The Trump administration has consented to invest as much as $150 million in xLight, a semiconductor startup focused on developing cutting-edge chip-making technology. This marks the third instance of the U.S. government taking an equity stake in a private startup, further expanding a contentious strategy that has placed Washington on the cap tables of American firms.
The Wall Street Journal reported on Monday that the Commerce Department will allocate the funding to xLight in exchange for an equity position, likely establishing the government as the startup’s primary shareholder. The arrangement utilizes funds from the 2022 Chips and Science Act and signifies the inaugural Chips Act award during President Trump’s second term, although it remains preliminary and subject to revisions.
Past government equity investments under the Trump administration encompass publicly traded entities like Intel, MP Materials, Lithium Americas, and Trilogy Metals. Additionally, two rare earths startups secured funding last month from the Commerce Department in return for equity.
One can imagine the reception this is receiving in Silicon Valley, where a strong libertarian philosophy prevails. During TechCrunch’s flagship Disrupt event in October, Roelof Botha of Sequoia Capital jokingly delivered what might be the understatement of the year when questioned about the trend: “[Some] of the most perilous words globally are: ‘I’m from the government, and I’m here to assist.’”
Other VCs have voiced similar concerns, albeit discreetly, regarding the implications when their portfolio companies suddenly face competition from startups supported by the U.S. Treasury, or even when they find themselves across the table from government officials during board meetings.
The four-year-old company, based in Palo Alto, California, at the heart of this particular experiment is endeavoring to accomplish something genuinely ambitious in semiconductor manufacturing. XLight aims to construct particle accelerator-powered lasers — colossal machines, the size of a football field — that would generate more potent and precise light sources for chip production.
If successful, it could challenge the almost complete dominance of ASML, the Dutch corporation that has been publicly traded since 1995 and presently holds an absolute monopoly on extreme ultraviolet lithography machines. (Its shares have increased by 48.6% this year.)
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The CEO of xLight is Nicholas Kelez, a veteran in quantum computing and government labs who presumably possesses extensive knowledge of particle accelerators. Supporting this venture as executive chairman is Pat Gelsinger, the former Intel CEO who departed late last year after his ambitious manufacturing revitalization plans did not come to fruition.
“I wasn’t finished yet,” Gelsinger — who also serves as a general partner at Playground Global, which spearheaded the startup’s $40 million funding round this summer — told the Journal, adding that the endeavor is “profoundly personal” to him.
Indeed, xLight aspires to not only compete with ASML but to surpass it significantly. While ASML’s machines operate at wavelengths of around 13.5 nanometers, xLight is targeting 2 nanometers. Gelsinger asserts that the technology could enhance wafer processing efficiency by 30% to 40% while consuming considerably less energy.
Coincidentally, both Kelez and Gelsinger will be presenting at TechCrunch’s StrictlyVC event on Wednesday night in Palo Alto, where the government’s backing will undoubtedly be a topic of discussion. (You can still secure a spot here.)
Commerce Secretary Howard Lutnick, on his part, maintains that this is all in the interest of national security and technological dominance, stating that the partnership could “fundamentally redefine the boundaries of chipmaking.” Critics will continue to question whether taxpayer-funded equity stakes represent forward-thinking industrial policy or state capitalism disguised with a patriotic veneer, although even skeptics recognize the geopolitical realities.
At the very least, Botha, who described himself at Disrupt as a “somewhat libertarian, free market thinker by nature,” acknowledged that industrial policy has its merits when national interests necessitate it. “The sole reason the U.S. is resorting to this is because we have other nation states with whom we compete who are employing industrial policy to advance their industries that are strategic and potentially detrimental to U.S. long-term interests.”
