Chip Startup xLight: When Uncle Sam Is a Major Shareholder
▼ Summary
– The Trump administration has agreed to provide up to $150 million in funding to semiconductor startup xLight in exchange for an equity stake, marking the third such government investment in a private company.
– This deal, using funds from the 2022 Chips and Science Act, is the first Chips Act award in President Trump’s second term and would make the U.S. government xLight’s largest shareholder.
– The startup aims to build large, particle accelerator-powered lasers to create advanced light sources for chipmaking, potentially challenging the monopoly of Dutch company ASML.
– Venture capitalists in Silicon Valley have expressed concern about the government’s expanding role as a direct investor in private companies, viewing it as a controversial departure from free-market principles.
– Proponents, including Commerce Secretary Howard Lutnick, argue the investment is for national security and technological leadership, a response to industrial policies used by competing nation-states.
The U.S. government is poised to become the largest shareholder in semiconductor startup xLight through a potential $150 million equity investment, a move that significantly expands a contentious federal strategy of taking direct ownership stakes in private technology companies. This preliminary deal, sourced from the 2022 Chips and Science Act, represents the first such award of the current presidential term and marks the third instance of the government acquiring equity in a private startup, placing Washington directly on the cap tables of American firms.
According to a recent report, the Commerce Department will provide the funding in exchange for a substantial ownership position. This follows a pattern established by prior government equity investments in publicly traded entities like Intel, MP Materials, and Lithium Americas, as well as in two rare earths startups just last month.
The strategy is generating unease within Silicon Valley’s deeply ingrained libertarian investment culture. At a major industry conference, a prominent venture capitalist humorously highlighted the tension by referencing the classic line, “I’m from the government, and I’m here to help.” Other investors have expressed quieter concerns about the competitive and governance implications of portfolio companies facing rivals backed by the U.S. Treasury or sharing a boardroom with government representatives.
The four-year-old Palo Alto company, xLight, is pursuing a remarkably ambitious goal within chip manufacturing. Its plan involves constructing massive, football-field-sized machines that use particle accelerator-powered lasers. This technology aims to generate more powerful and precise light sources for etching circuits onto silicon wafers. Success could pose a serious challenge to the current market landscape, where Dutch firm ASML holds a virtual monopoly on the advanced extreme ultraviolet lithography machines essential for cutting-edge chip production.
Leading xLight is CEO Nicholas Kelez, an expert in quantum computing and government laboratories. The venture is also backed by executive chairman Pat Gelsinger, the former Intel CEO who joined the startup after departing the chip giant. Gelsinger, whose firm led a $40 million funding round for xLight this summer, has stated the project is “deeply personal” and that he “wasn’t done yet” with his work in revitalizing American semiconductor manufacturing.
The company’s ambitions extend beyond simply competing with the industry leader. While ASML’s systems operate at wavelengths near 13.5 nanometers, xLight is targeting a far more precise 2-nanometer process. Gelsinger claims this approach could improve wafer processing efficiency by 30% to 40% while consuming significantly less energy.
Commerce Secretary Howard Lutnick defends the investment as crucial for national security and maintaining technological leadership, arguing it could “fundamentally rewrite the limits of chipmaking.” This perspective frames the equity stake as a necessary component of modern industrial policy. However, critics continue to debate whether such taxpayer-funded ownership represents visionary strategy or a form of state capitalism wrapped in patriotic rhetoric.
Even some skeptical observers acknowledge the geopolitical pressures driving this approach. The same venture capitalist who joked about government help conceded that when competing nation-states actively use industrial policy to advance strategic industries, the U.S. may have little choice but to respond in kind. The ongoing experiment with xLight will serve as a high-profile test case for this new era of public-private partnership in foundational technology.
(Source: TechCrunch)