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, 1998

                               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 incorporation           (I.R.S. Employer
     or organization)                                  Identification No.)
16750 Via Del Campo Court, San Diego, CA                    92127
(Address of principal executive offices)                 (Zip Code)

Registrant's telephone number, including area code     (619) 451-7300

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 April 27, 1998 was 28,850,174.


                           CYMER, INC.
                                
                            FORM 10-Q
                                
              For the Quarter Ended March 31, 1998
                                
                              INDEX
                                

                                                                 Page
                                                 
PART I.     FINANCIAL INFORMATION                     
                                                 
ITEM 1.     Consolidated Financial Statements
                                                 
            Consolidated Balance Sheets as                        3
            of December 31,
            1997 and March 31, 1998                   
                                                    
            Consolidated Statements of                            4
            Income for the
            three months ended March 31,              
            1997 and 1998
                                                    
            Consolidated Statements of Cash                       5
            Flows for the
            three months ended March 31,              
            1997 and 1998
                                                    
            Notes to Consolidated Financial                       7
            Statements
                                                    
ITEM 2.     Management's Discussion and                          10
            Analysis of Financial
            Condition and Results of                  
            Operations
                                                    
PART II.    OTHER INFORMATION                            
                                                    
ITEM 1.     Legal Proceedings                                     24

ITEM 2.     Changes in Securities                                 24
                                                    
ITEM 3.     Defaults upon Senior Securities                       24

ITEM 4.     Submission of Matters to a Vote                       24
            of Security Holders
                                                    
ITEM 5.     Other Information                                     24
                                                 
ITEM 6.     Exhibits and Reports on Form 8-K                      24
                                                 
SIGNATURE PAGE                                                    25



                 PART I.  FINANCIAL INFORMATION
                                
CYMER, INC.                                                             
CONSOLIDATED BALANCE SHEETS (UNAUDITED)                                 
(In thousands, except share data)                                       
<TABLE>
<CAPTION>
                                               December 31,         March 31,
ASSETS                                             1997               1998
                                                                       
CURRENT ASSETS:                                                         
<S>                                             <C>                 <C>
   Cash and cash equivalents                     $51,903             $68,705 
   Short-term investments                         80,387              29,351 
   Accounts receivable - net                      59,140              50,917 
   Foreign exchange contracts receivable          31,267              22,388 
   Inventories                                    47,502              56,098 
   Deferred income taxes                          12,690              12,673 
   Prepaid expenses and other                      2,847               2,948 
          Total current assets                   285,736             243,080 
                                                                        
PROPERTY - net                                    48,031              50,463 
LONG-TERM INVESTMENTS                             42,667              68,866 
OTHER ASSETS                                       8,446               8,370 
TOTAL ASSETS                                    $384,880            $370,779 
                                                                        
LIABILITIES AND STOCKHOLDERS' EQUITY                                    
                                                                        
CURRENT LIABILITIES:                                                    
   Accounts payable                              $22,615             $18,055 
   Accrued and other liabilities                  26,860              23,893 
   Foreign exchange contracts payable             27,278              19,421 
   Income taxes payable                            6,444               5,802 
          Total current liabilities               83,197              67,171 
                                                                       
CONVERTIBLE SUBORDINATED NOTES                   172,500             172,500 
OTHER LIABILITIES                                  3,566               3,555 
MINORITY INTEREST                                  1,077               1,017 
COMMITMENTS AND CONTINGENCIES (Note 6)                                  
                                                                        
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 28,724,000 and             29                  29 
    28,842,000 shares
   Paid-in capital                               109,367             109,688 
   Retained earnings                              18,637              21,340 
   Accumulated other comprehensive loss          (3,493)              (2,430) 
   Treasury stock at cost (100,000 common                             
    shares)                                                           (2,091)
       Total stockholders' equity                124,540             126,536 
                                                                        
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY      $384,880            $370,779 
                                                                        
