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

A year after being fired from Intel, Pat Gelsinger still wakes up at 4 a.m., still in the middle of the semiconductor wars — just on a different battlefield. Now a general partner at Playground Global, the 63-year-old works with 10 startups. But one portfolio company has captured a significant share of his attention: xLight, a semiconductor startup that announced last Monday that it had closed a seed deal worth up to $150 million from the US Commerce Department, with the government set to become its largest shareholder.

It’s a nice feather in the cap for Gelsinger, who spent 35 years across two stints at Intel before the board showed him the door late last year due to lack of confidence in his turnaround plans. But the xLight deal also highlights a trend that is making people in Silicon Valley quietly uncomfortable: the Trump administration taking equity stakes in strategically important companies.

“What the hell happened to free enterprise?” That’s what California Gov. Gavin Newsom asked at a speaking event this week, portraying the anxiety spreading through an industry that has long prided itself on free-market principles.

Speaking at a StrictlyVC event held by TechCrunch at Playground Global, Gelsinger — who is xLight’s CEO — seemed unfazed 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, that is.

“You know, I have 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 believe this is the technology that will awaken Moore’s Law.”

The xLight deal is the first chip and science law award of Trump’s second term, using funding earmarked for early-stage companies with promising technologies. But here’s the thing – the deal is currently in the letter of intent stage, which means it’s not finalized and the details could still change. When pressed on whether the funding might end up being twice the announced amount — or perhaps not materialize at all — Gelsinger was blunt.

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

The technology xLight is pursuing is quite serious in scale and ambition. The company plans to build machines roughly 100 x 50 meters — roughly the size of a football field — that will be placed outside semiconductor manufacturing plants. These free electron lasers will generate intense UV light with wavelengths up to 2 nanometers, which is much more powerful than the 13.5 nanometer wavelengths currently used by ASML, the Dutch giant that completely dominates the UV lithography market.

“About half of the capital goes into lithography,” Gelsinger explained of the entire semiconductor industry. “In the center of the lithograph is a light… [and] This ability to continue to innovate for shorter wavelength, higher energy light is at the core of the ability to continue to innovate for more advanced semiconductors.

Leading xLight is Nicholas Kelis, whose background is unusual for the world of semiconductors. Prior to founding xLight, Kelles 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 viable now when ASML abandoned a similar approach almost a decade ago? “The difference is that the technology was not mature,” Kelis explained. At the time, there were only a few extreme UV lithography machines, and the industry had already spent tens of billions of dollars in existing technology. “This was not the time to take on something completely new and orthogonal.”

Now, with UV radiation becoming ubiquitous in advanced semiconductor manufacturing and current light source technology reaching its limits, the timing seems even better. The main innovation, according to Kelis, is treating light as an auxiliary tool rather than integrating it into every machine. “We’re moving away from building an integrated light source with the tool, which is what… [ASML does] “Now that basically limits you to making it smaller and less powerful,” he said. Instead, “we treat light the same way we treat electrical power or heating, ventilation and air conditioning.” “We build out of factories on a large scale and then we distribute in them.”

The company aims to produce its first silicon chips by 2028, and will have its first commercial system online by 2029. But there are major hurdles, including ASML itself. Although the company is talking with xLight about integration, it has not formally committed to purchasing the technology.

“We are working closely with them now to design how to integrate with the ASML scanner,” Kelis said. “So we work with them, and with their providers, [like] Zeiss, who does their optics.

When asked whether Intel or other major chipmakers had committed to purchasing xLight technology, Gelsinger said they had not. “No one has committed yet, but work is ongoing with all the people on the list you would expect, and we are in extensive conversations with all of them.”

The competitive scene is heating up too. In October, Substrate — a semiconductor manufacturing startup backed by Peter Thiel — announced it had raised $100 million to develop U.S. chip factories, including a UV instrument that looks very similar to the xLight approach. Gelsinger doesn’t see them as a direct competitor, though. “If Substrate is successful, they could become a client of ours,” he said, explaining that Substrate is focused on building an integrated lithography scanner that will eventually need a free-electron laser, which is exactly what xLight is developing.

Gelsinger’s relationship with the Trump administration adds another layer to the story. He pitched 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 United States.

This arrangement has drawn criticism from some who view the administration’s approach as state capitalism, where the government picks winners and losers. But Gelsinger is unapologetic about it, portraying it as essential to national competitiveness. “I measure it by results,” he said. “Will this deliver the results we want and for which we need to revitalize our industrial policies? Many of our competitive countries are not having these discussions. They are moving forward with policies necessary to achieve their competitive results.”

He pointed to energy policy as another example. “How many nuclear reactors are being built in the United States today? Zero. How many nuclear reactors are being built in China today? 39. Energy policy in a digital AI economy equals the economic capacity of a nation.”

For xLight, the government’s share comes with minimal restrictions. The Commerce Department would not have veto power or a seat on the board, Kelles says. “There are no rights to information, nothing,” Gelsinger adds. “It’s a minority investment, in a non-governmental way, but it also says we need this company to succeed in the national interest.”

xLight has raised $40 million from investors including Playground Global and is planning another fundraising round in January. Unlike fusion or quantum computing startups that need billions, Kelis said xLight’s path is more manageable. “This is not fusion or quantum,” he said. “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, although that agreement also needs to be finalized.

For Gelsinger, it’s clear that xLight is more than just another portfolio company. It’s an opportunity to cement his importance in the semiconductor industry he helped build, even if his methods put him at odds with the traditional ethos of Silicon Valley.

Asked how to navigate his principles in the current political environment, Gelsinger retreated to a more technocratic view of corporate leadership — where money comes from the U.S. government, managements are temporary, and CEOs must remain above the fray.

“CEOs and companies don’t have to be Republicans or Democrats,” he said. “Your job is to achieve the business goal, serve investors, serve shareholders. That’s your goal. As a result, you should be able to know what policies are beneficial on the R side or what policies are beneficial on the D side, and be able to navigate through them.”

He added separately that of the $150 million provided by the Trump administration, “taxpayers will do well.”

When asked if working at 10 startups was enough for someone who used to run Intel, Gelsinger was emphatic. “Absolutely. The idea that I can now impact across a wide range of technologies — I’m a deep tech guy at my core. My mind is very stretched here, and I’m just grateful that the Playground team would ask me to join them and allow me to make them smarter and be a junior venture capitalist.”

He paused, then added with a smile: “And I made weekends for my wife.”

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