<PAGE>


                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

  X      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
-----    EXCHANGE ACT OF 1934

         FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001

                                       OR

         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT
-----    OF 1934

         For the Transition Period from __________ to ____________

                         Commission file number 0-21321

                                   CYMER, INC.
             (Exact name of registrant as specified in its charter)

             Nevada                                     33-0175463
--------------------------------------      ------------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

16750 Via Del Campo Court, San Diego, CA                   92127
----------------------------------------               ------------
(Address of principal executive offices)                 (Zip Code)

Registrant's telephone number, including area code:  (858) 385-7300

Former name, former address and former fiscal year, if changed since last
report.
 N/A


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes   X           No
    -----            -----

The number of shares of Common Stock, with $0.001 par value, outstanding on May
11, 2001 was 30,517,657.


<PAGE>


                                   CYMER, INC.

                                    FORM 10-Q

                      FOR THE QUARTER ENDED MARCH 31, 2001

                                      INDEX

<TABLE>
<CAPTION>

                                                                                                       PAGE
<S>                                                                                                   <C>
PART I.        FINANCIAL INFORMATION

ITEM 1.        Consolidated Financial Statements (unaudited)

               Consolidated Balance Sheets as of December 31,
                  2000 and March 31, 2001                                                                 3

               Consolidated Statements of Income for the
                  three months ended March 31, 2000 and 2001                                              4

               Consolidated Statements of Cash Flows for the
                  three months ended March 31, 2000 and 2001                                              5

               Notes to Consolidated Financial Statements                                                 7

ITEM 2.        Management's Discussion and Analysis of Financial
                  Condition and Results of Operations                                                    13

ITEM 3.        Quantitative and Qualitative Disclosures About
                   Market Risk                                                                           29

PART II.       OTHER INFORMATION

ITEM 1.        Legal Proceedings                                                                         30

ITEM 2.        Changes in Securities and Use of Proceeds                                                 30

ITEM 3.        Defaults upon Senior Securities                                                           31

ITEM 4.        Submission of Matters to a Vote of Security Holders                                       31

ITEM 5.        Other Information                                                                         31

ITEM 6.        Exhibits and Reports on Form 8-K                                                          31

SIGNATURE PAGE                                                                                           32

</TABLE>


                                        2
<PAGE>


                          PART I. FINANCIAL INFORMATION


CYMER, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                                               DECEMBER 31,  MARCH 31,
                                                                               ------------  ---------
ASSETS                                                                             2000         2001
                                                                               -----------------------
<S>                                                                             <C>          <C>
CURRENT ASSETS:
   Cash and cash equivalents                                                    $  79,678    $ 156,458
   Short-term investments                                                         117,017       49,530
   Accounts receivable - net                                                       85,569       77,584
   Foreign currency forward exchange contracts                                      2,664        6,292
   Inventories                                                                     76,887       74,041
   Deferred income taxes                                                           23,503       23,461
   Prepaid expenses and other                                                       4,571        3,011
                                                                                ---------    ---------
          Total current assets                                                    389,889      390,377

PROPERTY - NET                                                                     91,080       90,527
LONG-TERM INVESTMENTS                                                               8,984           --
DEFERRED TAXES - NON-CURRENT                                                        6,060        5,053
GOODWILL - NET                                                                         --       12,206
INTANGIBLE ASSETS - NET                                                                --        1,385
OTHER ASSETS                                                                        5,549        5,280
                                                                                ---------    ---------
TOTAL ASSETS                                                                    $ 501,562    $ 504,828
                                                                                =========    =========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
   Accounts payable                                                             $  23,471    $  21,023
   Accrued and other liabilities                                                   67,853       60,441
   Income taxes payable                                                            11,274        9,454
   Revolving loan                                                                   8,745           --
                                                                                ---------    ---------
          Total current liabilities                                               111,343       90,918
                                                                                ---------    ---------
CONVERTIBLE SUBORDINATED NOTES                                                    172,335      172,335
OTHER LIABILITIES                                                                   3,175        3,135
MINORITY INTEREST                                                                   1,741        1,852
COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
   Preferred Stock - authorized 5,000,000 shares; $.001 par value,
     no shares issued or outstanding                                                   --           --
   Common stock - authorized 50,000,000 shares; $.001 par value,
     issued and outstanding 29,496,000 and 30,343,000 shares
     at December 31, 2000 and March 31, 2001, respectively                             29           30
   Paid-in capital                                                                145,996      169,043
   Treasury stock, at cost (2,000,000 common shares)                              (24,871)     (24,871)
   Unearned compensation                                                               --       (4,300)
   Accumulated other comprehensive loss                                            (1,691)      (5,118)
   Retained earnings                                                               93,505      101,804
                                                                                ---------    ---------
          Total stockholders' equity                                              212,968      236,588
                                                                                ---------    ---------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                      $ 501,562    $ 504,828
                                                                                =========    =========

</TABLE>

See Notes to Unaudited Consolidated Financial Statements.


                                       3
<PAGE>


CYMER, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                                            FOR THE THREE MONTHS ENDED
                                                                                    MARCH 31,
                                                                            --------------------------
                                                                                2000        2001
                                                                            --------------------------
<S>                                                                           <C>         <C>
REVENUES:
   Product sales                                                              $ 80,532    $ 90,652
   Other                                                                            85         545
                                                                              --------    --------
          Total revenues                                                        80,617      91,197
                                                                              --------    --------

COSTS AND EXPENSES:
   Cost of product sales                                                        46,151      48,030
   Research and development                                                     10,764      14,437
   Sales and marketing                                                           3,798       6,382
   General and administrative                                                    4,574       5,722
   Amortization of goodwill and intangible assets                                   --         465
   Purchased in-process research and development                                    --       5,050
                                                                              --------    --------

          Total costs and expenses                                              65,287      80,086
                                                                              --------    --------

OPERATING INCOME                                                                15,330      11,111
                                                                              --------    --------
OTHER INCOME (EXPENSE):
   Foreign currency exchange gain - net                                             18       1,605
   Interest and other income                                                     2,388       2,732
   Interest and other expense                                                   (2,909)     (2,906)
                                                                              --------    --------

          Total other income (expense) - net                                      (503)      1,431
                                                                              --------    --------

INCOME BEFORE INCOME TAX PROVISION
   AND MINORITY INTEREST                                                        14,827      12,542
                                                                              --------    --------

INCOME TAX PROVISION                                                             4,448       3,763
MINORITY INTEREST                                                                 (205)       (110)
                                                                              --------    --------

INCOME BEFORE CUMULATIVE CHANGE IN
   ACCOUNTING PRINCIPLE                                                         10,174       8,669
                                                                              --------    --------

CUMULATIVE CHANGE IN ACCOUNTING PRINCIPLE                                           --        (370)
                                                                              --------    --------

NET INCOME                                                                    $ 10,174    $  8,299
                                                                              ========    ========

EARNINGS PER SHARE:
Basic earnings per share:
   Before cumulative change in accounting principle                           $   0.35    $   0.29
   Cumulative change in accounting principle                                        --    $  (0.01)
                                                                              --------    --------
   Basic earnings per share                                                   $   0.35    $   0.28
                                                                              ========    ========
   Weighted average common shares outstanding                                   28,711      29,954
                                                                              ========    ========

Diluted earnings per share:
   Before cumulative change in accounting principle                           $   0.33    $   0.28
   Cumulative change in accounting principle                                        --    $  (0.01)
                                                                              --------    --------
   Diluted earnings per share                                                 $   0.33    $   0.27
                                                                              ========    ========
   Weighted average common and common
     equivalent shares outstanding                                              31,166      30,776
                                                                              ========    ========

</TABLE>

See Notes to Unaudited Consolidated Financial Statements.


                                       4
<PAGE>


CYMER, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                                               FOR THE THREE MONTHS ENDED
                                                                                        MARCH 31,
                                                                               --------------------------
                                                                                    2000        2001
                                                                               --------------------------
<S>                                                                             <C>          <C>
OPERATING ACTIVITIES:
   Net income                                                                   $  10,174    $   8,299
   Adjustments to reconcile net income to net cash
     provided by operating activities:
     Cumulative change in accounting principle                                         --          370
     Depreciation and amortization                                                  4,784        5,664
     Minority interest                                                                205          110
     Purchased in process research and development                                     --        5,050
     Provision for deferred income taxes                                               --          992
     Loss on disposal and impairment of property and equipment                         95          379
     Change in assets and liabilities - net of acquisition:
       Accounts receivable - net                                                   (1,656)       4,633
       Foreign currency forward exchange contracts                                 (2,263)      (4,098)
       Inventories                                                                 (5,451)      (1,700)
       Prepaid expenses and other assets                                             (648)      (1,880)
       Accounts payable                                                                43       (3,011)
       Accrued and other liabilities                                                1,884       (6,975)
       Income taxes payable                                                          (234)      (1,594)
                                                                                ---------    ---------

          Net cash provided by operating activities                                 6,933        6,239
                                                                                ---------    ---------

INVESTING ACTIVITIES:
   Acquisition of property and equipment                                          (12,148)      (3,685)
   Purchases of investments                                                       (50,555)     (18,195)
   Proceeds from sold or matured investments                                       53,071       94,711
   Cash acquired in acquisition of ACX                                                 --          603
   Acquisition of minority interest                                                (1,104)          --
                                                                                ---------    ---------

          Net cash provided by (used in) investing activities                     (10,736)      73,434
                                                                                ---------    ---------

FINANCING ACTIVITIES:
   Payments, net of borrowings, under revolving loan and security agreements           --       (8,518)
   Proceeds from issuance of common stock                                           5,283        2,177
   Payments on capital lease obligations                                             (143)        (133)
                                                                                ---------    ---------

          Net cash provided by (used in) financing activities                       5,140       (6,474)
                                                                                ---------    ---------

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
  CASH EQUIVALENTS                                                                  2,947        3,581
                                                                                ---------    ---------

NET INCREASE IN CASH AND CASH EQUIVALENTS                                           4,284       76,780
CASH AND CASH EQUIVALENTS AT BEGINNING  OF PERIOD                                  75,765       79,678
                                                                                ---------    ---------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                                      $  80,049    $ 156,458
                                                                                =========    =========

</TABLE>


                                       5
<PAGE>


CYMER, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
(UNAUDITED)
(IN THOUSANDS)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                                               FOR THE THREE MONTHS ENDED
                                                                                        MARCH 31,
                                                                               --------------------------
                                                                                    2000        2001
                                                                               --------------------------
<S>                                                                             <C>          <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
   Interest paid                                                                $   3,284    $   6,467
   Income taxes paid                                                            $   4,100    $   5,327
                                                                                =========    =========

SUPPLEMENTAL DISCLOSURE OF NON CASH INVESTING
   AND FINANCING ACTIVITIES:

  Conversion of subordinated notes to equity                                    $     165           --
                                                                                =========    =========

</TABLE>

See Notes to Unaudited Consolidated Financial Statements.