See notes to consolidated financial statements.
</TABLE>
                                
CYMER, INC.                                                         
CONSOLIDATED STATEMENTS OF INCOME                                   
(UNAUDITED)
(In thousands, except per share data)
<TABLE>
<CAPTION>
                                                  For the three months ended
                                                          March 31,
                                                    1997              1998   
<S>                                               <C>                <C>
REVENUES:                                                          
   Product sales                                  $36,446            $49,628 
   Other                                              525                 51 
     Total revenues                                36,971             49,679 
                                                                    
COSTS AND EXPENSES:                                                 
   Cost of product sales                           21,697             30,630 
   Research and development                         4,248              7,817 
   Sales and marketing                              2,259              3,900 
   General and administrative                       1,797              2,478 
     Total costs and expenses                      30,001             44,825 
                                                                    
OPERATING INCOME                                    6,970              4,854 
                                                                    
OTHER INCOME (EXPENSE):                                             
   Foreign currency exchange loss - net              (555)              (232) 
   Interest and other income                          697              2,008 
   Interest and other expense                        (117)            (2,781) 
     Total other income (expense) - net                25             (1,005) 
                                                                    
INCOME BEFORE PROVISION FOR INCOME TAXES                          
   AND MINORITY INTEREST                            6,995              3,849 
                                                                    
PROVISION FOR INCOME TAXES                         (2,587)            (1,158) 
MINORITY INTEREST                                                         12 
                                                                    
NET INCOME                                         $4,408             $2,703 
                                                                    
EARNINGS  PER SHARE:                                                
  Basic:                                                             
   Earnings per share                               $0.16              $0.09 
   Weighted average common shares
    outstanding                                    27,674             28,775
  Diluted:                                                           
   Earnings per share                               $0.14              $0.09 
   Weighted average common and common                             
     equivalent shares outstanding                 30,426             30,496 
</TABLE>
                                                                    
See notes to consolidated financial statements.
                                
CYMER, INC.                                                   
CONSOLIDATED STATEMENTS OF CASH FLOWS                         
(UNAUDITED)
(In thousands)                                                
<TABLE>
<CAPTION>
                                                   For the three months ended
                                                            March 31
                                                       1997           1998
<S>                                                  <C>            <C>
OPERATING ACTIVITIES:                                         
   Net income                                         $4,408         $2,703
   Adjustments to reconcile net income to net                 
    cash used for operating activities:                           
     Depreciation and amortization                     1,163          3,413
     Minority interest                                                  (12)
   Change in assets and liabilities:                                
     Accounts receivable                             (11,537)         7,997
     Foreign exchange contracts receivable            (6,762)         8,616
     Inventories                                     (10,491)        (8,564)
     Prepaid expenses and other assets                  (658)          (457)
     Accounts payable                                  7,666         (3,319)
     Accrued and other liabilities                     7,147         (3,920)
     Foreign exchange contracts payable                6,085         (7,633)
     Income taxes payable                                463           (561)
     Other                                               465           
                                                              
       Net cash used for operating activities         (2,051)        (1,737)
                                                              
INVESTING ACTIVITIES:                                         
   Acquisition of property                            (6,430)        (5,719)
   Purchases (costs) of investments                  (20,375)       (26,199)
   Proceeds from sold or matured investments           5,950         51,102
                                                              
     Net cash provided by (used for)          
      investing activities                           (20,855)        19,184
                                                              
FINANCING ACTIVITIES:                                         
   Net payments under revolving loan and            
    security agreements                                 (250)
   Debt issue costs                                                     197
   Proceeds (costs) from issuance of common            
    stock                                                (93)           321
   Purchase of treasury stock                                        (2,091)
   Payments on capital lease obligations                 (94)          (158)
                                                              
     Net cash used for financing activities             (437)        (1,731)
                                                              
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND                   
  CASH EQUIVALENTS                                       774          1,086
                                                              
NET INCREASE (DECREASE) IN CASH AND CASH
  EQUIVALENTS                                        (22,569)        16,802
CASH AND CASH EQUIVALENTS AT BEGINNING OF           
  PERIOD                                              55,405         51,903
                                                              
CASH AND CASH EQUIVALENTS AT END OF PERIOD           $32,836        $68,705

                                                               
SUPPLEMENTAL DISCLOSURE OF CASH FLOW                           
 INFORMATION:
  Interest paid                                         $143         $3,395
  Income taxes paid                                   $1,938         $1,814
                                                               
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING                   
  AND FINANCING ACTIVITIES:                                    
   Capital lease obligations incurred for
    furniture and equipment                             $619            $71
</TABLE>

See notes to consolidated financial statements.


