Pat Gelsinger wants to save Moore’s Law, with a little help from the Feds

A year after being kicked out of Intel, Pat Gelsinger still wakes up at 4 a.m., still in the middle of the semiconductor wars – just on a different battlefield. He is now a general partner at venture capital firm Playground Global and works with ten startups. But one portfolio company has captured an inordinate amount of his attention: xLighta semiconductor startup that announced last Monday that it had signed a preliminary deal for up to $150 million with the U.S. Department of Commerce, in which the government will become a meaningful shareholder.

It is a nice feather in the cap of Gelsinger, who spent two stints at Intel over 35 years before the board dismissed him at the end of last year due to a lack of trust in his turnaround plans. But the xLight deal also puts a spotlight on a trend that’s quietly making people in Silicon Valley uncomfortable: the Trump administration taking equity stakes in strategically important companies.

“What the hell happened to free enterprise?” California Governor Gavin Newsom asked at a lecture event this week, which captured the unease rippling through an industry that has long prided itself on its free-market principles.

Speaking at one of TechCrunch’s StrictlyVC events at Playground Global, Gelsinger – xLight’s executive chairman – seemed untroubled by the philosophical debate. He’s more focused on his bet that xLight can solve what he sees as the semiconductor industry’s biggest bottleneck: lithography, the process of etching microscopic patterns onto silicon wafers. The startup is developing massive “free-electron lasers,” powered by particle accelerators, that could revolutionize chip manufacturing. If the technology works at scale, that is.

“You know, I’m on a long-term mission to continue to see Moore’s Law in the semiconductor industry,” Gelsinger said, referring to the decades-old principle that computing power should double every two years. “We think this is the technology that will shake up Moore’s Law.”

The xLight deal is the first Chips and Science Act award under Trump’s second term, using funding earmarked for early-stage companies with promising technologies. Notably, the deal is currently in the letter of intent stage, meaning it has not yet been finalized and details are subject to change. When asked whether the financing could ultimately be double the announced amount – or possibly not materialize at all – Gelsinger was candid.

“We agree in principle on the terms, but as with any of these contracts there is still work to be done,” he said.

The technology xLight is pursuing is quite serious, both in scale and ambition. The company plans to build machines measuring about 100 by 50 meters – about the size of a football field – that will be placed outside semiconductor factories. These free-electron lasers would generate extreme ultraviolet light with wavelengths as precise as 2 nanometers, much more powerful than the 13.5 nanometer wavelengths currently used by ASML, the Dutch giant that utterly dominates the EUV lithography market.

“About half of the capital goes into lithography,” Gelsinger explained of the entire semiconductor industry. ‘At the center of a lithography machine is light. [and] This ability to continue to innovate 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 background is unusual for the semiconductor world. Before founding xLight, Kelez led quantum computer development efforts at PsiQuantum (a Playground Global portfolio company) and spent two decades building large-scale X-ray science facilities at national laboratories including SLAC and Lawrence Berkeley, where he was chief engineer for the Linac Coherent Light Source.

So why is this feasible now, when ASML abandoned a similar approach almost a decade ago? “The difference was that the technology was not yet that mature,” Kelez explains. At the time, only a handful of extreme ultraviolet lithography (EUV) machines existed, and the industry had already poured tens of billions into the established technology. “It just wasn’t the time to tackle something completely new and orthogonal.”

Now that EUV is ubiquitous in advanced semiconductor manufacturing and existing light source technology is reaching its limits, the timing looks better. The most important innovation, according to Kelez, is treating light as a utility, instead of building it into every machine. “We’re moving away from building an integrated light source with the tool, and that’s what [ASML does] Now, and that fundamentally forces you to make it smaller and less powerful,” he said. And instead, “We treat light the same way you treat electrical energy or HVAC. We build outside the factory at a utility scale and then distribute inside.”

The company aims to produce its first silicon wafers by 2028 and have its first commercial system online by 2029.

There are of course obstacles, but at the moment direct competition with ASML does not seem to be one of them. “We are currently working very closely with them to design the basis for integration with an ASML scanner,” said Kelez. “So we work with both them and their suppliers, [like] Zeiss, who does their optics.”

When asked whether Intel or other major chipmakers have committed to buying xLight’s technology, Gelsinger said that is not the case. “No one has committed yet, but work is underway with everyone on the list you would expect, and we are having intense conversations with all of them.”

Meanwhile, the competitive landscape is heating up. In October, Substrate – a semiconductor manufacturing startup backed by Peter Thiel – announced it would increase its support $100 million to develop US chip factories, including an EUV tool very similar to xLight’s approach. However, Gelsinger does not view them as direct competition. “If Substrate is successful, they could be a customer for us,” he said, offering that Substrate is focused on building a full-stack lithography scanner that would eventually require a free-electron laser, which is exactly what xLight is developing.

Gelsinger’s relationship with the Trump administration adds a new layer to the story. He brought up xLight to Commerce Secretary Howard Lutnick in February, before Playground funded the startup and before Lutnick was confirmed, pitching it as a company that could help bring chip manufacturing back to the US.

The scheme has drawn criticism from some who view the government’s approach as state capitalism, with the government picking winners and losers. But Gelsinger is unapologetic and sees it as necessary for national competitiveness. “I measure it by the results,” he said. “Is this delivering the results we want and should we reinvigorate our industrial policy? Many of our competitive countries are not having such debates. They are moving forward with the policies needed to achieve their competitive results.”

He mentioned energy policy as another example. “How many nuclear reactors are being built in the US today? Zero. How many are being built in China today? 39. Energy policy in an AI digital economy equals the nation’s economic capacity.”

For xLight, government involvement comes with minimal obligations. The Commerce Department does not have veto power or a board seat, Kelez said. “No information rights, nothing,” Gelsinger adds. “It’s a minority investment, in a non-governmental way, but it also says we need this company to succeed for the national interest.”

xLight has raised $40 million from investors including Playground Global and is planning a new fundraising round in January. Unlike fusion or quantum computing startups that require billions, Kelez says xLight’s path is more manageable. “This is not fusion or quantum,” he said. “We don’t need billions.”

The company also signed a letter of intent with New York to build its first machine at New York’s CREATE site near Albany, although that agreement also has yet to be finalized.

For Gelsinger, xLight is clearly more than just a portfolio company. It’s a chance to cement his relevance in the semiconductor industry he helped build, even as his methods put him at odds with Silicon Valley’s traditional ethos.

When asked how he might apply his principles in today’s political environment, Gelsinger retreated to a more technocratic vision of corporate leadership—one in which the money comes from the U.S. government, governments are temporary, and CEOs must stay above the fray.

“CEOs and companies should be neither Republican nor Democrat,” he said. “Your job is to achieve the corporate purpose, to serve your investors, to serve your shareholders. That’s your purpose. And as a result, you have to be able to figure out what policies are favorable on the R side or what policies are favorable on the D side, and be able to navigate through that.”

Separately, he added of the Trump administration’s $150 million, “The taxpayers will be fine.”

When asked whether working at ten startups is enough for someone who used to run Intel, Gelsinger was emphatic. “Absolutely. The idea that I can now make an impact 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 wanted me to join them and let me make them smarter and become an early-stage venture capitalist.”

He paused and added with a grin, “And I gave my wife her weekends back.”

It’s a nice thought, although anyone who knows Gelsinger’s reputation as a workaholic might wonder how long that arrangement will last.