                                       6
<PAGE>


                                   CYMER, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        THREE MONTHS ENDED MARCH 31, 2001
                                   (UNAUDITED)


1.       BASIS OF PRESENTATION

         The accompanying consolidated financial information has been prepared
by Cymer, Inc., and its wholly-owned and majority-owned subsidiaries
(collectively "Cymer"), without audit, in accordance with the instructions to
Form 10-Q and therefore does not include all information and footnotes necessary
for a fair presentation of financial position, results of operations and cash
flows in accordance with accounting principles generally accepted in the United
States of America.

         PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
include the accounts of Cymer, Inc., its wholly-owned subsidiaries, Cymer Japan,
Inc. "Cymer Japan", Cymer Singapore Pte Ltd. "Cymer Singapore", Cymer B.V. in
the Netherlands "Cymer B.V.", Cymer Southeast Asia, Inc., in Taiwan "Cymer SEA",
Active Control eXperts, Inc. "ACX", and its majority-owned subsidiary, Cymer
Korea, Inc. "Cymer Korea". Cymer, Inc. owns 70% of Cymer Korea. During the first
quarter of 2000, Cymer, Inc. acquired the 25% minority interest in Cymer SEA for
$1,104,000. During the first quarter of 2001, Cymer acquired 100% of ACX for a
total consideration of $24,751,000, which includes 689,000 common shares of
Cymer stock and 336,000 stock options. Cymer sells its excimer lasers in Japan
primarily through Cymer Japan. Cymer Korea, Cymer SEA, Cymer Singapore and Cymer
B.V. are field service offices for customers in those regions. All significant
intercompany balances have been eliminated in consolidation.

         ACCOUNTING ESTIMATES - The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results may differ
from those estimates.

         UNAUDITED INTERIM FINANCIAL DATA - In the opinion of management, the
unaudited consolidated financial statements for the interim periods presented
reflect all adjustments, consisting of only normal recurring accruals, necessary
for a fair presentation of the financial position and results of operations as
of and for such periods indicated. These consolidated financial statements and
notes thereto should be read in conjunction with the consolidated financial
statements and notes thereto included in Cymer's Annual Report on Form 10-K
(including items incorporated by reference therein) for the year ended December
31, 2000. Results for the interim periods presented herein are not necessarily
indicative of results which may be reported for any other interim period or for
the entire fiscal year.

2.       EARNINGS PER SHARE

         EARNINGS PER SHARE - Basic earnings per share ("EPS") excludes dilution
and is computed by dividing net income or loss attributable to common
stockholders by the weighted-average of common shares outstanding for the
period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock (convertible preferred
stock, warrants to purchase common stock and common stock options using the
treasury stock method) were exercised or converted into common stock. Potential
common shares in the diluted EPS computation are excluded in net loss periods as
their effect would be anti-dilutive.


                                       7
<PAGE>


<TABLE>
<CAPTION>
                                                                          THREE MONTHS ENDED MARCH 31,
                                                                     --------------------------------------
                                                                          2000                  2001
                                                                             (IN THOUSANDS, EXCEPT
                                                                              PER SHARE AMOUNTS)
<S>                                                                      <C>              <C>
      Net income                                                         $10,174          $       8,299
                                                                         =======          =============

      Basic earnings per share:

      Before cumulative change in accounting principle                   $  0.35          $        0.29
      Cumulative change in accounting principle                               --          $       (0.01)
                                                                         -------          -------------
      Basic earnings per share                                           $  0.35          $        0.28
                                                                         =======          =============
      Basic weighted average common shares
         outstanding                                                      28,711                 29,954

      Effect of dilutive securities:
         Warrants                                                             34                     18
         Options                                                           2,421                    804
                                                                         -------          -------------
      Diluted weighted average common and potential
         common shares outstanding                                        31,166                 30,776
                                                                         =======          =============

      Diluted earnings per share:

      Before cumulative change in accounting principle                   $  0.33          $        0.28
      Cumulative change in accounting principle                               --          $       (0.01)
                                                                         -------          -------------
      Diluted earnings per share                                         $  0.33          $        0.27
                                                                         =======          =============

</TABLE>

         For the three months ended March 31, 2000 and 2001, weighted average
options and warrants to purchase 12,000 and 3,011,000 shares of common stock,
respectively, were outstanding but not included in the computation of diluted
earnings per share as their effect was anti-dilutive. In addition, for each of
the three months ended March 31, 2000 and 2001, weighted average common shares
attributable to Convertible Subordinated Notes of 3,666,704 were not included
in the calculation of diluted earnings per share as they were also
anti-dilutive.

         Included in the earnings per share calculations are outstanding shares
and options that were issued in connection with the ACX acquisition on February
13, 2001. For the three month period ended March 31, 2001, 360,000 shares and
201,000 options issued in conjunction with the ACX acquisition are included in
the basic and diluted weighted average shares outstanding, respectively.

         RECLASSIFICATIONS - Certain amounts in the prior years' consolidated
financial statements have been reclassified to conform to current period
presentation.

3.       BALANCE SHEET DETAILS

<TABLE>
<CAPTION>

                                                         DECEMBER 31,  MARCH 31,
                                                            2000         2001
                                                          --------    --------
                                                             (IN THOUSANDS)
<S>                                                       <C>         <C>
INVENTORIES:
   Raw materials                                          $ 22,101    $ 23,351
   Work-in-progress                                         29,308      28,740
   Finished goods                                           40,478      36,450
   Allowance for excess and obsolete inventory             (15,000)    (14,500)
                                                          --------    --------
   Total                                                  $ 76,887    $ 74,041
                                                          ========    ========

</TABLE>


                                       8
<PAGE>


<TABLE>
<CAPTION>

                                                                      DECEMBER 31,            MARCH 31,
                                                                          2000                  2001
                                                                    ------------------    ------------------
                                                                                (IN THOUSANDS)
      <S>                                                           <C>                   <C>
      ACCRUED AND OTHER LIABILITIES:
         Warranty and installation reserves                            $  34,050             $  32,173
         Payroll and payroll related                                      14,491                12,091
         Interest                                                         15,052                11,149
         Other                                                             4,260                 5,028
                                                              ------------------    ------------------
         Total                                                         $  67,853             $  60,441
                                                              ==================    ==================

</TABLE>

4.       REPORTING COMPREHENSIVE INCOME

         The accumulated balance of other comprehensive income (loss) is
disclosed as a separate component of stockholders' equity. For Cymer,
comprehensive income includes gains and losses on foreign currency forward
exchange contracts, foreign currency translation adjustments, and unrealized
holding gains and losses on available-for-sale securities, which are recorded as
short-term and long-term investments in the accompanying consolidated balance
sheet.

         The following table summarizes the change in each component of
accumulated other comprehensive loss for the periods ended December 31, 2000 and
March 31, 2001:

<TABLE>
<CAPTION>

                                                             Total unrealized      Total gain or loss         Accumulated
                                                             gains (losses) on     on foreign currency           other
                                           Translation       available-for-sale     forward exchange        comprehensive
                                           adjustment           investments             contracts            income (loss)
                                          --------------     ------------------    --------------------     -----------------
<S>                   <C>                 <C>                <C>                   <C>                      <C>
January 1, 2000       Balance                 $ (3,581)                $  (39)                  $    -             $ (3,620)
                      Period net change          1,784                    145                        -                1,929
                                          --------------     ------------------    --------------------     -----------------
December 31, 2000     Balance                   (1,797)                   106                        -               (1,691)
                      Period net change         (3,672)                    45                      200               (3,427)
                                          --------------     ------------------    --------------------     -----------------
March 31, 2001        Balance                 $ (5,469)                $  151                   $  200             $ (5,118)
                                          ==============     ==================    ====================     =================

</TABLE>

5.       CLASS ACTION LAWSUITS

         Cymer has been named as a defendant in several putative shareholder
class action lawsuits which were filed in September and October, 1998 in the
U.S. District Court for the Southern District of California. Certain executive
officers and directors of Cymer are also named as defendants. The plaintiffs
purport to represent a class of all persons who purchased Cymer's Common Stock
between April 24, 1997 and September 26, 1997 (the "Class Period"). The
complaints allege claims under the federal securities laws. The plaintiffs
allege that Cymer and the other defendants made various material
misrepresentations and omissions during the Class Period. The complaints do not
specify the amount of damages sought. The complaints have been consolidated into
a single action and a class representative has been appointed by the court. A
consolidated amended complaint was filed in early August, 1999. On November 5,
1999, Cymer and the other defendants filed a motion to dismiss the consolidated
amended claim for failure to state a cause of action. On April 1, 2000, the
court granted defendant's motion to dismiss with leave to amend the complaint by
the plaintiffs. The plaintiffs filed their second amended complaint on June 5,
2000. Cymer moved to dismiss the amended complaint on August 4, 2000. On January
22, 2001, the court heard oral argument on Cymer's motion to dismiss, but has
not yet decided the motion. Cymer believes it has meritorious defenses to the
claims asserted and intends to defend the action vigorously. Accordingly, no
provision for any liability or loss that may result from adjudication or
settlement thereof has been made in the accompanying consolidated financial
statements.


                                       9
<PAGE>


         Even though Cymer believes the claim to be meritless and intends to
vigorously defend the action, there can be no assurances that Cymer will be
successful in ultimately defending and dismissing the action. Such litigation
may result in Cymer being required to pay damages, incur substantial costs and
divert management's attention and resources, and therefore could have a material
adverse effect on Cymer's business, financial condition and results of
operations.

6.       ACQUISITION

         On February 13, 2001, Cymer acquired the Cambridge, Massachusetts
based company Active Control eXperts, Inc. ("ACX") in an all-stock
transaction which includes 689,000 common shares of Cymer stock and 336,000
stock options. ACX is a leading developer, manufacturer and marketer of
hardware, software and firmware solutions for vibrations and nano-motion. ACX
provides active control solutions to original equipment manufacturers of
precision manufacturing equipment where speed, accuracy and precision provide
competitive advantage. ACX technology can be physically embedded, creating
adaptive "smart structures" to intrinsically improve the stability and
precision of nano-motion control in next-generation semiconductor capital
equipment. Cymer's marketing strength, industry applications capability and
worldwide service and support infrastructure will help to both fully develop
the market potential of ACX's technology, and accelerate its penetration into
the semiconductor marketplace.