                           CYMER, INC.
                                
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                Three Months Ended March 31, 1998
                           (Unaudited)

1.   BASIS OF PRESENTATION

     The accompanying consolidated financial information has been
prepared  by  Cymer, Inc.,  its wholly-owned subsidiaries,  Cymer
Japan,  Inc.,  (Cymer Japan), Cymer Singapore,  Pte  Ltd.  (Cymer
Singapore),  and Cymer B.V. in the Netherlands (Cymer  B.V.)  and
its  majority-owned subsidiaries, Cymer Korea, Inc. (Cymer Korea)
and  Cymer  Southeast Asia, Inc. (Cymer SEA)  (collectively,  the
"Company"), 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
generally accepted accounting principles.

      Principles  of  Consolidation - The consolidated  financial
statements  include the accounts of Cymer, Inc., its wholly-owned
subsidiaries,  Cymer Japan, Cymer Singapore and Cymer  B.V.,  and
its  majority-owned  subsidiaries, Cymer  Korea  and  Cymer  SEA.
Cymer,  Inc. owns 70% of Cymer Korea and 75% of Cymer  SEA.   The
Company 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  generally  accepted  accounting
principles  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 the Company's Annual Report  on  Form  10-K
(including items incorporated by reference therein) for the  year
ended  December  31,  1997.   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  -  In  February  1997,  the  Financial
Accounting   Standards  Board  issued  Statement   of   Financial
Accounting  Standards  ("SFAS") No. 128,  "Earnings  Per  Share,"
effective  for  financial statements issued  after  December  15,
1997.   SFAS  No. 128 requires dual presentation of  "Basic"  and
"Diluted"  EPS  by  entities  with  complex  capital  structures,
replacing  "Primary"  and "Fully Diluted"  EPS  under  Accounting
Principals  Board  ("APB") Opinion No. 15.   Basic  EPS  excludes
dilution  from  common  stock  equivalents  and  is  computed  by
dividing income available to common stockholders by the weighted-
average  number  of  common shares outstanding  for  the  period.
Diluted  EPS  reflects the potential dilution from  common  stock
equivalents,  similar to fully diluted EPS,  but  uses  only  the
average stock price during the period as part of the computation.
The  Company adopted the new method of reporting EPS for the year
ended December 31, 1997.  Reconciliation of the basic and diluted
EPS is as follows:
<TABLE>
<CAPTION>
                                         Three months ended March 31,
                                             1997        1998
                                           (In thousands, except
                                             per share amounts)
                                              
<S>                                         <C>          <C>
Net income                                  $4,408       $2,703
                                                       
Basic earnings per share                     $0.16        $0.09
Basic weighted average common                          
 shares outstanding                         27,674       28,775
                                                       
Effect of dilutive securities:                         
   Warrants                                    367          118
   Options                                   2,385        1,603
Diluted weighted average common                        
 and common equivalent shares 
 outstanding                                30,426       30,496
Diluted earnings per share                   $0.14        $0.09
</TABLE>
     
<TABLE>
<CAPTION>
1.   BALANCE SHEET DETAILS

                                         December 31,      March 31,
                                             1997            1998
                                                (in thousands)
<S>                                        <C>              <C>
INVENTORIES:                                          
   Raw Materials                           $24,365          $25,952
   Work-in-progress                         18,394           20,088
   Finished goods                            4,743           10,058
Total                                      $47,502          $56,098
                                                      
ACCRUED AND OTHER LIABILITIES:                        
   Warranty and installation
    reserves                               $15,730          $14,347
   Payroll and payroll related               2,735            3,288
   Interest                                  3,920            3,301 
   Other                                     4,475            2,957
Total                                      $26,860          $23,893
</TABLE>

1.   STOCKHOLDERS' EQUITY

      Stock Split - On August 7, 1997, the Company declared a  2-
for-1  stock split of its common stock effective August 21, 1997.
All  share  amounts  and  earnings  per  share  for  all  periods
presented have been adjusted to give effect to this stock split.

