A year after his departure from Intel, Pat Gelsinger is back at the forefront of the semiconductor industry, this time as a general partner at Playground Global and executive chairman of xLight. His latest venture, xLight, a semiconductor startup, has secured a preliminary deal for up to $150 million from the U.S. Commerce Department, with the government poised to become a significant shareholder. This strategic investment aims to revolutionize chip manufacturing through advanced lithography, potentially reviving Moore's Law and bolstering national competitiveness in the crucial deep tech sector.
Gelsinger, who spent 35 years at Intel across two tenures before his exit last year due to a lack of confidence in his turnaround strategies, now dedicates a substantial portion of his attention to xLight among his 10 portfolio companies. The deal, however, has sparked quiet discomfort in Silicon Valley, where the Trump administration's practice of taking equity stakes in strategically important companies raises questions about free-market principles. California Governor Gavin Newsom voiced this unease, asking, “What the hell happened to free enterprise?” at a speaking event this week, capturing the sentiment rippling through an industry long proud of its free-market ethos.
Revolutionizing Chip Manufacturing with Free Electron Lasers
Speaking at one of TechCrunch’s StrictlyVC events at Playground Global, Gelsinger, unperturbed by the philosophical debate, focused on xLight's mission: to tackle what he sees as the semiconductor industry's most significant bottleneck – lithography. This process of etching microscopic patterns onto silicon wafers is critical for chip advancement. xLight is developing groundbreaking “free electron lasers” powered by particle accelerators, a technology that could fundamentally transform chip manufacturing if scaled successfully. Gelsinger articulated his long-term goal, stating, “You know, I have this long-term mission to continue to see Moore’s law in the semiconductor industry,” adding, “We think this is the technology that will wake up Moore’s law.” He was referencing the decades-old principle that computing power should double approximately every two years.
This xLight agreement marks the first Chips and Science Act award under Trump’s second term, specifically targeting early-stage companies with promising technologies. It’s important to note that the deal is currently a letter of intent, meaning it’s not yet finalized and details could change. When pressed on the funding amount, Gelsinger was candid: “We’ve agreed in principle on the terms, but like any of these contracts, there’s still work to get done.”
The Technology Deep Dive
xLight’s technology is ambitious in both scale and precision. The company plans to construct machines roughly 100 meters by 50 meters – about the size of a football field – to be situated outside traditional semiconductor fabrication plants. These free electron lasers aim to generate extreme ultraviolet (EUV) light at an unprecedented 2-nanometer wavelength, significantly more powerful than the 13.5-nanometer wavelengths currently employed by ASML, the Dutch giant dominating the EUV lithography market. Gelsinger emphasized the importance of this innovation: “About half of the capital goes into lithography… In the middle of a lithography machine is light. . . [and] this ability to keep innovating for shorter wavelength, higher power light is the essence of being able to continue to innovate for more advanced semiconductors.”
Leading xLight is Nicholas Kelez, whose extensive background includes developing quantum computers at PsiQuantum (a Playground Global portfolio company) and two decades building large-scale X-ray science facilities at national labs like SLAC and Lawrence Berkeley, where he served as Chief Engineer for the Linac Coherent Light Source.
Kelez explained why this approach is viable now, despite ASML abandoning a similar strategy almost a decade ago: “The difference was the technology wasn’t as mature.” He noted that with EUV now ubiquitous in leading-edge semiconductor manufacturing and existing light source technology reaching its limits, the timing is opportune. Kelez highlighted the key innovation: treating light as a utility rather than integrating it into each machine. “We go away from building an integrated light source with the tool, which is what [ASML does] now and that fundamentally constrains you to make it smaller and less powerful,” he said. Instead, “We treat light the same way you treat electrical power or HVAC. We build outside the fab at utility scale and then distribute in.”
The company is aiming to produce its first silicon wafers by 2028 and have its first commercial system online by 2029.
Market Reception and the Competitive Landscape
While direct competition with ASML isn't an immediate concern – Kelez mentioned close collaboration on integration with ASML scanners and optics providers like Zeiss – securing commitments from major chipmakers is still ongoing. Gelsinger stated, “Nobody has committed yet, but the work is going on with everybody on the list that you would expect, and we’re having intense conversations with all of them.”
The competitive landscape is evolving, with Peter Thiel-backed Substrate, a semiconductor manufacturing startup, announcing in October that it raised $100 million to develop U.S. chip fabs, including an EUV tool seemingly similar to xLight’s approach. However, Gelsinger doesn’t see them as direct competition. “If Substrate is successful, they could be a customer for us,” he said, explaining that Substrate focuses on building a full-stack lithography scanner that would ultimately require xLight’s free electron laser technology.
Gelsinger's Political Stance and National Competitiveness
Gelsinger’s relationship with the Trump administration adds another dimension to the story. He initially pitched xLight to Commerce Secretary Howard Lutnick in February, before Playground Global funded the startup, framing it as crucial for repatriating chip manufacturing to the U.S. Despite criticism labeling the administration’s approach as state capitalism, with the government picking winners and losers, Gelsinger remains unapologetic, defending it as essential for national competitiveness. “I measure it by the results,” he asserted. “Does it drive the results that we want and that we need to reinvigorate our industrial policies? Many of our competitive countries don’t have such debates. They’re moving forward with the policies that are necessary to accomplish their competitive outcomes.” He further drew a parallel to energy policy, noting, “How many nuclear reactors are being built in the US today? Zero. How many being built in China today? 39. Energy policy in a digital AI economy equals the economic capacity of the nation.”
The government’s equity stake in xLight comes with minimal conditions. Kelez confirmed the Commerce Department will not have veto rights or a board seat. Gelsinger added, “No information rights, nothing. It’s a minority investment, in a non-governing way, but it also says we need this company to succeed for national interest.”
xLight has already secured $40 million from investors, including Playground Global, and plans another fundraising round in January. Kelez believes xLight’s financial needs are more manageable than those of fusion or quantum computing startups, stating, “This is not fusion or quantum. We don’t need billions.” The company has also signed a letter of intent with New York to build its first machine at the New York CREATE site near Albany, though this agreement also awaits finalization.
Gelsinger's Enduring Vision
For Gelsinger, xLight transcends a typical portfolio company; it represents an opportunity to solidify his legacy in the semiconductor industry, even if his methods challenge Silicon Valley’s traditional ethos. When asked about navigating his principles in the current political climate, Gelsinger adopted a more technocratic view of corporate leadership: “CEOs and companies should neither be Republican or Democrat. Your job is to accomplish the business objective, serve your investors, serve your shareholders. That is your objective. And as a result, you need to be able to figure out what policies are beneficial on the R side or what policies are beneficial in the D side, and be able to navigate through them.” He optimistically added about the $150 million federal investment, “Taxpayers will do well.”
Asked if managing 10 startups is sufficient for someone who once led Intel, Gelsinger responded emphatically, “Absolutely. The idea that I can now influence across such a wide range of technologies – I’m a deep tech guy at the core of who I am. My mind is so stretched here, and I’m just grateful that the Playground team would have me to join them and let me make them smarter and be a rookie venture capitalist.” He then quipped, “And I gave my wife back her weekends.” While a pleasant thought, Gelsinger’s reputation as a workaholic suggests this arrangement might be short-lived.
