BluGlass (ASX:BLG) receives nod from US Department of Defense

BluGlass Limited (ASX:BLG) CEO Jim Haden discusses the company's being named a hub member of the US Department of Defense's Microelectronics Commons.

Paul Sanger: We're talking today with BluGlass (ASX:BLG), and they have a market cap of around $80m. The company has been developing leading-edge semiconductor manufacturing technology and devices for more than a decade. It is a global provider to the photonics industry, delivering cutting-edge visible lasers of the industrial, defence, quantum, display and scientific markets. We welcome BluGlass CEO Jim Haden. Jim, welcome back to the network.

Jim Haden: Thank you, Paul. It's great to be here.

Paul Sanger: Now, Jim, a bit of news out of the last couple of weeks, and BluGlass recently announced that they've been named a hub member of the US Department of Defense's $2 billion Microelectronics Commons as part of the CHIPS and Science Act. For Australian investors, can you tell us what the Microelectrics Commons is?

Jim Haden: Yes. So, basically there's a concept that the Department of Defense wanted to get into the market where they have these key technologies that are available to take from lab to fab. So, the lab would be partners like universities and so forth, and they have the incubation and the lab to fab means that they want to have commercial partners. They want to be able to productionise and commercialise these ideas and move them through these hub members. And so, what it basically entails is a dual use. The government wants to have these technologies. They've deemed these technologies, like the high-bandgap GaN material that we're doing, as core technologies that they need for the government, and they want to have them continuously available, so they have the commercial aspect. Sometimes the government's needs go up and down. They want to have a steady supply of it.

Paul Sanger: And, breaking that down, the Deputy Defense Secretary Kathy Hicks announced a total of eight regional innovation hubs has been established across the US, and BluGlass has been named as part of the Commercial Leap Ahead for Wide Bandgap Semiconductors (CLAWS) hub. Can you tell us more about this hub?

Jim Haden: Yeah, so this hub is interesting in several ways. As you mentioned, there's eight hubs. Ours is one of them. In those hubs, there's 460 members, and they're just companies and universities across the United States. Our hub has one leader and seven members, so we're eight. We're about the lowest membership of any hub. And the award that we've been given in that hub of the $238 million for fiscal year '23 award, ours was among the largest. And so, ours has companies like GE, Wolfspeed, the University of North Carolina, the state university, and then our company, BluGlass, is the only photonics in there. The other ones are electronics, high-bandgap electronics. So, it's a really interesting hub for many reasons.

Paul Sanger: So, just on that point, so you've kind of had the sort of… You've been rubber-stamped by the Department of Defense, and you're now rubbing shoulders with some of the biggest companies in the world.

Jim Haden: Yeah, that's a good way of putting it.

Paul Sanger: The CLAWS hub has been awarded US$ 39.4 million for FY23. How does this align with the BluGlass strategy, and how will it impact the business going forward?

Jim Haden: That's a good question. So that 39.4, as I said, is just for the next fiscal year. It was the FY23 award for FY24. The $2 billion is allocated over five years. What we did is we presented the technologies that we have, we showed the results we've gotten to date. And you know about those. They are wide wavelengths from 405, the violet up to blue and our DFB. Those types of products have shown what we can do and then where we want to go. And the nice thing about it is that this is sort of a Department of Defense endorsement of the roadmap we laid forward in conjunction with our partners in this hub. So, basically they're saying they like the roadmap and this is the first step of going along where you want to go.

Paul Sanger: Jim, you're also working with several OEMs, a national lab and other customers who are qualifying your laser in their applications. Can you tell us about this process, and what feedback have you received thus far?

Jim Haden: So, the processes could be different with any different type of customer. We basically have three customers, three types — those that have products in the market already. Maybe they're using IR lasers or they have some competitors. We have customers that are new, they're start-ups and they're developing products. And then we have this type of project customer, like ME Commons, or other large customers that maybe want to accelerate a roadmap.

And so, in those, the engagement can happen in different ways, but, in general, most of the companies that we are engaging with those are those that are doing new product developments. And so, they're putting our products into their next-generation products. And when you go through that process, what you'll have is you'll have a company that starts to qualify, and then they'll go to production, and then after a while they start a new product development. And so, then you'll get into that. And oftentimes you get the stepping stones, and then more companies will join in as well. The projects obviously could be a boost because they could help fund those roadmaps, and that's exactly what this ME Commons is trying to do is fund the acceleration, so they have a commercial partner that can do this, and for allies as well. And so, it's a really nice way of doing non-dilutive funding. So, it's good for our shareholders as well.

Paul Sanger: Absolutely, a rare word these days in current markets. And following, look, it's been a huge year for BluGlass. You recently had your AGM — I think it was only yesterday. What can the investors look for for the rest of the year?

Jim Haden: Well, the first one I would want to say was hopefully more news on ME Commons. That should be coming. As we get more products in the market, we've had sales distribution that they're interested in helping us out in different regions. And so, hopefully we'll see some news where we're signing some contracts and expanding our sales capability. With that, you have to have advancements in the core products, so we'll continue to push those. And then the novel products that we talked about in the AGM and elsewhere, the DFBs and so forth, and extending the wavelength. And using the extending of the wavelengths, we're expecting the RPCVD to play a larger role. So, those are some key things that we should see in the next year.

Paul Sanger: And it's probably fair to say that now you've had the endorsement from the Department of Defense that maybe contracts, going forward, are maybe a little bit easier to get across the line?

Jim Haden: I think it'll make it a lot easier, and our name is getting out there amongst other… There's what we call prime contractors and so forth. So, it is going to help us have good standing with them as well. So, hopefully we'll see more announcements like ME Commons.

Paul Sanger: Jim, it's been an absolute pleasure. Great to have you back in the studio, and we'll be keeping a close eye on the story over the next few months.

Jim Haden: Great. Thank you, Paul.

Paul Sanger: Thanks for your time.