     Treasury Stock - On January 28, 1998, the Company's Board of
Directors  authorized  the  Company to  repurchase  up  to  $50.0
million  of  the Company's common stock from  time  to  time  on the 
open market or in privately negotiated  transactions.  As of March 31, 
1998, the Company had repurchased 100,000 shares at a cost of $2.1 million.

      Option Repricing - On January 28, 1998, the Company's Board
of  Directors  authorized  an incentive  stock  option  repricing
effective  March  2,  1998 at a new option price  of  $22.56  per
share.   The  repricing  took  effect  on  839,020  options  with
original  prices ranging from $21.03 to $33.75 per share  granted
from  December 1996 through October 1997.  The four year  vesting
period  of the repriced options also began on March 2,  1998  and
the term of such options was set at ten years.

      Stockholder  Rights  Plan  -  On  February  13,  1998,  the
Company's  Board of Directors adopted a Stockholder Rights  Plan.
Under  the  terms  of the plan, rights were distributed  as  a
dividend at a rate of one preferred share purchase right on  each
outstanding  share  of  the  Company's  common  stock   held   by
stockholders of record as of close of business on March 2,  1998.
The dividend distribution was made on or about April 20, 1998
with  rights  expiring  on February 13,  2008.   The  rights  are
designed to assure that all Company stockholders receive fair and
equal  treatment  in the event of any proposed  takeover  of  the
Company  and  to  guard against partial tender offers  and  other
abusive tactics to gain control of the Company without paying all
stockholders the fair value of their shares, including a  control
premium.


5.   REPORTING COMPREHENSIVE INCOME

  Effective  January 1, 1998, the Company adopted SFAS  No.  130,
Reporting Comprehensive Income.  SFAS 130 requires reporting  and
displaying  comprehensive income and its components,  which,  for
the Company, include foreign currency translation adjustments and
unrealized  holding  gains  and  losses  on  available  for  sale
securities that are currently being presented by the Company as a
component of stockholders' equity.  The adoption of SFAS No.  130
had no impact on the Company's results of operations or financial
position.   In  accordance  with SFAS No.  130,  the  accumulated
balance  of other comprehensive income (loss) is disclosed  as  a
separate component of stockholders' equity.  Prior year financial
statements  have been reclassified to conform to the requirements
of SFAS No. 130.
  
Comprehensive income consisted of the following (in thousands):
<TABLE>
<CAPTION>
                                             Three months ended
                                                  March 31,
                                              1997         1998
                                                           
<S>                                         <C>          <C>
Net income                                  $4,408       $2,703
Other comprehensive income (loss),                       
  net of tax:
    Foreign  currency  translation
     adjustments                              (154)         698
    Total unrealized holding  gains                       
     (losses) on available for sale     
     investments                               (25)          46
Other comprehensive income (loss), 
  net of tax:                                 (179)         744
Comprehensive income                        $4,229       $3,447
</TABLE>

6.   CONTINGENCIES

      The  Company's  Japanese  manufacturing  partner  has  been
notified  that its manufacture of the Company's laser systems  in
Japan  may  infringe a Japanese patent held by  another  Japanese
company.   The Company has indemnified its Japanese manufacturing
partner   against  patent  infringement  claims   under   certain
circumstances.  The Company believes, based upon  the  advice  of
counsel,  that the Company's products do not infringe  any  valid
claim of the asserted patent.


