U.S. government to invest $150 million in lithography startup

• It also continues the White House's trend of taking equity stakes in private companies, acting like something akin to a venture capital fund, whereas the CHIPS Act had been intended to provide grants and other incentives.
• Also worth noting that, earlier this year, Trump told Congress to "get rid of" the CHIPS Act.

Catch up quick: xLight was founded in 2021 and this past summer raised $40 million in Series B funding led by Playground Global — with Playground partner and former Intel CEO Pat Gelsinger becoming xLight's executive chairman.

Zoom in: Axios spoke briefly this morning with Nicholas Kelez, xLight's CEO and CTO, to better understand the deal and what his company does. What follows is an edited transcript of our conversation:

Axios: How did this award come about?

Kelez: "Two months ago there was a request for applications that came out of CHIPS, which was specific to lithography. This letter of intent is the next step in accepting our proposal. It was an incredibly fast turnaround.

• "In general we've been engaged with CHIPS for over two years, just like anyone else involved in semiconductors."

Did you always expect this to be equity vs. a grant?

"Not all the terms have been negotiated yet, it's still a letter of intent, except that the government will be a minority shareholder. So I don't want to go too far into that until we finalize the details over the next month or two."

What does xLight do?

"At the heart of advanced semiconductor manufacturing is lithography, which is the process that writes the features on the chips. When we want to make better-performing chips, it's lithography that drives that.

• "Light is key to lithography, but current light technology has reached its limitations. We address the need for more and better light by changing the paradigm. Rather than small integrated light sources, we're building outside the fab at utility-scale, the same way you'd do for power generation."

You're talking football field-sized facilities, right?

"At the maximum, yes. And you need to be robust to enter the semiconductor manufacturing environment. But we have paths to shrink that."

Does this government deal replace your next VC funding round?

"It doesn't replace it, but does help us accelerate our schedule. The intent of this money is to help us do our next fundraise earlier by creating an anchor for the next round and for building prototypes faster.

• "This is a very audacious plan to build something big, and hardware is expensive."

Any worries that some VC firms might avoid a startup whose largest outside investor is the U.S. government?

"We wouldn't have done this if we have those concerns, although certainly some people have those opinions.

• "The landscape of industrial policy has changed and I'm grateful that the U.S. government is looking at keeping the country competitive in different ways. Other governments are investing billions in this exact space, light sources for lithography."