The Netherlands' ASML is the undisputed heavyweight of lithography, etching patterns onto silicon wafers in chip fabs. Fellow Dutch company Morphotonics is the scrappy underdog in the same field, specializing in nanoimprint lithography (NIL) - a process for manufacturing displays in AR glasses and other optics. It has benefited from ASML's supply chain and uses many of the same vendors, which is a bit like your garage band borrowing Metallica's amps.

After 12 years of quietly toiling away, Morphotonics announced Tuesday it has raised €40 million to scale up production and expand into a new market: optical components for data centers. The round was backed by 3M Ventures, Innovation Industries, BOM, and Invest-NL. The European Innovation Council (EIC) Fund, Ernij Next (a Dutch family office), and the European Investment Bank (EIB) also participated.

Morphotonics' NIL technology involves creating a "stamp" that is applied to photosensitive materials to produce various displays, from augmented reality glasses to privacy screens for cars. This is particularly useful for waveguide technology used in smart glasses like the Meta Ray-Ban Display, Even Reality, and Magic Leap. Waveguides are thin pieces of glass or plastic that deflect light along a specific path, displaying an image in front of the wearer's eyes. So, yes, they're the reason you can look like a cyborg while checking your email.

Smart glasses are just one application, but currently the most in-demand. This week, China reported that smart glasses sales doubled in the first eight months of this year. In June, IDC noted that shipments of smart glasses with displays are expected to reach 12.2 million by 2030. As that market grows, manufacturers are scrambling for machines like Morphotonics' that can produce displays at scale.

The latest fundraising is part of an extended round that began in 2024, raised in multiple installments. The company has used the money to more than double its headcount to 60 employees, up from roughly 30 in September 2024, when CEO Hugo Da Silva joined. Morphotonics still plans to hire and expects headcount to stabilize around 70 to 75 people.

"Typically, display manufacturers would acquire our equipment as part of the supply chain, and we integrate it into the entire manufacturing process. We teach them the process, we provide the chemicals, and they can manufacture that," Da Silva said. The company's manufacturing is heavily concentrated in Asia, with teams in China, Taiwan, South Korea, and the U.S. "Strong local presence is very important," he said, presumably while eyeing a map.

Da Silva said the company's next machine, currently being built, will be capable of producing more than 6 million waveguides a year. It's expected to start shipping early next year. Beyond displays, the expansion includes a push into co-packaged optics, a technology used in data centers that use Photonic Integrated Circuits - chips that use light instead of electricity - to move data between servers and network equipment. The startup hasn't shipped any machines in this area yet, but it said customers have validated its tech. So, no pressure.

Morphotonics sells both hardware machines and licenses its process to ensure customers get the best results. Right now, roughly 90% of its revenue comes from hardware sales, with 10 to 15 systems deployed globally. The company expects to reach 50 deployments in the next two to three years, which should also increase its revenue from services. Because nothing says "success" like diversifying your income stream.