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

      AN  ASTERISK  ("*")  DENOTES  A  FORWARD-LOOKING  STATEMENT
REFLECTING   CURRENT   EXPECTATIONS  THAT   INVOLVE   RISKS   AND
UNCERTAINTIES.  ACTUAL RESULTS MAY DIFFER FROM THOSE DISCUSSED IN
SUCH  FORWARD-LOOKING STATEMENTS, AND STOCKHOLDERS OF CYMER, INC.
(THE   "COMPANY"  OR  "CYMER"  )  SHOULD  CAREFULLY  REVIEW   THE
CAUTIONARY STATEMENTS SET FORTH IN THIS FORM 10Q, INCLUDING "RISK
FACTORS" BEGINNING ON PAGE 14 HEREOF.  THE COMPANY MAY FROM  TIME
TO   TIME   MAKE  ADDITIONAL  WRITTEN  AND  ORAL  FORWARD-LOOKING
STATEMENTS,  INCLUDING  STATEMENTS  CONTAINED  IN  THE  COMPANY'S
FILINGS  WITH THE SECURITIES AND EXCHANGE COMMISSION AND  IN  ITS
REPORTS  TO  STOCKHOLDERS.  THE COMPANY  DOES  NOT  UNDERTAKE  TO
UPDATE  ANY FORWARD-LOOKING STATEMENT THAT MAY BE MADE FROM  TIME
TO TIME BY OR ON BEHALF OF THE COMPANY.

Results of Operations

  The  following table sets forth certain items in the  Company's
statements  of income as a percentage of total revenues  for  the
periods indicated:
<TABLE>
<CAPTION>
  
                                             Three months ended
                                                  March 31,
                                             1997          1998
                                              
<S>                                        <C>           <C>
Revenues:                                     
   Product sales                            98.6%         99.9%
   Other                                     1.4            .1
     Total revenues                        100.0%        100.0%
                                        
Cost and expenses:                      
   Cost of product                          58.7          61.7
   Research and development                 11.5          15.7
   Sales and marketing                       6.1           7.8
   General and administrative                4.9           5.0
      Total costs and expenses              81.2          90.2
                                        
Operating income                            18.8           9.8
Other income (expense) - net                 0.1          (2.0)
                                        
Income before provision                 
 for income taxes and                     
 minority interest                          18.9           7.8
                                        
Provision for income taxes                  (7.0)         (2.3)
Minority interest                                          (.1)
                                        
Net income                                  11.9%          5.4%
                                        
Gross margin on product sales               40.5%         38.3%
</TABLE>

Three Months Ended March 31, 1997 and 1998

     Revenues.   The Company's total revenues consist of  product
sales,  which include sales of laser systems and spare parts  and
service and training, and other revenues, which primarily include
revenues   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 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 36% from $36.4 million in the  three
months  ended March 31, 1997 to $49.6 million in the three months
ended  March  31, 1998, primarily due to increased sales  of  DUV
photolithography laser systems and spare parts.  As a  result  of
the  increase  in  the Company's installed base  of  lasers,  the
Company believes that revenues from spares, replacement parts and
services  will  be  an increasingly larger component  of  product
sales.*  Funded development revenues decreased from $525,000  for
the  three  months ended March 31, 1997 to $51,000 in  the  three
months  ended  March  31,  1998,  primarily  due  to  substantial
completion  of  various  laser  research  projects  sponsored  by
customers   and  SEMATECH.  The  Company  expects   that   funded
development revenues will continue to decrease as a percentage of
total revenues as the Company focuses on product sales.*
     
      The Company's sales are generated primarily by shipments to
customers  in  Japan,  the Netherlands, and  the  United  States.
Approximately  81%, 89% and 90% of the Company's sales  in  1996,
1997  and  the  first  three months of 1998,  respectively,  were
derived  from customers outside the United States.   The  Company
maintains a wholly-owned Japanese subsidiary which sells  to  the
Company's  Japanese customers.  Revenues from Japanese customers,
generated  primarily by this subsidiary, accounted for  61%,  65%
and 55% of revenues from 1996, 1997 and the first three months of
1998,  respectively.   The activities of the  Company'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 the Company's products,  including
costs  of  shipment to Japan, are recorded on the  books  of  the
parent company.  The Company 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,
manufacturing  and service overhead, and foreign  exchange  gains
and losses on foreign currency exchange contracts associated with
purchases  of  the Company's products by the Japanese  subsidiary
for resale under firm third-party sales commitments.
     