         The acquisition was accounted for using the purchase method of
accounting. The total consideration for the purchase was approximately $24.8
million, which includes the value of the 689,000 shares of Cymer common stock
issued and 336,000 stock options issued to effect the purchase. The details
of the acquisition and the preliminary allocation of the purchase price,
based upon the estimated fair values of the acquired assets and liabilities
assumed and an independent appraisal of intangible assets consist of the
following:

<TABLE>
<CAPTION>

                                                                                  FAIR VALUE
                                                                                (IN THOUSANDS)
                                                                              --------------------
           <S>                                                                <C>
           CONSIDERATION:
            Purchase price - common stock                                                 $14,982

                Liabilities assumed                                                         2,998
                Employee options assumed                                                    5,889
                Capitalized transaction costs                                                 882
                                                                              --------------------

           Total consideration                                                            $24,751
                                                                              ====================

           Tangible assets                                                                  1,529

           Intangible assets:
                Existing technology                                                           640
                Assembled workforce                                                           790
                In-process research and development                                         5,050
                                                                              --------------------

            Total identifiable intangible assets                                            6,480
                                                                              ====================

           Goodwill - before unearned compensation                                         16,742

           Unearned compensation                                                            4,439
                                                                              --------------------

           Goodwill - after unearned compensation                                         $12,303
                                                                              ====================

</TABLE>


                                       10
<PAGE>


              Cymer expects to finalize the purchase price allocation within one
     year and does not anticipate material adjustments to the preliminary
     purchase price allocation at closing. Amounts allocated to existing
     technology, assembled workforce, and goodwill are being amortized on a
     straight-line basis over their estimated useful lives of four years. From
     the acquisition date through March 31, 2001, the amortization of existing
     technology, assembled workforce, and goodwill totaled approximately
     $429,000. In future quarters, the estimated amortization will be
     approximately $858,000 for the three month period.

              Unearned compensation of $4.4 million, related to unvested ACX
     options assumed by Cymer, is being amortized to compensation expense on a
     straight-line basis over the four year vesting period of the options. From
     the acquisition date through March 31, 2001, the amortization of unearned
     compensation approximated $139,000. In future quarters, the unearned
     compensation related to the unvested options assumed in the acquisition
     will approximate $278,000 for each quarter until the options are fully
     vested.

              The purchased in-process research and development ("IPR&D")
     totaling $5.1 million was expensed upon acquisition because the application
     of ACX's technology to semiconductor manufacturing was at a stage of
     development that required further research and development before reaching
     technological feasibility and commercial viability. In valuing the ACX
     IPR&D, consideration was given to key characteristics of the products under
     development, as well as the technology's life cycle, and the projects'
     stage of development. A discounted cash flow model was used to value the
     ACX IPR&D. This model included key assumptions on ACX's revenue growth,
     cost of goods levels, selling, general, and adminstrative ("SG&A")
     expenses, research and development ("R&D") expenses, and income tax rates,
     all over a four year projection period from 2001 through 2004. Included in
     these assumptions over the four year period were significant increases in
     revenue growth as compared to previous years and reductions in cost of
     goods, SG&A expenses and R&D expenses as a percentage of these higher
     projected revenues. These amounts were converted into estimated cash flows
     attributable to the technology to a present value equivalent using a 20%
     discount rate. The value of the ACX IPR&D was then calculated by summing
     these net present value amounts over the four year projection period,
     adding the tax amortization benefit, and applying a 70% percentage of
     completion factor for all IPR&D products. Estimates of time to complete,
     analysis of technological milestones, and other qualitative factors were
     considered to arrive at this percentage of completion factor.

              There are significant technological and commercial risks
     associated with ACX's technologies under development. These risks stem from
     the fact that the application of ACX's technologies to semiconductor
     manufacturing are in the early stages of development. There are significant
     risks associated with reaching the technological milestones on time and
     within budget. There are also commercial risks associated with the
     intellectual property limitations and market acceptance. Since ACX has
     patents pending but not yet granted, competitors may develop methods to
     compete with ACX's technologies. In addition, since it has only been since
     1998 that ACX shifted its focus to the semiconductor manufacturing
     industry, the application of these technologies under development has not
     yet been verified. The market for semiconductor manufacturing equipment is
     highly competitive and is rapidly evolving. Many of the competitors within
     the industry are publicly-traded companies with strong financial resources
     to dedicate to R&D investments.

              Cymer believes that the assumptions used to value the acquired
     intangibles were reasonable at the time of acquisition. No assurance can be
     given, however, that the underlying assumptions on projected revenues,
     costs, expenses, product development costs, percentages to complete, or the
     events associated with such projects, will have the same outcomes as
     expected and estimated within the valuation models used. For these reasons,
     among others, actual results may vary from the projected results.


                                       11
<PAGE>


         The accompanying consolidated balance sheets and statements of income
include the operations of ACX from the acquisition date. From the date of
acquisition through March 31, 2001, ACX had revenues totaling $583,000 and a net
loss of $345,000. The impact of ACX's results of operations to the consolidated
results of operations for the three months ended March 31, 2001 was a decrease
of $0.01 to both the basic and diluted earnings per share.

7.       ACCOUNTING CHANGE

         Cymer adopted Statement of Financial Accounting Standards No. 133
"Accounting for Derivative Instruments and Hedging Activities" ( "SFAS 133" )
on January 1, 2001. SFAS 133 requires that all derivative instruments be
recorded on the balance sheet at fair value. Gains or losses resulting from
changes in the values of those derivatives would be accounted for depending
upon the use of the derivative and whether it qualifies for hedge accounting.
Cymer uses foreign currency forward exchange contracts as a means of hedging
foreign currency exposure associated with its Japanese operations. Due to the
large volume of business that Cymer conducts in Japan, its Japanese
operations pose the greatest foreign currency risk. Cymer manages this risk
by entering into foreign currency forward exchange contracts to reduce the
impact of currency fluctuations related to purchases of Cymer's inventories,
mainly laser systems, by Cymer Japan for resale under firm third-party sales
commitments. Prior to the adoption of SFAS 133, net gains or losses were
recorded on the date the lasers were received by Cymer Japan (the transaction
date) and were included in the cost of product sales in the consolidated
statements of income at the same time that the related sales were
consummated. By recording the transaction in this manner, Cymer was able to
appropriately match revenue and expenses for each laser system sale from its
Japanese office. Due to the extensive documentation and administration
requirements of SFAS 133, Cymer does not currently qualify for hedge
accounting treatment. Although Cymer's foreign currency forward exchange
contracts are designated as cash flow hedges, Cymer cannot adopt hedge
accounting treatment, which would result in accounting treatment similar to
its previous accounting treatment, until all required documentation is
completed and hedging criteria are met. Since SFAS 133 requires that all
unrealized gains and losses on derivatives not qualifying for hedge
accounting be recognized currently through earnings, Cymer accounted for all
of its foreign currency forward exchange contracts in this manner for the
three months ended March 31, 2001. Upon adoption of SFAS 133 on January 1,
2001, Cymer recorded a loss to cumulative change in accounting principle of
$370,000 and a net gain on the change in value of its foreign currency
forward exchange contracts of $2.1 million for the three months ended March
31, 2001. This unrealized gain was recorded in other income (expense) on the
accompanying consolidated statements of income. As part of the transition
adjustment at January 1, 2001, Cymer also recorded a gain of $2.4 million to
accumulated other comprehensive income on the balance sheet per SFAS 133
transition guidelines. Of the $2.4 million accumulated other comprehensive
income, Cymer recognized a $2.2 million net gain on the underlying foreign
currency forward contracts into cost of product sales during the quarter
ended March 31, 2001. The remaining $0.2 million balance in other
comprehensive income at March 31, 2001 is expected to be recognized into cost
of product sales in the second quarter of 2001. Cymer is currently reviewing
the requirements to adopt hedge accounting treatment and may pursue such
treatment in the future.

8.       CONTINGENCIES

         Cymer's Japanese manufacturing partner and at least one of Cymer's
Japanese customers have been notified that Cymer's laser systems in Japan may
infringe certain Japanese patents held by another Japanese company. Cymer has
agreed to indemnify its Japanese manufacturing partner and its customers against
patent infringement claims under certain circumstances. Cymer believes, based
upon the advice of qualified Japanese counsel, that Cymer's products do not
infringe any valid claim of the asserted patents or that it is entitled to prior
user rights in Japan.


                                       12
<PAGE>


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS


         STATEMENTS IN THIS QUARTERLY REPORT ON FORM 10-Q THAT ARE NOT STRICTLY
HISTORICAL IN NATURE ARE FORWARD-LOOKING STATEMENTS. THESE STATEMENTS INCLUDE,
BUT ARE NOT LIMITED TO, REFERENCES TO MANUFACTURING ACTIVITIES; EXPECTED PRODUCT
SALES AND DEVELOPMENT; SERVICE AND SUPPORT; RESEARCH AND DEVELOPMENT
EXPENDITURES; EXPECTED PRODUCT DEVELOPMENT; EXPECTED INTERNATIONAL PRODUCT
SALES, DEVELOPMENT AND REVENUE; ADEQUACY OF CAPITAL RESOURCES AND INVESTMENTS;
EFFECTS OF THE SEMICONDUCTOR BUSINESS; COMPETITIVE POSITIONING; AND CONTINUING
RELATIONSHIPS WITH THIRD-PARTY MANUFACTURERS FOR PRODUCT MANUFACTURING. THESE
STATEMENTS INCLUDE, WITHOUT LIMITATION, STATEMENTS CONTAINING THE WORDS
"BELIEVES," "ANTICIPATES," "EXPECTS," AND WORDS OF SIMILAR IMPORT. THESE
STATEMENTS ARE ONLY PREDICTIONS BASED ON CURRENT INFORMATION AND EXPECTATIONS
AND INVOLVE A NUMBER OF RISKS AND UNCERTAINTIES. ACTUAL EVENTS OR RESULTS MAY
DIFFER MATERIALLY FROM THOSE PROJECTED IN SUCH STATEMENTS DUE TO VARIOUS
FACTORS, INCLUDING, BUT NOT LIMITED TO, THOSE SET FORTH UNDER THE CAPTIONS
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS," "RISK FACTORS" AND "LEGAL PROCEEDINGS," AND ELSEWHERE CONTAINED IN
THIS QUARTERLY REPORT ON FORM 10-Q. CYMER ASSUMES NO OBLIGATION TO UPDATE ANY
FORWARD-LOOKING STATEMENTS CONTAINED IN THIS QUARTERLY REPORT ON FORM 10-Q.

         THE FOLLOWING DISCUSSION OF THE FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF CYMER, INC. SHOULD BE READ IN CONJUNCTION WITH CYMER'S
CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE IN THIS
QUARTERLY REPORT ON FORM 10-Q.

