The Trump administration has agreed to inject up to $150 million into xLight, a semiconductor startup developing advanced chip manufacturing technology, marking the third time the U.S. government has taken a stake in a private startup and expanding on a controversial strategy that has put Washington on the cap table of U.S. companies.
The Wall Street Journal reported on Monday that the Commerce Department would provide funding to xLight in exchange for stock that would likely make the government the startup’s largest shareholder. The agreement utilizes funding from the Chips and Science Act of 2022 and would be the first Chipps Act award of President Trump’s second term, but it is still preliminary and subject to change.
Previous government stock investments under the Trump administration include publicly traded companies Intel, MP Materials, Lithium Americas and Trilogy Metals. Two rare earth startups also secured funding from the Commerce Department last month in exchange for stock.
You can imagine how this plays out in Silicon Valley, where libertarianism is strong. At TechCrunch’s signature Disrupt event back in October, Roelof Botha of Sequoia Capital, when asked about the trend, joked that this might be the understatement of the year.[Some] The most dangerous words in the world are: “I’m a government employee, and I’m here to help.” ”
Other venture capitalists have similarly expressed quiet concerns about what it would mean if their portfolio companies suddenly found themselves competing with U.S. Treasury-backed startups, or even sitting across the table from government representatives on the board.
The four-year-old Palo Alto, Calif., company at the center of this special experiment is trying to do something truly bold in semiconductor manufacturing. XLight wants to build particle accelerator-powered lasers – machines the size of a football field – that would produce more powerful and precise light sources for making chips.
If it succeeds, it could challenge the near-total domination of Dutch giant ASML, which has been publicly traded since 1995 and currently enjoys an absolute monopoly on extreme ultraviolet lithography equipment. (The company’s stock price has risen 48.6% this year.)
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xLight’s CEO is Nicholas Keres, a veteran of quantum computing and government labs who is presumably well versed in using particle accelerators. The venture is backed by former Intel CEO Pat Gelsinger, who resigned late last year after an ambitious manufacturing turnaround plan failed to materialize.
“I’m not done yet,” Gelsinger, who is also a general partner at Playground Global, which led the startup’s $40 million funding round this summer, told WSJ, adding that the effort is “very personal” to him.
In fact, xLight doesn’t just compete with ASML, it goes even further. ASML’s machines operate at wavelengths around 13.5 nanometers, while xLight targets 2 nanometers. Gelsinger claims this technology can increase wafer processing efficiency by 30% to 40% while using significantly less energy.
Coincidentally, Keres and Gelsinger are scheduled to appear at TechCrunch’s StrictlyVC event in Palo Alto on Wednesday night, which is sure to bring some government support. (You can still reserve your seat here.)
Commerce Secretary Howard Lutnick insisted this was all in the interest of national security and technological leadership, saying the partnership could “fundamentally rewrite the boundaries of semiconductor manufacturing.” Even skeptics acknowledge the geopolitical reality, but critics will continue to question whether taxpayer-funded stocks represent visionary industrial policy or state capitalism with a patriotic sheen.
At least Mr. Botha, who described himself in Disrupt as “essentially a kind of liberal, free-market thinker,” acknowledged that industrial policy should have its place when the national interest demands it. “The only reason the United States would resort to such measures is because other nations with which we compete promote their industries using industrial policies that may be detrimental to the United States in their strategic, long-term interests.”