     Cost  of  product sales rose 41% from $21.7 million for  the
three  months ended March 31, 1997 to $30.6 million for the three
months  ended March 31, 1998 due to the increase in sales volume.
The  gross  margin on these sales decreased from  40.5%  for  the
three  months  ended March 31, 1997 to 38.3% for the  same  three
month  period in 1998.  This reduction was primarily due  to  the
additional  costs  of  the Company's new  manufacturing  facility
which was completed in late 1997 and the related reduced capacity
utilization of the facility in the first three months of 1998, as
well  as  an  increase  in field support overhead  costs  as  the
Company   continued   to  build  its  worldwide   field   support
infrastructure in order to provide fast and responsive service to
the semiconductor manufacturers.
     
     Net gains or losses from foreign currency exchange contracts
are  included  in  cost  of  product sales  in  the  consolidated
statements  of  operations as the related sales  are  recognized.
The  Company  recognized  net gains on  such  contracts  of  $2.0
million  and  $2.3 million for the three months ended  March  31,
1997 and 1998, respectively.
  
     Research and Development.  Research and development expenses
include  costs of internally-funded and customer-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  84% from $4.2 million in  the  three  months
ended  March  31, 1997 to $7.8 million in the three months  ended
March 31, 1998, due primarily to the development and introduction
of  the  Company's new ELS-5010 laser system, development efforts
on  the  Company's  next generation Orion laser  system,  product
support efforts associated with the Company's 5000 series lasers,
the  hiring  of additional technical personnel and the  continued
development  of  new  laser products.  As a percentage  of  total
revenues,  such  expenses increased from 11.5% to  15.7%  in  the
respective  periods as the Company continues  to  invest  in  the
development of new products and product enhancements.*
  
     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 73% from $2.3 million for the three months ended  March
31, 1997 to $3.9 million in the three months ended March 31, 1998
due  primarily to increased product management and sales  support
efforts  and marketing activities as more lasers were  placed  in
the  field.   As  a  percentage of total revenues,  such  expense
increased from 6.1% to 7.8% in the respective periods due to  the
new  product  introduction  of the ELS-5010  and  the  continuing
infrastructure development in order to support system integrators
as well as chip manufacturers.
  
     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
38% from $1.8 million in the three months ended March 31, 1997 to
$2.5 million for the three months ended March 31, 1998, due to an
increase  in general and administrative support as the  Company's
sales  volume,  manufacturing capacity, employee  headcount,  and
overall level of business activity increased.  As a percentage of
total  revenues,  such  expenses remained  relatively  flat  from
period to period.
  
     Other  Income  (Expense) - net.  Net other income  (expense)
consists  primarily  of interest income and expense  and  foreign
currency   exchange   gains  and  losses  associated   with   the
fluctuations in the value of the Japanese yen against the  United
States  dollar. Net other income decreased from $25,000  for  the
three  months ended March 31, 1997 to $1.0 million of  net  other
expense for the three months ended March 31, 1998, primarily  due
to the increase in interest income associated with the investment
of  excess cash, offset by interest expense associated  with  the
convertible  subordinated notes issued  in  August  1997,  and  a
foreign  currency  exchange loss for the first  three  months  of
1998.    Foreign  currency  exchange  losses  totaled   $555,000,
interest  income  totaled $697,000 and interest  expense  totaled
$117,000  for the three months ended March 31, 1997, compared  to
an exchange loss of $232,000, interest income of $2.0 million and
$2.8 million in interest expense for the three months ended March
31, 1998.
  
     The   Company's  results  of  operations  are   subject   to
fluctuations in the value of the Japanese yen against the  United
States  dollar.  Sales by the Company to its Japanese  subsidiary
are  denominated  in  dollars, and sales  by  the  subsidiary  to
customers  in  Japan  are  denominated  in  yen.   The  Company's
Japanese subsidiary manages its exposure to such fluctuations  by
entering  into foreign currency exchange contracts to  hedge  its
purchase  commitments to the Company.  The gains or  losses  from
these  contracts are recorded as a component of cost  of  product
sales,  while the remaining foreign currency exposure is recorded
as  other  income  (expense)  in the consolidated  statements  of
operations.   Gains  and losses resulting from  foreign  currency
translation   are   accumulated  as  a  separate   component   of
consolidated stockholders' equity.
  