RESULTS OF OPERATIONS

     The following table sets forth certain items in Cymer's consolidated
statements of operations as a percentage of total revenues for the periods
indicated:

<TABLE>
<CAPTION>

                                                                                   THREE MONTHS ENDED
                                                                                        MARCH 31,
                                                                              ------------------------------
                                                                                 2000              2001
<S>                                                                           <C>                <C>
Revenues:
   Product sales                                                                    99.9%             99.4%
   Other                                                                              .1                .6
                                                                              ------------      ------------
            Total revenues                                                         100.0%            100.0%
                                                                              ------------      ------------

Cost and expenses:
   Cost of product sales                                                             57.2              52.7
   Research and development                                                          13.4              15.8
   Sales and marketing                                                                4.7               7.0
   General and administrative                                                         5.7               6.3
   Amortization of goodwill and intangible assets                                       -                .5
   Purchased in-process research and development                                        -               5.5
                                                                              ------------      ------------
            Total costs and expenses                                                 81.0              87.8
                                                                              ------------      ------------

Operating income                                                                     19.0              12.2
Other income (expense) - net                                                         (.6)               1.5

Income before provision for
   income taxes and minority interest                                                18.4              13.7

</TABLE>


                                       13
<PAGE>


<TABLE>
<CAPTION>

                                                                                   THREE MONTHS ENDED
                                                                              ------------------------------
                                                                                        MARCH 31,
                                                                                 2000              2001
<S>                                                                           <C>               <C>
Provision for income taxes                                                            5.5               4.1
Minority interest                                                                     (.3)              (.1)
                                                                              ------------      ------------

Income before cumulative change in accounting principle                              12.6                9.5

Cumulative change in accounting principle                                               -                (.4)
                                                                              ------------      ------------

Net income                                                                           12.6%              9.1%
                                                                              ============      ============

Gross margin on product sales                                                        42.7%             47.0%
                                                                              ============      ============

</TABLE>

THREE MONTHS ENDED MARCH 31, 2000 AND 2001

         REVENUES. Cymer's total revenues consist of product sales, which
include sales of laser systems, spare parts, service and training. Other
revenues include revenue from funded development activities performed for
customers and for SEMATECH. Revenue from product sales is generally recognized
at the time of shipment, unless customer agreements contain inspection,
acceptance or other conditions, in which case revenue is recognized at the time
such conditions are satisfied. Funded development contracts are accounted for on
the percentage-of-completion method based on the relationship of costs incurred
to total estimated costs, after giving effect to estimates of costs to complete
the development project.

         Product sales increased 13% from $80.5 million in the three months
ended March 31, 2000 to $90.7 million in the three months ended March 31, 2001,
primarily due to increased sales of DUV photolithography laser systems,
replacement parts, and services. This increase in product sales was also
attributable to increased average selling prices ("ASP") from period to period
on Cymer's laser systems. ASP's for the period ended March 31, 2000 were
$511,000 as compared to $516,000 for the three month period ended March 31,
2001. The increased revenues related to replacement parts and services are due
to the continued increase in Cymer's installed base of lasers. Revenues from
funded development projects increased from $85,000 for the three months ended
March 31, 2000 to $545,000 for the three months ended March 31, 2001, primarily
due to additional such revenues generated from the acquisition of the ACX
business during the first quarter of 2001. Currently, the majority of ACX's
revenues are generated from funded development projects and accounted for
$397,000 of the total $545,000 funded development projects revenue for the three
months ended March 31, 2001.

         Cymer's sales are generated primarily by shipments to customers in
Japan, the Netherlands, and the United States. Approximately 85%, 81% and 85% of
Cymer's sales in 1999, 2000 and the first three months of 2001, respectively,
were derived from customers outside the United States. Cymer maintains a
wholly-owned Japanese subsidiary which sells to Cymer's Japanese customers.
Revenues from Japanese customers, generated primarily by this subsidiary,
accounted for 37%, 42% and 47% of revenues for 1999, 2000 and the first three
months of 2001, respectively. The activities of Cymer's Japanese subsidiary are
limited to sales and service of products purchased by the subsidiary from the
parent corporation. All costs of development and production of Cymer's products,
including costs of shipment to Japan, are recorded on the books of the parent
company. Cymer anticipates that international sales will continue to account for
a significant portion of its net sales.

         COST OF PRODUCT SALES. Cost of product sales includes direct material
and labor, warranty expenses, license fees, and manufacturing and service
overhead. Although Cymer was


                                       14
<PAGE>


previously permitted to also account for foreign exchange gains and losses on
foreign currency forward exchange contracts associated with purchases of Cymer's
products by its Japanese subsidiary for resale under firm third-party sales
commitments within cost of product sales, this is no longer allowed under a
newly adopted accounting pronouncement, SFAS 133, for those companies not
qualified for hedge accounting. Cymer adopted SFAS 133 on January 1, 2001 and
has not as of March 31, 2001 pursued the documentation required to adopt hedge
accounting treatment. As a result, Cymer is now required to record changes in
the value of its foreign currency forward exchange contracts directly through
earnings in the other income (expense) on the consolidated statements of income
on a monthly basis. During the transition period for the implementation of SFAS
133, the first quarter of 2001, Cymer was able to account for such gains and
losses through cost of product sales for certain of these contracts which were
in existence as of December 31, 2000. The transition adjustments recorded were
made in accordance with SFAS 133 guidance.

         Cost of product sales increased 4% from $46.2 million for the three
months ended March 31, 2000 to $48.0 million for the three months ended March
31, 2001 due primarily to the increase in sales of product and spare parts
volume. The gross margin on these sales increased from 43% for the three months
ended March 31, 2000 to 47% for the same three month period in 2001. This
increase was primarily due to increased volume of shipments absorbing fixed
costs of production and the ongoing improvements with regards to cycle times and
overall manufacturing and field support services processes.

         For the three months ended March 31, 2000, net gains or losses from
foreign currency forward exchange contracts were included in cost of product
sales in the consolidated statements of income as the related sales were
recognized. For the three months ended March 31, 2001, only those contracts
meeting the transition period requirements under SFAS 133 were included in cost
of product sales in the consolidated statements of income. Cymer recognized net
gains on such contracts of $746,000 and $2.2 million for the three months ended
March 31, 2000 and 2001, respectively.

         RESEARCH AND DEVELOPMENT. Research and development expenses include
costs of internally-funded and externally-funded projects as well as continuing
research support expenses which primarily include employee and material costs,
depreciation of equipment and other engineering related costs. Research and
development expenses increased 34% from $10.8 million for the three months ended
March 31, 2000 to $14.4 million for the three months ended March 31, 2001, due
primarily to continued product development efforts associated with the ELS-6000
and ELS-6010 series laser systems as well as development efforts associated with
ArF laser development which includes Cymer's most recent laser, the NanolithTM
7000. Research and development expenses were also higher during the first
quarter of 2001 due to technology obsolescence charges resulting from the
current pace of change in industry requirements as well as the additional
research and development expenses associated with the ACX business. As a
percentage of total revenues, such expenses increased from 13.4% to 15.8% in the
respective periods.

         SALES AND MARKETING. Sales and marketing expenses include the expenses
of the sales, marketing and customer support staffs and other marketing
expenses. Sales and marketing expenses increased 68% from $3.8 million for the
three months ended March 31, 2000 to $6.4 million for the three months ended
March 31, 2001 due primarily to increased staffing expenses associated with
expanded operations in the areas of product marketing, new product development,
and sales administration as well as additional expenses incurred to support the
sales and marketing organizations internationally. As a percentage of total
revenues, such expenses increased from 4.7% to 7.0% from period to period.

         GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of management and administrative personnel costs, professional
services and administrative operating costs. General and administrative expenses
increased 25% from $4.6 million in the


                                       15
<PAGE>


three months ended March 31, 2000 to $5.7 million for the three months ended
March 31, 2001. This was due primarily to additional support activities required
as a result of increased business levels from period to period as well as the
addition of the ACX business during the first quarter of 2001. As a percentage
of total revenues, such expenses increased from 5.7% to 6.3% in the respective
periods.

         PURCHASED IN-PROCESS RESEARCH AND DEVELOPMENT. Purchased in-process
research and development expenses consist primarily of costs associated with the
acquisition of a company and its in-process research and development projects.
There were no such expenses incurred during the period ended March 31, 2000 as
compared to $5.1 million for the period ended March 31, 2001. These expenses for
the period ended March 31, 2001 are due to the acquisition of ACX and represent
the fair market value of ACX's development projects associated with the
application of its technology to the semiconductor market. As of the date of the
ACX acquisition, this purchased in-process research and development was expensed
because the application of this technology to the semiconductor market was at a
stage of development that required further research and development before
reaching technological feasibility and commercial viability.

         OTHER INCOME (EXPENSE) - NET. Net other income (expense) consists
primarily of interest income and expense and foreign currency exchange gains and
losses associated with fluctuations in the value of the Japanese yen against the
United States dollar and gains and losses on foreign currency forward exchange
contracts. For the three months ended March 31, 2000, net other expense totaled
$503,000 as compared to net other income of $1.4 million for the three months
ended March 31, 2001. This change from net other expense to net other income was
primarily due to gains associated with the change in value of foreign currency
forward exchange contracts and the new SFAS 133 treatment of foreign exchange
contracts in 2001. Foreign currency exchange gains totaled $18,000, interest
income totaled $2.4 million, interest expense totaled $2.9 million, and other
expense totaled $94,000 for the three months ended March 31, 2000, compared to
an exchange gain of $1.6 million, interest income of $2.7 million, interest
expense of $2.9 million, and other income of $36,000 for the three months ended
March 31, 2001.

         Cymer's results of operations are subject to fluctuations in the value
of the Japanese yen against the United States dollar. Sales by Cymer to its
Japanese subsidiary are denominated in dollars, and sales by the subsidiary to
customers in Japan are denominated in yen. Cymer's Japanese subsidiary manages
its exposure to such fluctuations by entering into foreign currency forward
exchange contracts to hedge its purchase commitments to Cymer. In 2001, with the
adoption of SFAS 133, the gains or losses resulting from the change in the value
of these contracts are recorded as other income (expense) in the consolidated
statements of income. These gains and losses were included in cost of goods sold
prior to the adoption of SFAS 133. Gains and losses resulting from foreign
currency translation are accumulated as a separate component of consolidated
stockholders' equity.

         INCOME TAX PROVISION. The tax provision of $4.4 million and $3.8
million for the three months ended March 31, 2000 and 2001, respectively,
reflects an annual effective rate of 30% for both periods. The annual effective
tax rates for both periods are less than the U.S. statutory rate of 35%
primarily as a result of permanent book/tax differences and tax credits.

