The Trump administration is planning to buy a direct stake in yet another chip technology company.
The U.S. Commerce Department announced on December 1 that it had signed a letter of intent to buy up to $150 million of xLight, a startup that focuses on lithography, a critical part of the semiconductor manufacturing process.
The move shows that the government’s nearly $9 billion investment in Intel—for a 10% stake in the company structured as a silent partnership—wasn’t a one-off, and that officials are moving forward with plans to buy equity in technology companies the administration deems critical.
As part of the latest deal, the startup will receive tens of millions in exchange for developing a prototype that would use free-electron laser (FEL) technology to manufacture chips. The approach, if successful, would be a big deal, since it could provide an alternative to lithography equipment made by Dutch company ASML, which is practically the only choice for chipmakers.
For the U.S. government, the hope is that xLight’s technology could help produce extremely tiny and highly sought-after transistors.
“The right shareholder?”
Under the Trump administration, the government has rapidly increased its ownership shares in private companies—a controversial strategy.
A good number of conservative economists believe the government shouldn’t be getting so involved in the private sector. There’s also concern that current investments don’t reflect a consistent strategy, and could veer into favoritism for political friends. The Trump administration may also be risking taxpayer money, since there’s no guarantee industrial policy investments will actually pan out.
“Is the government really going to be the right shareholder to help these companies succeed? Is the government going to start showing favoritism to these companies over companies that it doesn’t own?” Peter Harrell, from the Carnegie Endowment for Peace, recently asked during a segment on PBS News Hour. “What are the kind of political requirements that are going to be put on companies that the government is taking an ownership in?”
In addition to xLight and Intel, new federal government investments now include millions in equity in mineral and steel firms, according to The New York Times. There were reports earlier this year that the Trump administration might even take a direct stake in quantum computing companies, though when Fast Company asked, a senior official denied the reports.
Further CHIPS entanglements
It’s true that Intel was unlikely to return to its former status as a leader in chips manufacturing based on the billions it would have received under the Biden administration alone, said one former employee at the Commerce Department-based CHIPS office, which was created under the Creating Helpful Incentives to Produce Semiconductors (CHIPS) Act and helped oversee massive new subsidies for semiconductor companies.
Still, the Trump administration buying direct equity in the company doesn’t really achieve that goal, the person said. There might be a world in which the government’s equity in xLight and Intel work in “tandem,” the person added. “But do we really want the government telling Intel to use the startup the government invested in?” (Notably, Pat Gelsinger, the former CEO of Intel, leads xLight’s board.)
Regardless, xLight may not be the last of the Trump administration’s investments in chipmakers.
This past September, the CHIPS R&D office, housed within the Commerce Department, released a broad agency announcement sharing that entities could apply for awards meant to boost the country’s microtechnology industry. That announcement stipulated that awardees might need to give the government “equity, warrants, licenses to intellectual property, royalties or revenue sharing, or other such instruments to ensure a return on investment to the Government.”