     Provision  for  Income  Taxes.  The tax  provision  of  $2.6
million for the three months ended March 31, 1997 reflects a  37%
annual effective tax rate.  This 1997 annual rate was reduced  in
the three month period ended June 30, 1997 to an annual effective
tax  rate  of  25% due to a partial reduction of a  deferred  tax
asset valuation allowance carried over from 1996.  Had this  rate
been  applied during the three months ended March 31,  1997,  the
tax  provision  would  have been reduced  to  $1.7  million.  The
provision  for income taxes for the three months ended March  31,
1998 of $1.2 million reflects an annual effective tax rate of 30%
as  the  Company  had  no additional loss or valuation  allowance
carryovers from previous periods to be applied in 1998.
     
     To  date, inflation has not had a significant effect on  the
Company or its results of operations.

Liquidity and Capital Resources

     Since  inception,  the  Company has  funded  its  operations
primarily through the private sale of equity securities  totaling
approximately  $27.1  million, borrowings  from  certain  of  its
investors  for  bridge financing, bank borrowings, its  September
18,  1996 initial public offering, which resulted in net proceeds
to  the  Company  of  approximately  $29.7  million,  the  public
offering on December 12, 1996, which resulted in net proceeds  of
approximately  $50.0  million, and more recently,  raised  a  net
$167.3  million  in a convertible subordinated note  offering  on
August  6,  1997.   As  of  March  31,  1998,  the  Company   had
approximately  $68.7 million in cash and cash equivalents,  $29.4
million  in  short-term investments, $68.9 million  in  long-term
investments, $175.9 million in working capital and no bank debt.
  
     Net  cash  used  for operating activities was  approximately
$2.1  million for the three months ended March 31, 1997 and  $1.7
million  for the three months ended March 31, 1998.  The decrease
in  cash used in operations for the three months ended March  31,
1997 as compared to 1998 was primarily attributable to a decrease
in accounts receivable offset by lower increases in inventory and
a decrease in accounts payable during the period.
  
     Net  cash  used  for investing activities was  approximately
$20.9  million  for  the three months ended  March  31,  1997  as
compared  to net cash provided by investing activities  of  $19.2
million for the three months ended March 31, 1998.  The cash used
for  investing  activities  during 1997  primarily  reflects  the
investment  activity  of  funds received  through  the  Company's
public offerings in September and December, 1996 and the purchase
of  computer  equipment, test equipment, research and development
tools, manufacturing process machinery and tenant improvements to
the  manufacturing facility in order to accommodate the  business
expansion  for  the period.  The net cash provided  by  investing
activities  during  the  first three  months  of  1998  primarily
reflects  continued  property  acquisitions  to  accommodate  the
business  expansion and focus, offset by the timing of short  and
long  term  investments maturing and being reinvested during  the
period.
  
     Net  cash  used  for financing activities was  approximately
$437,000  for  the three months ended March 31,  1997,  and  $1.7
million  for the three months ended March 31, 1998.   During  the
three months ended March 31, 1997, the Company decreased it  bank
borrowings  by  $250,000.  For the three months ended  March  31,
1998, the Company received a net $321,000 through the issuance of
common  stock,  offset  by a treasury stock  repurchase  of  $2.1
million.
  
     The Company requires substantial working capital to fund its
business,  particularly  to  finance  inventories  and   accounts
receivable  and  for capital expenditures.  The Company's  future
capital  requirements will depend on many factors, including  the
rate  of  the Company'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  market  acceptance  of  the  Company's
products.*   The Company believes that it has sufficient  working
capital  and  available  bank credit to  sustain  operations  and
provide for the future expansion of its business during the  1998
fiscal year.*
     
Recent Accounting Pronouncements

      In  June  1997,  the  FASB issued SFAS No.  130,  Reporting
Comprehensive Income.  SFAS No. 130 establishes requirements  for
disclosure of comprehensive income and became effective  for  the
Company  for  the  year ending December 31, 1998.   Comprehensive
income  includes  such  items  as  foreign  currency  translation
adjustments and unrealized holding gains and losses on  available
for  sale  securities that are currently being presented  by  the
Company  as  a  component of stockholders' equity.   The  Company
adopted  this standard as of March 31, 1998 and the December  31,
1997  financial  statements have been  restated  to  reflect  the
change.
  