LIQUIDITY AND CAPITAL RESOURCES

          Since its initial public offering and a second public offering, both
in 1996, Cymer funded its operations primarily through a convertible
subordinated note offering on August 6, 1997, which generated net proceeds of
$167.3 million, bank borrowings, cash flow from operations and the proceeds from
employee stock option exercises.

           Cymer issued $172.5 million in aggregate principal amount in the
subordinated note offering. The notes are due on August 6, 2004, with interest
payable semi-annually on February 6


                                       16
<PAGE>


and August 6, beginning February 6, 1998, at 3 1/2% per annum from August 6,
1997 through August 5, 2000 and 7 1/4% per annum from August 6, 2000 to maturity
or earlier redemption. The notes are convertible at the holder's option into
shares of Cymer Common Stock on or after November 5, 1997, at a conversion rate
of 21.2766 shares per $1,000 principal amount. Cymer may redeem the notes, in
whole or in part, at specified redemption prices. As of March 31, 2001, $172.3
million under the Notes was outstanding.

          As of March 31, 2001, Cymer had approximately $156.5 million in cash
and cash equivalents, and $49.5 million in short-term investments. As of March
31, 2001, Cymer had $299.5 million in working capital.

         Net cash provided by operating activities was approximately $6.9
million and $6.2 million for the three months ended March 31, 2000 and 2001,
respectively. The slight decrease in cash provided by operating activities from
period to period is primarily due to lower net income, decreases in accounts
payable, accrued and other liabilities, and income taxes payable offset by
increases in accounts receivable, and a one time purchased in-process research
and development charge associated with the acquisition of ACX during the three
month period ended March 31, 2001. In addition, due to slowing sales and
bookings during the three month period ending March 31, 2001, inventory levels
did not decrease at the same level as in the three month period ended March 31,
2000.

         Net cash used in investing activities was approximately $10.7 million
for the three month period ended March 31, 2000 as compared to net cash provided
by investing activities of approximately $73.4 million for the three month
period ended March 31, 2001. The net cash used in investing activities for the
three months ended March 31, 2000 primarily reflects acquisition of property and
equipment to accommodate Cymer's increased business activity, such as the
construction of an additional facility at the San Diego, California location, as
well as the implementation of a new ERP system. In addition, during the three
months ended March 31, 2000, $1.1 million in cash was used to acquire the
minority shareholder's interest in Cymer's Taiwan subsidiary. For the three
months ended March 31, 2001, the cash provided by investing activities is
primarily due to the timing of short term and long term investments maturing and
being reinvested during the period offset by the purchase of $3.7 million in
capital equipment in support of normal business activities during the three
month period.

         Net cash provided by financing activities was approximately $5.1
million for the three months ended March 31, 2000 as compared to net cash used
in financing activities of approximately $6.5 million for the three months ended
March 31, 2001. The net cash provided by financing activities for the three
months ended March 31, 2000 was primarily attributable to the receipt of $5.3
million upon the issuance of common stock due to the exercise of stock options
by Cymer employees offset by payments on capital lease obligations. For the
period ended March 31, 2001, the cash used was attributable to an $8.5 million
payment on Cymer's revolving loan during the period offset by the receipt of
$2.2 million upon issuance of common stock due to employee stock option
exercises.

         Cymer requires substantial working capital to fund its business,
particularly to finance inventories and accounts receivable and for capital
expenditures. Cymer's future capital requirements will depend on many factors,
including the rate of Cymer's manufacturing expansion, the timing and extent of
spending to support product development efforts and expansion of sales and
marketing and field service and support, the timing of introductions of new
products and enhancements to existing products, and the market acceptance of
Cymer's products. Cymer believes that it has sufficient working capital and
available banking arrangements to sustain operations and provide for the future
expansion of its business during 2001.


                                       17
<PAGE>


RISK FACTORS

LIKELY FLUCTUATIONS IN OPERATING RESULTS

         CERTAIN FACTORS CAUSING FLUCTUATIONS

         Cymer's operating results have in the past fluctuated and are likely in
the future to fluctuate significantly. These fluctuations depend on a variety of
factors which may include:

         o        the demand for semiconductors in general and, in particular,
                  for leading edge devices with smaller circuit geometries;
         o        the rate at which semiconductor manufacturers take delivery of
                  photolithography tools from Cymer's customers and the rate at
                  which those customers take delivery of lightsources from
                  Cymer;
         o        the rate of installation at chipmakers;
         o        cyclicality in the market for semiconductor manufacturing
                  equipment;
         o        the timing and size of orders from Cymer's small base of
                  customers, as well as delays, cancellations and shipment
                  acceptance from customers;
         o        the ability of Cymer to meet its production and/or product
                  development schedule;
         o        the ability of Cymer to manufacture, test and deliver laser
                  systems in a timely and cost effective manner;
         o        the mix of laser models, replacement parts and service
                  revenues in Cymer's total revenue, the decrease of any which
                  can substantially affect Cymer's total revenue;
         o        decrease in utilization rates of lasers, in addition to
                  decrease in installed chipmaker base, decreases sales for
                  replacement parts and services;
         o        the ability of Cymer's competitors to obtain orders from
                  Cymer's customers;
         o        the entry of new competitors into the market for DUV
                  photolithography illumination sources;
         o        the ability of Cymer to manage its costs and unanticipated
                  costs as it supplies its products in higher volumes and
                  multiple models;
         o        the ability of Cymer to integrate newly acquired businesses
                  and new products; and
         o        the ability of Cymer to effectively manage its exposure to
                  foreign currency exchange rate fluctuations, principally with
                  respect to the Japanese yen (in which sales by Cymer's
                  Japanese subsidiary are denominated).

In addition, as customers become more efficient at integrating Cymer's lasers
into their photolithography tools, reductions in customer laser inventories may
affect Cymer's operating results.

         TIMING OF REVENUE RECOGNITION

         Cymer has historically derived a substantial portion of its quarterly
and annual revenues from the sale of a relatively small number of systems. As a
result, the precise timing of the recognition of revenue from an order for a
small number of systems can have a significant impact on Cymer's total revenues
and operating results for a particular period. If customers cancel or reschedule
orders for a small number of systems or if Cymer cannot fill orders in time to
recognize revenue during a particular period, this could adversely affect
Cymer's operating results for that period. For example, unanticipated
manufacturing, testing, shipping or product acceptance delays could cause such
cancellations, rescheduling or inability to fill orders promptly.

         FIXED EXPENSES

         Cymer's expense levels are based, in large part, on Cymer's
expectations as to future revenues. Therefore, Cymer's expenses are relatively
fixed in the short term. If revenue levels fall below expectations, this would
disproportionately and adversely affect net income. Cymer cannot


                                       18
<PAGE>


forecast the impact of these and other factors on its revenues and operating
results in any future period with any degree of certainty.

         SEMICONDUCTOR MANUFACTURER DEMAND

         Cymer believes that semiconductor manufacturers are currently
developing capability for production and pilot production of 0.18 um and below
devices. Cymer also believes that the efforts to develop such capability are
driving present demand for its laser systems for DUV photolithography tools.
Once semiconductor manufacturers have acquired such capability, their demand for
Cymer's DUV photolithography tools will depend on whether they want to expand
their capacity further to manufacture such devices. This will in turn depend on
whether their sales forecasts and manufacturing process yields justify such an
investment. Cymer currently expects that demand for its DUV laser systems will
depend on such demand and process development constraints of the semiconductor
manufacturers.

         INDUSTRY CONDITIONS

         Cymer has sized its operations in response to rapidly changing industry
conditions. Should conditions continue to deteriorate due to decreased capital
spending and lessening of semiconductor demand, current operating levels may
negatively impact profitable operations.

         Due to the foregoing, as well as other unanticipated factors, Cymer's
operating results will likely fall below the expectations of public market
analysts or investors in some future quarter or quarters. Such failure to meet
operating result expectations would materially adversely affect the price of
Cymer's Common Stock.

DEPENDENCE ON SEMICONDUCTOR INDUSTRY

          Cymer derives substantially all of its revenues from photolithography
tool manufacturers. Photolithography tool manufacturers depend in turn on the
demand for their products from semiconductor manufacturers. Semiconductor
manufacturers depend on the demand from manufacturers of end-products or systems
that use semiconductors. The semiconductor industry is highly cyclical and has
historically experienced periodic and significant downturns. These downturns
have often had a severe effect on the demand for semiconductor manufacturing
equipment, including photolithography tools. Cymer believes that downturns in
the semiconductor manufacturing industry will periodically occur, resulting in
periodic decreases in demand for semiconductor manufacturing equipment. In
addition, Cymer believes that in a future downturn Cymer's need to continue
investment in research and development, and to maintain extensive ongoing
customer service and support capability, will constrain its ability to reduce
expenses. Accordingly, downturns in the semiconductor industry would likely have
a material adverse effect on Cymer's business, financial condition and results
of operations.

DEPENDENCE ON SMALL NUMBER OF CUSTOMERS

         A small number of manufacturers of DUV photolithography tools
constitute Cymer's primary customer base. Three large firms, ASM Lithography,
Canon and Nikon dominate the photolithography tool business. Collectively, they
accounted for approximately 74%, 77% and 75% of Cymer's total revenues in 1999,
2000, and the three months ended March 31, 2001, respectively. Individually,
sales to ASM Lithography, Canon and Nikon accounted for approximately 30%, 19%
and 28%, respectively, of total revenues in 2000 and 26%, 16% and 33%,
respectively, of total revenues for the three months ended March 31, 2001. Cymer
expects that sales of its systems to these customers will continue to account
for a substantial majority of its revenues in the foreseeable future. None of
Cymer's customers are obligated to purchase a minimum number of Cymer's
products. The loss of any significant business from any one of these customers,
a significant reduction in orders from any one of these customers or production
problems for any one of these customers that cause a slow down in Cymer's
deliveries, would have a material adverse effect on Cymer's business, financial
condition and results of operations.


                                       19
<PAGE>


Reductions caused by changes in a customer's competitive position, a decision to
purchase illumination sources from other suppliers, or economic conditions in
the semiconductor and photolithography tool industries, could all cause such a
loss of business or reduction in orders.

NEED TO MANAGE A CHANGING BUSINESS

         In recent years, in response to business cycles in the semiconductor
industry, Cymer has sharply expanded and contracted the scope of its operations
and the number of employees in most of its functional areas. In a cyclical
environment of dramatic growth or contraction, Cymer must:

         o        continue close management of these areas, and
         o        improve its management, operational and financial systems,
                  including

                  o        accounting and other internal management systems,
                  o        quality control,
                  o        order fulfillment,
                  o        field service and customer support capabilities, and
                  o        changing sales and marketing channels.

