Aiming at key EUV technologies! The US government bets on laser startup xLight: up to $150 million in exchange for majority shareholder position

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Amid intensifying global competition in the semiconductor industry, the U.S. government is seeking to target the most critical and core technological segments to reshape the advanced process supply chain.

According to the latest official disclosures, the Trump administration has decided to invest up to $150 million in the laser chip startup xLight—this is the first investment from CHIPS and Science Act funds in Trump’s second term. According to the agreement, the Department of Commerce will acquire equity in the company and is expected to become its largest shareholder.

xLight’s goal is not to build an entire lithography machine, but to break through the most difficult and core part of current EUV lithography systems—the laser. Currently, only ASML of the Netherlands can produce EUV lithography machines for advanced chip manufacturing, with each device costing up to hundreds of millions of dollars. Within this complex system, the real technical bottleneck and most challenging R&D difficulty is the laser that generates the 13.5nm-wavelength EUV light source.

U.S. Commerce Secretary Howard Lutnick stated that this collaboration will support a technology that can “fundamentally rewrite the limits of chip manufacturing.” This investment marks a ramp-up in direct government investment into strategic semiconductor manufacturing technologies.

Technological Breakthroughs Target Core Lithography Segment

xLight hopes to use technology originating from particle accelerators to build a Free Electron Laser that, with lower energy consumption, can generate a more stable and precise EUV light source, and plans to connect it to ASML’s or other vendors’ lithography systems.

The company is even targeting the more advanced 2-nanometer wavelength, which means that if the technology succeeds, chip manufacturing precision could be significantly enhanced, helping to sustain the life of Moore’s Law.

Even more notable, the company recently welcomed former Intel CEO Pat Gelsinger, who became executive chairman of xLight’s board this March. After leaving Intel, Gelsinger sees this project as his “second chance,” and describes it as a “very personal mission.”

“We are here to awaken Moore’s Law; it’s been napping,” Gelsinger said in a media interview. He predicts that xLight’s new technology could improve wafer processing efficiency by 30% to 40% while sharply reducing energy consumption, thus reshaping the economic model of advanced manufacturing processes.

This investment comes from the 2022 CHIPS & Science Act and is part of a program supporting early-stage cutting-edge technologies. This is also the first investment by the current administration after taking over a $7.4 billion semiconductor research institution. Though still in a “preliminary non-binding agreement” stage, the political signal is clear.

Lutnick bluntly stated in his announcement that the U.S. has “ceded leadership for too long” in advanced lithography technology, and that “this situation must end now.”

xLight's ambitions are vast. Its free electron laser device could measure up to 100 meters by 50 meters and is planned as a “utility-scale” installation on the periphery of chip fabs. The company aims to produce its first batch of silicon wafers by 2028.

Currently, the company is led by CEO Nicholas Kelez, who previously worked at government labs and quantum computing firms. This summer, xLight raised $40 million from investors including Playground Global, where Gelsinger is a partner.

Direct Government Investment Strategy Triggers Controversy

However, the government’s direct equity investment in the company has drawn criticism from some in the market, who see it as a form of “state capitalism” with the risk of “picking winners and losers.”

Lutnick defended the move, saying it is reasonable to stimulate the development of critical industries and to bring in private partners.

In addition to xLight, the U.S. is encouraging more domestic semiconductor technology challengers. Peter Thiel-backed startup Substrate recently announced a $100 million funding round with plans to develop an American EUV alternative. Meanwhile, the government is pressuring TSMC and others to expand their investments in the U.S.

It is foreseeable that a new round of “technological arms race” centering on EUV lithography and its core components is quietly taking shape. Whether xLight can go from lab to mass production, and from technological aspiration to industrial reality, will become an important variable in the evolution of the semiconductor landscape in coming years.

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