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XLight raises $40 million to pursue new EUV light source

for

lithography machines

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China investing heavily in EUV technology development

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XLight's funding led by Playground Global, joined by

several

investors

By Stephen Nellis

PALO ALTO, California, July 22 (Reuters) - Silicon

Valley startup xLight has raised $40 million, aiming to build

the first prototype of a new class of laser that could shake up

the global chip industry and reclaim U.S. leadership in a field

that China is aggressively investing in.

XLight's laser - based on the same technologies as massive

particle accelerators used by U.S. national labs in cutting-edge

physics research - will sit at the heart of what are known as

extreme ultraviolet (EUV) lithography machines. EUV machines are

the tools primarily responsible for the creation of smaller,

faster chips.

In a world where advances in fields such as AI are

determined by how many chips Nvidia ( NVDA ) and other chip

companies can supply, xLight is aiming to help chip factories,

called "fabs" in the industry, turn out more of the

dinner-plate-sized silicon "wafers" that contain advanced chips

more quickly and cheaply.

"This is the most expensive tool in the fab. It's what

drives the cost of the wafer more than any other tool in the

fab, and it's what drives capacity more than any other tool in

the fab," Nicholas Kelez, CEO of xLight, said at the company's

Palo Alto headquarters.

XLight declined to disclose its valuation. It expects to

have an operational prototype in 2028.

'TERRIBLE MISTAKE'

The EUV machines themselves took the chip industry decades to

develop, and Europe's ASML is currently the world's

only supplier. ASML and xLight do not have a business

partnership, but technical leaders at ASML have provided xLight

with the requirements a laser must meet to be considered for use

in ASML's machines.

The U.S. government has worked across multiple presidential

administrations to stop EUV machines from being sent to China,

with one official calling it the "single most important export

control" held by the U.S. and Europe.

China has responded by pouring resources into the field,

with a close manufacturing partner of national champion Huawei

Technologies claiming breakthroughs in developing its

own EUV laser and more than a dozen research papers appearing at

international conferences chasing the same technological path as

xLight.

A U.S.-based firm named Cymer perfected the first EUV laser

technology and was scooped up by ASML more than a decade ago for

$2.5 billion, helping create ASML's dominant position in the

market.

"There was a terrible mistake made giving Cymer the ability

to become a European-owned and controlled company," said Pat

Gelsinger, former CEO of Intel ( INTC ) who now serves as

executive chairman of xLight's board and is a general partner at

Playground Global, one of xLight's investors.

Many of xLight's prototype components will come from U.S.

national labs as xLight works to build a supply chain in the

U.S. and allied countries.

"We can build that here, or it can be built elsewhere. China

is investing heavily in this space. There's an extraordinary

backstory here that says, 'Let's get this one right,'" Gelsinger

said.

The financing round was led by Playground Global and joined

by Boardman Bay Capital Management. Morpheus Ventures, Marvel

Capital, and IAG Capital Partners also joined the round.