         Cymer must also effectively manage its inventory levels, including
assessing and managing excess and obsolete inventories associated with the
changing environment and new product introductions. Cymer will need to attract,
train, retain and manage key technical personnel in order to support Cymer's
growth and/or contraction. Cymer will also need to manage effectively its
international operations, including:

         o        operations of its subsidiaries located in Japan, Korea,
                  Taiwan, Singapore and the Netherlands,
         o        field service and support presence in Asia and Europe, and
         o        the relationship with Seiko as a manufacturer of its
                  photolithography lasers.

         Cymer must also effect timely deliveries of its products and maintain
the product quality and reliability required by its customers. Any failure to
effectively manage Cymer's growth or contraction would materially adversely
affect Cymer's business, financial condition and results of operations.

RAPID TECHNOLOGICAL CHANGE; NEW PRODUCT INTRODUCTIONS

         Semiconductor manufacturing equipment and processes are subject to
rapid technological change. Cymer believes that its future success will depend
in part upon its ability to:

         o        continue to enhance its excimer laser products and their
                  process capabilities, and
         o        develop and manufacture new products with improved
                  capabilities.

         In order to enhance and improve its products and develop new products,
among other things, Cymer must work closely with its customers, particularly in
the product development stage, to integrate its lasers with its customers'
photolithography tools. Future technologies, such as EUV and scalpel processes,
might render Cymer's excimer laser products obsolete. Further, Cymer might not
be able to develop and introduce new products or enhancements to its existing
products and processes in a timely or cost effective manner that satisfy
customer needs or achieve market acceptance. The failure to do so could
materially adversely affect Cymer's business, financial condition and results of
operations.


                                       20
<PAGE>


DEPENDENCE ON KEY SUPPLIERS

          Cymer obtains certain of the components and subassemblies included in
its products from a single supplier or a limited group of suppliers. In
particular, there are no alternative sources for certain of such components and
subassemblies, including certain optical components used in Cymer's lasers. In
addition, Cymer is increasingly outsourcing the manufacture of various
subassemblies. To date Cymer has been able to obtain adequate supplies of the
components and subassemblies in a timely manner from existing sources. However,
due to the nature of Cymer's product development requirements, key suppliers
often need to rapidly advance their own technologies in order to support Cymer's
new product introduction schedule. These suppliers may or may not be able to
satisfy Cymer's schedule requirements in providing new modules and subassemblies
to Cymer. If Cymer cannot obtain sufficient quantities of such materials,
components or subassemblies, or if such items do not meet Cymer's quality
standards, delays or reductions in product shipments could have a material
adverse effect on Cymer's business, financial condition and results of
operations.

COMPETITION

         LAMBDA-PHYSIK AND GIGAPHOTON

         Cymer currently has two significant competitors in the market for
excimer laser systems for photolithography applications:

         o        Lambda-Physik and
         o        Gigaphoton.

Both of these companies:

         o        are larger than Cymer,
         o        have access to greater financial, technical and other
                  resources than does Cymer, and
         o        are located in closer proximity to most of Cymer's customers
                  than Cymer.

Cymer believes that Lambda-Physik and Gigaphoton are aggressively seeking to
gain larger positions in this market. Cymer believes that its customers have
each purchased products offered by these competitors and that its customers have
qualified competitors' lasers for use with their products. Cymer believes that
Gigaphoton in particular has been qualified for production use by chipmakers in
Japan and elsewhere. Cymer also believes that Lambda-Physik has been qualified
for production use by chipmakers in the U.S. and Europe. Cymer could lose market
share and its growth could slow or even decline as competitors gain market
acceptance.

         OTHER TECHNOLOGIES

         In the future, Cymer will likely experience competition from other
technologies, such as EUV and scalpel processes. To remain competitive, Cymer
believes that it will need to:

         o        manufacture and deliver products to customers on a timely
                  basis and without significant defects, and
         o        maintain a high level of investment in research and
                  development and in sales and marketing.

Cymer might not have sufficient resources to continue to make the investments
necessary to maintain its competitive position.


                                       21
<PAGE>


         SMALL AND IMMATURE MARKET FOR EXCIMER LASERS

         The market for excimer lasers is still small and immature. Larger
competitors with substantially greater financial resources, including other
manufacturers of industrial lasers, might attempt to enter the market. Further,
other competitors may introduce new and enhanced product offerings that
customers deem superior to Cymer's products.

         Cymer might not remain competitive. A failure to remain competitive
would have a material adverse effect on Cymer's business, financial condition
and results of operations.

         Any one of these risks could have an adverse effect on Cymer's
business, financial condition and results of operations.

RISK OF EXCESSIVE INVENTORY BUILDUPS BY PHOTOLITHOGRAPHY TOOL MANUFACTURERS

         Photolithography tool manufacturers constitute substantially all of
Cymer's customers. Photolithography tool manufacturers sell their systems in
turn to semiconductor manufacturers. Market conditions in the industry and
production efficiency of the photolithography tool manufacturer can cause
Cymer's customers to expand or reduce their orders for new laser systems as they
try to manage their inventories to appropriate levels which better reflect their
expected sales forecasts and production requirements. Cymer is working with its
customers to better understand these issues. However, there can be no assurance
that Cymer will be successful in this regard, or that its customers will not
build excessive laser inventories. Excessive customer laser inventories could
result in a material decline in Cymer's revenues and operating results in future
periods as such inventories are brought into balance.

DEPENDENCE ON KEY PERSONNEL

         Cymer is highly dependent on the services of a number of key employees
in various areas, including:

         o        engineering,
         o        research and development,
         o        sales and marketing, and
         o        manufacturing.

In particular, there are a limited number of experts in excimer laser
technology. There is intense competition for such personnel, as well as for the
highly-skilled hardware and software engineers that Cymer requires. Cymer has in
the past experienced, and continues to experience, difficulty in hiring
personnel, including experts in excimer laser technology. Cymer believes that,
to a large extent, its future success will depend upon:

         o        the continued services of its engineering, research and
                  development, sales and marketing and manufacturing and service
                  personnel, and
         o        its ability to attract, train and retain highly skilled
                  personnel in each of these areas.

Cymer does not have employment agreements with most of its employees, and Cymer
might not be able to retain its key employees. The failure of Cymer to hire,
train and retain such personnel could have a material adverse effect on Cymer's
business, financial condition and results of operations.

DEPENDENCE ON SINGLE PRODUCT LINE

         Cymer's only product line is excimer lasers (KrF, ArF and F2 laser
systems). The primary market for excimer lasers is for use in DUV
photolithography equipment for manufacturing deep-submicron semiconductor
devices. Demand for Cymer's products will depend in part on the rate


                                       22
<PAGE>


at which semiconductor manufacturers adopt excimer lasers as the illumination
source for their photolithography tools.

Impediments to such adoption include:

         o        instability of photoresists used in advanced DUV
                  photolithography, and
         o        potential shortages of specialized materials used in DUV
                  optics.

There can be no assurance that such impediments can or will be overcome. In any
event, such impediments may materially reduce the demand for Cymer's products.
Further, if Cymer's customers experience reduced demand for DUV photolithography
tools, or if Cymer's competitors are successful in obtaining significant orders
from such customers, Cymer's financial condition and results of operations would
be materially adversely affected.

DISRUPTION OF ELECTRIC SERVICE

         The state of California, the location of Cymer's headquarters, primary
manufacturing facility and where a number of Cymer's suppliers are located, is
experiencing significant problems in the operations of its electric utility
infrastructure. This has caused Cymer and its suppliers' electric utility
suppliers to notify companies that they could be subject to blackouts of
electric power. Some of Cymer's suppliers have experienced disruptions in
services. While Cymer has some back up power capability, any prolonged blackout
or series of periodic blackouts could disrupt Cymer's production schedule. Any
extended disruption of electric service could have a material adverse impact
upon Cymer's financial performance.

MAINTENANCE OF FIELD SERVICE AND SUPPORT ORGANIZATION

         Cymer believes that the need to provide fast and responsive service to
the semiconductor manufacturers using its lasers is critical. Cymer cannot
depend solely on its direct customers to provide this specialized service.
Therefore, Cymer believes it is essential to maintain through its own personnel
or through trained third party sources, a rapid response capability to service
its lasers throughout the world. Accordingly, Cymer has an ongoing effort to
continuously develop its direct support infrastructure in the United States,
Japan, Europe, Korea, Singapore, Taiwan and Southeast Asia. This task entails
recruiting and training qualified field service personnel or identifying
qualified independent firms and maintaining effective and highly trained
organizations that can provide service to customers in various countries in
their assigned regions. Cymer has historically experienced difficulties in
effectively training field service personnel. Additionally, field service
personnel often experience high turnover. Cymer might not be able to attract and
train qualified personnel to maintain these operations successfully. Further,
the costs of such operations might be excessive. A failure to implement this
plan effectively could have a material adverse effect on Cymer's business,
financial condition and results of operations.

UNCERTAINTY REGARDING PATENTS AND PROTECTION OF PROPRIETARY TECHNOLOGY

         CYMER PATENTS

         Cymer believes that the success of its business depends more on such
factors as the technical expertise of its employees, as well as their innovative
skills and marketing and customer relations ability, than on patents,
copyrights, trade secrets and other intellectual property rights. Nevertheless,
the success of Cymer may depend in part on patents. As of March 31, 2001, Cymer
owned 101 United States patents covering certain aspects of technology
associated with excimer lasers. Such patents will expire at various times during
the period from January 2008 to December 2019. As of March 31, 2001, Cymer had
also applied for 62 additional patents in the United States, 7 of which have
been allowed. As of March 31, 2001, Cymer owned 82 foreign patents and had filed
252 patent applications pending in various foreign countries.


                                       23
<PAGE>


         Cymer's pending patent applications and any future applications might
not be approved. Cymer's patents might not provide Cymer with competitive
advantages. Third parties might challenge Cymer's patents. In addition, third
parties' patents might have an adverse effect on Cymer's ability to do business.
In this regard, due to cost constraints, Cymer did not begin filing for patents
in Japan or other countries with respect to inventions covered by its United
States patents and patent applications until 1993. Therefore, Cymer lost the
right to seek foreign patent protection for certain of its early inventions.
Additionally, because foreign patents may afford less protection under
applicable foreign law than may be available under corresponding United States
patent law, any such patents issued to Cymer might not adequately protect
Cymer's technology in a given foreign jurisdiction. Furthermore, third parties
might independently develop similar products, duplicate Cymer's products or, to
the extent patents are issued to Cymer, design around those patents.

         COMPETITIVE PATENTS

         Others may have filed and in the future may file patent applications
that are similar or identical to those of Cymer. To determine the priority of
inventions, Cymer may have to participate in interference proceedings declared
by the United States Patent and Trademark Office. Such interference proceedings
could result in substantial cost to Cymer. Such third party patent applications
might have priority over patent applications filed by Cymer.

