jean-Michel: The barrier of entry for semiconductors in general is very high. For laser semiconductor to be more specific is very high. It’s been the same, you know, with infrared a long time ago. And if you look in the past couple of decades, there’s only a handful, in fact, essentially two large manufacturers that have entered. The reason is the gallium nitride semiconductors takes time to develop. They are intricate, they are complex. You have to develop manufacturing processes, you know, at the wafer level, at the packaging level, and so on and so forth. It requires a long development, essentially.

So, if you look at the, essentially the two major manufacturers today, they are making lasers, but also making a lot of LEDs and micro LEDs and are re-consumed by LEDs and micro LEDs. And they also focused onto a very low mix and high volume, which is they select only certain wavelength and focus on high volume, which is highly commoditized you know, devices market.

As a result, there is now more and more demand for let’s say different wavelength, different packages for different segments of the product offering that are not addressed by those. And there’s a large number of demand, and this is where actually BluGlass is providing the device.

But if I look at BluGlass, BluGlass is more than a decade of development, and reach what I would call the critical mass really to be able to develop lasers and compete quite effectively, you know, with the existing manufacturers based on that. And then also they’re addressing the market not being addressed by the largest one. So, it is a small market, takes a lot of time, and BluGlass is essentially the element to address that.

Marc: Right. Okay. So, we’ve talked about the long-term trends and how you can take advantage of that. If we sort of bring it back to the rest of the issue, the remainder of ’23 and maybe 2024, what can investors and shareholders look forward to? What should we be expecting in the next little while?

Jim: Well, what we saw in the show, we were just recently in Munich, is there’s quite a bit of interest, and the interest is just growing. So, I think there will be more customer interactions for us, and we will continue to move our products forward in those areas I talked about, the continuous improvements, and then look for ways that we could have quantum leaps in our improvements.

And we’re going to do that in a few areas, but we’re continuing to push on the power conversion efficiency as Jean-Michel said that the green aspects of this to make it more efficient, and then we are going to expand the wavelengths as well, and we’ll use our RPCVD technologies to move to longer and longer wavelengths.

When I spoke with you last, we had up to blue, which is about 450 nanometers. We’ve extended that another 40 nanometers now to 490 nanometers, and we want to take that up to green, which will mean that we need to go up another maybe 40 nanometers, and you could expect to see us continue to make progress there.

We also introduced DFB to the market, which is a distributed feedback laser that is able to get a very narrow frequency. And then the advantage of that is it interacts with the crystals. When you talk about quantum computing and those types of things, it’s a much cleaner interaction with specific interactions with that atom. And so, those areas we will continue to push and improve, and you’re probably going to see us working with more customers in those areas as well as they want to have us move that to the market.

Marc: All right. Actually, I’ve got two questions. One final question, we’ll get to that. Just wondering about Chinese export restrictions for gallium nitride that could potentially have an impact on the industry and BluGlass. Just wanted to get your thoughts on that because that would be a very short-term sort of issue if anything came of that in China, I guess.

Jim: Yeah. So, we’ve been in contact with all of the vendors that we use that we know would use Gallium to deliver products to us. And we’ve been assured by all of them that there are no short-term impacts, and they’re going to continue to monitor to see if there are long-term impacts. One of our U.S. customers in fact says that they will not even have long-term impacts already because most of the gallium they use is from recycled sources. So, they don’t need to get the raw materials from China. So, so far it looks like no impact, and we’ll continue monitoring.

Marc: Right. Okay. Yeah, I’m just asking because it will be sort of reciprocal given what the U.S. and the Netherlands, and Japan is doing in terms of equipment. So, yeah, let’s keep a close eye on that one. So, final question, and we spoke a little bit about it already, but what’s the next big thing? You mentioned a few sort of, you know, areas where laser will have a big impact, if you had to single out one of those areas, you know, to request them to do both of these.

Jim: Okay. So, we talked a lot about quantum, so I’ll start with quantum and maybe you could jump on after that. But you know, so the long-term, you know, quantum computing, I don’t know if you’ve seen pictures of [inaudible 00:14:24] quantum computers, but they’re big right now. There’s cover benches, so obviously that has to get smaller, more compact. That’s probably, you know, going to happen within the next decade, but more closer in, there’s a lot of quantum sensing type of applications. And I think that we’ll see more and more moving in that. And there’s very exciting applications for robotics and AI that can be involved in that. And what it’ll do is, like I mentioned, is you can use pulses from your body to move robots, and so, it could be used for prosthetics, right? And it could improve the quality of life for people that are amputees or so forth.

Also reading brainwaves and so forth, you can use these types of things, and it could, you’ll give us a lot of information of what’s going on with people that have epilepsy and those types of things. And then in the biotech moving into the field where you can sense different cancers much more quickly and readily, you could, you’ll look into blood, you could sense oxygenated blood, so you’re going to see more and more wearables, and you’re going to see these moving into automobile industry as well for sensing and trying to make vehicles more efficient in the way they operate and less emissions and so forth. So, those are some areas, and I’ll let Jean-Michel continue and jump in.

Jean-Michel: I’ll make it very simple. Let me just add one thing before I answer your question. I think, I’ve been on the board of BluGlass for the past couple of years, and it’s been absolutely very encouraging to see how quickly the laser performance they’ve done, has improved. The pace of improvement has been very, very strong, and how they are about to reach the performance of the other ones. So, this is for the short term I should say.

Now, to your question, I’m going to take a bird’s eye view. I agree with Jim and all the application he’s talking about into the next few years, maybe in a decade. But I think, you know, being in the industry for [inaudible 00:16:25] four decades, and I’ve seen three major changes. I think the next leap, if you want in term is how the lasers will, you know, lasers have invaded the industry.

They’ve invaded the communications. I think they’re going to come closer to humans, and they come to come in your house, they’re going to come in you, just around you, and help you to do a number of things, you know, and let me make an analogy. Laser started in the telecommunication by being a mile away from the mission. And you have fiber optics going to a city, and then from the city, they went to the neighborhood, and they went to the house, and then they went to your apartment. I think it’s the same thing, you know, with [inaudible 00:17:06], it’s getting closer and closer.

So, I think maybe in the next 10 years or 15 years, you got some time, you’re going to see a lot of applications just in your house, around you, in your car, and so on and so forth. But time will tell.

Marc: Yeah. Okay. Well, so you talked about brainwaves. Mindreading would be very helpful in the stock market, by the way. So, [crosstalk 00:17:25] let me know.

Jim: All right, we’ll do that.

Marc: All right gentlemen, thank you very much for your time. It’s interesting times for laser in general, specifically for BluGlass. So yeah, we hope you can come back in say six months, and we’ll sort of, you know, keep checks on [inaudible 00:17:40] how you’re going. But from the sounds of it, things are moving really rapidly, especially for I read your [inaudible 00:17:46] what’s happening with customers and so, great job, and thank you for your time.

Jim: All right. Thank you very much.