         OTHER FORMS OF PROTECTION

         Cymer also relies upon:
         o        trade secret protection,
         o        employee nondisclosure agreements,
         o        third-party nondisclosure agreements, and
         o        other intellectual property protection methods

to protect its confidential and proprietary information. Despite these efforts,
third parties might:

         o        independently develop substantially equivalent proprietary
                  information and techniques,
         o        otherwise gain access to Cymer's trade secrets, or
         o        disclose such technology.

Cymer might not be able to meaningfully protect its trade secrets.

         POSSIBLE CLAIMS TO OWNERSHIP OF CYMER'S INTELLECTUAL PROPERTY

         Cymer has in the past funded a significant portion of its research and
development expenses from outside research and development revenues. Cymer has
received such revenues from photolithography tool manufacturers and from
SEMATECH, a semiconductor industry consortium, in connection with the design and
development of specific products. Cymer currently funds a small portion of its
development expenses through SEMATECH. Although Cymer's arrangements with
photolithography tool manufacturers and SEMATECH seek to clarify the ownership
of the intellectual property arising from research and development services
performed by Cymer, disputes over the ownership or rights to use or market such
intellectual property might arise between Cymer and such parties. Any such
dispute could result in restrictions on Cymer's ability to market its products
and could have a material adverse effect on Cymer's business, financial
condition and results of operations.

         PATENT INFRINGEMENT

         Third parties have in the past notified, and may in the future notify,
Cymer that it may be infringing intellectual property rights of others.
Conversely, Cymer has in the past notified, and


                                       24
<PAGE>


may in the future notify, third parties that they may be infringing Cymer's
intellectual property rights.

         Specifically, Cymer has engaged in discussions with one of its
competitors, Komatsu, with respect to certain of Komatsu's Japanese patents, in
the course of which Komatsu has also identified to Cymer a number of additional
Japanese and U.S. patents that Komatsu asserts may be infringed by Cymer or by
Cymer's Japanese manufacturing partner, Seiko. Komatsu has also notified one of
Cymer's integrator customers, Nikon, of its belief that Cymer's lasers infringe
several of Komatsu's Japanese and U.S. patents. Cymer, in consultation with
Japanese patent counsel, has initiated oppositions to certain Komatsu Japanese
patents and patent applications in the Japanese Patent Office. Some of these
oppositions have been dismissed by the Japanese Patent Office. Litigation might
ensue with respect to the Komatsu Japanese patents or Komatsu U.S. patents.
Also, Komatsu might assert infringement claims under other or additional
patents. Komatsu has notified Seiko that Komatsu intends to enforce its rights
under the Komatsu Japanese patents against Seiko if Seiko engages in
manufacturing activities for Cymer. In connection with its manufacturing
agreement with Seiko, Cymer has agreed to indemnify Seiko against such claims
under certain circumstances. Cymer and Seiko might not ultimately prevail in any
such litigation.

         Cymer has notified its competitors and others of Cymer's United States
patent portfolio. Cymer has specifically asserted certain of its U.S. patents
against Komatsu when informed that Komatsu lasers might be integrated into
steppers intended for shipment into the U.S. Cymer and Komatsu have engaged in
discussions with regard to each party's claims. Those discussions might not be
successful and litigation could result. Attorneys representing Komatsu are
currently challenging one of Cymer's U.S. patents in the U.S. Patent Office.
During 2000, Komatsu's lithography laser business was transferred to Gigaphoton,
Inc., a joint venture of Komatsu and Ushio, Inc. Cymer has also been engaged in
patent discussions with another competitor, Lambda-Physik, concerning
allegations by each party against the other of possible patent infringement.
These discussions also might not be successful and litigation could result.

         Any patent litigation initiated by Cymer, or initiated by Cymer's
competitors against Cymer, would, at a minimum, be costly. Litigation could also
divert the efforts and attention of Cymer's management and technical personnel.
Both could have a material adverse effect on Cymer's business, financial
condition and results of operations. Furthermore, in the future other third
parties might assert other infringement claims, and customers and end users of
Cymer's products might assert other claims for indemnification resulting from
infringement claims. Such assertions, if proven to be true, might materially
adversely affect Cymer's business, financial condition and results of
operations. If any such claims are asserted against Cymer, Cymer may seek to
obtain a license under the third party's intellectual property rights. However,
such a license might not be available on reasonable terms or at all. Cymer could
decide, in the alternative, to resort to litigation to challenge such claims or
to design around the patented technology. Any of these actions could be costly
and would divert the efforts and attention of Cymer's management and technical
personnel, which would materially adversely affect Cymer's business, financial
condition and results of operations.

         TRADEMARK

         Cymer has registered the trademark CYMER in the United States and
certain other countries and is seeking additional registrations of other
trademarks including "Insist on Cymer" in the United States and in certain other
countries. Cymer uses these and a variety of other marks in its advertisements
and other business activities around the world. Based on the use of these or
other marks, Cymer might be subjected to actions for trademark infringement,
which could be costly to defend. If a challenge to a mark were to be successful,
Cymer might be required to cease use of the mark and, potentially, to pay
damages.


                                       25
<PAGE>


RISKS ASSOCIATED WITH MANUFACTURING IN JAPAN

         Cymer has qualified Seiko of Japan as a contract manufacturer of its
photolithography lasers. Komatsu, a member of the Gigaphoton joint venture and
competitor of Cymer, has advised Seiko that certain aspects of Cymer's lasers
might infringe certain patents that have been issued to Komatsu in Japan.
Komatsu has advised Seiko it intends to enforce its rights under such patents
against Seiko if Seiko engages in manufacturing activities for Cymer. In the
event that, notwithstanding its manufacturing agreement with Cymer, Seiko
determines not to continue manufacturing Cymer's products until resolution of
the matter with Komatsu, Cymer's ability to meet any heavy demand for its
products could be materially adversely affected. See -- "Uncertainty Regarding
Patents and Protection of Proprietary Technology."

RISKS OF INTERNATIONAL SALES AND OPERATIONS

         SIGNIFICANT INTERNATIONAL TRADE

         Cymer derived approximately 85%, 81% and 85% of its revenues in 1999,
2000 and the three months ended March 31, 2001, respectively, from customers
located outside the United States. Because a significant majority of Cymer's
principal customers are located in other countries, particularly in Asia, Cymer
anticipates that international sales will continue to account for a significant
portion of its revenues. In order to support its overseas customers, Cymer:

         o        maintains subsidiaries located in Japan, Korea, Taiwan,
                  Singapore and the Netherlands,
         o        is further developing its field service and support operations
                  worldwide, and
         o        will continue to work with Seiko as a manufacturer of its
                  products in Japan.

         Cymer might not be able to manage these operations effectively. Cymer's
investment in these activities might not enable it to compete successfully in
international markets or to meet the service and support needs of its customers.
Additionally, a significant portion of Cymer's sales and operations could be
subject to certain risks, including:

         o        tariffs and other barriers,
         o        difficulties in staffing and managing foreign subsidiary and
                  branch operations,
         o        currency exchange risks and exchange controls,
         o        potentially adverse tax consequences, and
         o        the possibility of difficulty in accounts receivable
                  collection.

Because many of Cymer's principal customers, as well as many of the end-users of
Cymer's laser systems, are located in Asia, the recent economic problems and
currency fluctuations affecting that region could intensify Cymer's
international risk. Further, while Cymer has experienced no difficulty to date
in complying with United States export controls, these rules could change in the
future and make it more difficult or impossible for Cymer to export its products
to various countries. These factors could have a material adverse effect on
Cymer's business, financial condition and results of operations.

         CURRENCY FLUCTUATIONS

         Sales by Cymer to its Japanese subsidiary are denominated in dollars,
while sales by the subsidiary to customers in Japan are denominated in yen. This
means that Cymer's results of operations show some fluctuation based on the
value of the Japanese yen against the U.S. dollar. Cymer's Japanese subsidiary
manages its exposure to such fluctuations by entering into foreign currency
exchange forward contracts to hedge its purchase commitments. Management will
continue to monitor Cymer's exposure to currency fluctuations, and, when
appropriate, use financial hedging techniques to minimize the effect of these
fluctuations. However, exchange rate fluctuations might have a material adverse
effect on Cymer's results of operations or financial


                                       26
<PAGE>


condition. In the future, Cymer might need to sell its products in other
currencies, which would make the management of currency fluctuations more
difficult and expose Cymer to greater risks in this regard.

         FOREIGN REGULATIONS

         Numerous foreign government standards and regulations apply to Cymer's
products. These standards and regulations are continually being amended.
Although Cymer endeavors to meet foreign technical and regulatory standards,
Cymer's products might not continue to comply with foreign government standards
and regulations, or changes thereto. It might not be cost effective for Cymer to
redesign its products to comply with such standards and regulations. The
inability of Cymer to design or redesign products to comply with foreign
standards could have a material adverse effect on Cymer's business, financial
condition and results of operations.

PRODUCTION USE OF EXCIMER LASERS

         Cymer's products might not meet production specifications or cost of
operation requirements over time when subjected to prolonged and intense use in
volume production in semiconductor manufacturing processes. If any semiconductor
manufacturer cannot successfully achieve or sustain volume production using
Cymer's lasers, Cymer's reputation with semiconductor manufacturers or the
limited number of photolithography tool manufacturers could be damaged. This
would have a material adverse effect on Cymer's business, financial condition
and results of operations.

RISKS ASSOCIATED WITH EXPANDING PRODUCT OFFERINGS AND INTEGRATING ACQUIRED
BUSINESSES

         The enhancement of Cymer's excimer laser products and their process
capabilities, as well as the development and manufacture of new products to
serve other semiconductor applications through strategic agreements and
acquisitions of businesses will be required for Cymer to continue to improve its
operational and financial growth. Cymer cannot be certain that it will be able
to manage its growth, the acceleration of the development enhancements for
existing technology and creating new technologies and products, or effectively
integrate new products and applications into Cymer's current operations. Any of
these risks could materially harm Cymer's business, financial condition and
results of operations.

         In addition, the integration of acquired businesses (including the
recent acquisition of ACX) will require additional management, technical and
administrative resources. The risks involved with an acquisition may include,
and are not limited to: diversion of management's attention, failure to retain
key personnel, amortization of acquired intangible assets, client
dissatisfaction or performance problems with an acquired firm, costs associated
with acquisitions and the integration of acquired operations, and assumption of
unknown liabilities, or other unanticipated events or circumstances. There can
be no assurances that ACX's technology will extend Cymer's opportunity or
product offerings in the field of adaptive precision motion diagnostics and
control. There can also be no assurances that ACX's technology will solve
stability and motion control challenges critical to the future semiconductor
equipment industry or that ACX's technology will successfully penetrate the
semiconductor market. Any of these risks could materially harm Cymer's business,
financial condition and results of operations. There can be no assurances that
Cymer can effectively develop or market the technology of newly acquired
businesses such as ACX or that any business acquired will achieve anticipated
revenues or operating results.

         Cymer cannot be certain that it can integrate any businesses that it
acquires, including ACX, or its products.


                                       27
<PAGE>


ENVIRONMENTAL AND OTHER GOVERNMENT REGULATIONS

         Federal, state and local regulations impose various controls on the
storage, handling, discharge and disposal of substances used in Cymer's
manufacturing process and on the facility leased by Cymer. Cymer believes that
its activities conform to present governmental regulations applicable to its
operations and its current facilities. These regulations include those related
to environmental, land use, public utility utilization and fire code matters.
Such governmental regulations might in the future impose the need for additional
capital equipment or other process requirements upon Cymer. They might also
restrict Cymer's ability to expand its operations. The adoption of such
measures, or the failure by Cymer to comply with applicable environmental and
land use regulations or to restrict the discharge of hazardous substances, could
subject Cymer to future liability or could cause its manufacturing operations to
be curtailed or suspended.

RISKS OF PRODUCT LIABILITY CLAIMS

         Cymer faces a significant risk of exposure to product liability claims
in the event that the use of its products results in personal injury or death.
Cymer might experience material product liability losses in the future. Cymer
maintains insurance against product liability claims. However, such coverage
might not continue to be available on terms acceptable to Cymer. Such coverage
also might not be adequate for liabilities actually incurred. Further, in the
event that any of Cymer's products prove to be defective, Cymer may need to
recall or redesign such products. A successful claim brought against Cymer in
excess of available insurance coverage, or any claim or product recall that
results in significant adverse publicity against Cymer, could have a material
adverse effect on Cymer's business, financial condition and results of
operations.

POSSIBLE PRICE VOLATILITY OF COMMON STOCK

         The following factors may significantly affect the market price of
Cymer's Common Stock:

         o        actual or anticipated fluctuations in Cymer's operating
                  results,
         o        announcements of technological innovations,
         o        new products or new contracts by Cymer or its competitors,
         o        developments with respect to patents or proprietary rights,
         o        conditions and trends in the laser device and other technology
                  industries,
         o        changes in financial estimates by securities analysts,
         o        general market conditions, and
         o        other factors.

In addition, the stock market has experienced extreme price and volume
fluctuations that have particularly affected the market price for many high
technology companies. Such fluctuations have in some cases been unrelated to the
operating performance of these companies. Severe price fluctuations in a
company's stock have frequently been followed by securities litigation. Cymer is
currently in the process of defending such an action (see - "Legal Matters").
Such litigation can result in substantial costs and a diversion of management's
attention and resources and therefore could have a material adverse effect on
Cymer's business, financial condition and results of operations.

LEGAL MATTERS

         Cymer has been named as a defendant in several putative shareholder
class action lawsuits which were filed in September and October, 1998 in the
U.S. District Court for the Southern District of California. Certain executive
officers and directors of Cymer are also named as defendants. The plaintiffs
purport to represent a class of all persons who purchased Cymer's Common Stock
between April 24, 1997 and September 26, 1997 (the "Class Period"). The
complaints allege claims under the federal securities laws. The plaintiffs
allege that Cymer and the other defendants made various material
misrepresentations and omissions during the Class


                                       28
<PAGE>


Period. The complaints do not specify the amount of damages sought. The
complaints have been consolidated into a single action and a class
representative has been appointed by the court. A consolidated amended complaint
was filed in early August, 1999. On November 5, 1999, Cymer and the other
defendants filed a motion to dismiss the consolidated amended claim for failure
to state a cause of action. On April 1, 2000, the court granted defendant's
motion to dismiss with leave to amend the complaint by the plaintiffs. The
plaintiffs filed their second amended complaint on June 5, 2000. Cymer moved to
dismiss the amended complaint on August 4, 2000. On January 22, 2001, the court
heard oral argument on Cymer's motion to dismiss, but has not yet decided the
motion. Cymer believes it has meritorious defenses to the claims asserted and
intends to defend the action vigorously. Accordingly, no provision for any
liability or loss that may result from adjudication or settlement thereof has
been made in the accompanying consolidated financial statements.

         Even though Cymer believes the claim to be meritless and intends to
vigorously defend the action, there can be no assurances that Cymer will be
successful in ultimately defending and dismissing the action. Such litigation
may result in Cymer being required to pay damages, incur substantial costs and
divert management's attention and resources, and therefore could have a material
adverse effect on Cymer's business, financial condition and results of
operations.

ANTI-TAKEOVER EFFECT OF NEVADA LAW AND CHARTER AND BYLAW PROVISIONS;
AVAILABILITY OF PREFERRED STOCK FOR ISSUANCE

         Nevada law as well as Cymer's charter and other documents contain
provisions that could discourage a proxy contest or make more difficult the
acquisition of a substantial block of Cymer's Common Stock, including Cymer's
Articles of Incorporation and Bylaws and Cymer's Preferred Shares Rights
Agreement ("poison pill") dated February 13, 1998. In addition, the Board of
Directors is authorized to issue, without shareholder approval, up to 5,000,000
shares of Preferred Stock. Such shares of Preferred Stock may have voting,
conversion and other rights and preferences that may be superior to those of the
Common Stock and that could adversely affect the voting power or other rights of
the holders of Common Stock. The Board of Directors could use the issuance of
Preferred Stock or of rights to purchase Preferred Stock to discourage an
unsolicited acquisition proposal.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

FOREIGN CURRENCY RISK

         Cymer conducts business in several international currencies through its
worldwide operations. Due to the large volume of business Cymer manages in
Japan, the Japanese operation poses the greatest foreign currency risk. Cymer
uses financial instruments, principally forward exchange contracts, in Japan to
manage its foreign currency exposures. Cymer enters into foreign currency
forward exchange contracts in order to reduce the impact of currency
fluctuations related to purchases of Cymer's inventories by Cymer Japan for
resale under firm third-party sales commitments. Cymer does not enter into
forward exchange forward contracts for trading purposes.

         At March 31, 2001, Cymer had outstanding foreign currency forward
exchange contracts to buy US$58.2 million for 6.4 billion yen under foreign
currency exchange facilities with contract rates ranging from 102.82 yen to
122.59 yen per US dollar and which contracts expire on various expiration dates
through January 2002.

INVESTMENT AND DEBT RISK

         Cymer maintains an investment portfolio consisting primarily of
government and corporate fixed income securities, certificates of deposit and
commercial paper. While it is Cymer's general intent to hold such securities
until maturity, management will occasionally sell certain securities for


                                       29
<PAGE>


cash flow purposes. Therefore, Cymer's investments are classified as
available-for-sale and are carried on the balance sheet at fair value. Due to
the conservative nature of the investment portfolio, a sudden change in interest
rates would not have a material effect on the value of the portfolio.

         In August 1997, Cymer issued $172.5 million aggregate principal amount
of Step-Up Convertible Subordinated (Notes) due August 6, 2004, with interest
payable semi-annually on February 6 and August 6, commencing February 6, 1998.
Interest on the notes is stated at 3 1/2% per annum from August 6, 1997 through
August 5, 2000 and at 7 1/4% per annum from August 6, 2000 to maturity or
earlier redemption, representing a yield to maturity accrued at approximately
5.47%. The Notes are convertible at the option of the holder into shares of
Common Stock of Cymer at any time on or after November 5, 1997 and prior to
redemption or maturity, at a conversion rate of 21.2766 shares per $1,000
principal amount of Notes, subject to adjustment under certain conditions. Cymer
could not redeem the Notes prior to August 9, 2000. Thereafter, Cymer can redeem
the Notes from time to time, in whole or in part, at specified redemption
prices. The Notes are unsecured and subordinated to all existing and future
senior indebtedness of Cymer. The indenture governing the Notes does not
restrict the incurrence of senior indebtedness or other indebtedness by Cymer.
These Notes are recorded at face value on the consolidated balance sheets. The
fair value of such debt, based on quoted market prices at March 31, 2001 was
$168.0 million. As of December 31, 2000 and March 31, 2001, $172.3 million in
Notes was outstanding. During the first quarter of 2000, $165,000 of the Notes
were converted into 3,510 shares of common stock.


                           PART II. OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS

         There is nothing to report on this quarterly report on Form 10-Q.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

         On February 13, 2001, the merger between Padres Acquisition Corp., a
wholly owned subsidiary of Cymer, and Active Control eXperts, Inc. ("ACX"),
became effective pursuant to the terms of the Agreement and Plan of Merger
and Reorganization dated November 19, 2000, among Cymer, Padres Acquisition
Corp. and ACX. Padres Acquisition Corp. was merged with and into ACX, leaving
ACX as the surviving entity and wholly owned subsidiary of Cymer. A total of
689,000 shares of common stock of Cymer and 336,000 stock options were sold
in consideration for the exchange of all outstanding shares of ACX common
stock (including shares of ACX common stock issuable upon conversion of ACX
series A preferred stock) and options to purchase ACX common stock. Effective
February 13, 2001, holders of outstanding shares of ACX common stock had the
right to receive .120133827 of a share of Cymer common stock. Cymer assumed
all outstanding options as of February 13, 2001 to acquire ACX common stock,
and such holders receive the same number of shares of Cymer common stock upon
exercise at an adjusted exercise price of such options. The 689,000 shares of
common stock of Cymer and 336,000 stock options sold in connection with the
merger are issued upon reliance of an exemption from registration under the
Securities Act of 1933, pursuant to Section 3(a)(10) of that act. Cymer
relied on the public fairness hearing conducted before the Department of
Corporations of the State of California pursuant to Section 25142 of the
California Corporate Securities Law of 1968, resulting in Cymer obtaining a
permit dated January 25, 2001 to issue the 1,025,000 shares of common stock.

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<PAGE>


ITEM 3.           DEFAULTS UPON SENIOR SECURITIES

                  None.

ITEM 4.           SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

                  None.

ITEM 5.           OTHER INFORMATION

                  None.

ITEM 6.           EXHIBITS AND REPORTS ON FORM 8-K

                  (a)      Exhibits

                  None.

                  (b)      Reports on Forms 8-K

                  None.


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<PAGE>


                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this quarterly report on Form 10-Q to be signed on
its behalf by the undersigned thereunto duly authorized.



                                               CYMER, INC.
                                               (Registrant)


Date:  May 15, 2001                         By: /s/ William A. Angus, III
                                               ---------------------------------
                                               William A. Angus, III
                                               Sr. Vice President and
                                               Chief Financial Officer
                                               (Duly Authorized Officer and
                                               Principal Financial Officer)


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