     In  June  1997,  the FASB issued SFAS No.  131,  Disclosures
about  Segments  of an Enterprise and Related Information.   SFAS
No.  131  establishes  standards for disclosure  about  operating
segments  in annual financial statements and selected information
in  interim financial reports.  It also establishes standards for
related disclosures about products and services, geographic areas
and  major  customers.  This statement supersedes  SFAS  No.  14,
Financial  Reporting for Segments of a Business Enterprise.   The
new  standard  becomes  effective for the Company  for  the  year
ending   December   31,  1998,  and  requires  that   comparative
information  from  earlier years be restated to  conform  to  the
requirements  of  this  standard.   Interim  reporting  of   this
standard  is  not  required. The Company  does  not  expect  this
pronouncement   to   materially  change  the  Company's   current
reporting and disclosures.*
  
Impact of Year 2000 Issue

          The Company has reviewed its data processing systems as
well  as  computer  applications  and  has  determined  that  the
Company's  data processing will not be materially impacted by any
date-sensitive  calculations related  to  the  year  2000.*   The
Company  has  initiated  efforts to remedy  all  currently  known
situations  and expects all programs to be corrected  and  tested
prior  to the year 2000.*  The incremental costs of this  project
will  not  have  a material effect on the Company's  consolidated
financial statements.*
  
  RISK FACTORS
  
      Likely  Fluctuations in Operating Results.   The  Company's
operating  results have in the past fluctuated and are likely  in
the future to fluctuate significantly depending upon a variety of
factors.  Such factors may include: the demand for semiconductors
in  general  and,  in particular, for leading edge  devices  with
smaller  circuit  geometries;  the rate  at  which  semiconductor
manufacturers  take delivery of photolithography tools  from  the
Company's  customers; cyclicality in the market for semiconductor
manufacturing equipment; the timing and size of orders  from  the
Company's small base of customers; the ability of the Company  to
manufacture, test and deliver laser systems in a timely and  cost
effective  manner; the mix of shipments between  new  lasers  and
lower-margin  replacement  parts; the ability  of  the  Company's
competitors  to  obtain orders from the Company's customers;  the
entry of new competitors into the market for DUV photolithography
illumination  sources; the ability of the Company to  manage  its
costs  as  it  supplies its products in higher volumes;  and  the
Company's  ability to manage effectively its exposure to  foreign
currency exchange rate fluctuations, principally with respect  to
the  Japanese  yen  (in  which sales by  the  Company's  Japanese
subsidiary   are  denominated).   In  addition,   the   Company's
operating results may be affected by reductions in customer laser
inventories as customers become more efficient at integrating the
Company's lasers into their photolithography tools.

      The  Company 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 the Company's
total  revenues  and  operating results for a particular  period.
The Company's operating results for a particular period could  be
adversely  affected if orders for a small number of  systems  are
canceled or rescheduled by customers or cannot be filled in  time
to  recognize  revenue during that period due  to,  for  example,
unanticipated   manufacturing,  testing,  shipping   or   product
acceptance  delays. The Company's expense levels  are  based,  in
large  part, on the Company's expectations as to future  revenues
and  are,  therefore, relatively fixed in  the  short  term.   If
revenue  levels  fall  below expectations,  net  income  will  be
disproportionately and adversely affected.  The impact  of  these
and other factors on the Company's revenues and operating results
in  any  future  period cannot be forecast  with  any  degree  of
certainty.

      The  Company believes that semiconductor manufacturers  are
currently  developing capability for pilot production  of  0.25um
devices.*  The Company also believes that demand for its  excimer
lasers  for DUV photolithography tools is currently being  driven
by  the  efforts to develop such capability.*  Once semiconductor
manufacturers have acquired such capability, the Company believes
that  they will continue to invest in DUV photolithography  tools
to  expand their capacity to manufacture 0.25um devices  only  to
the   degree   to   which  their  sales  forecasts   and   0.25um
manufacturing    process   yields   justify   such    investment.
Accordingly,  the Company currently expects that demand  for  its
DUV  excimer  lasers will be subject to such demand  and  process
development constraints.*

      Recently, the Company has significantly increased the scale
of  its  operations  and  its manufacturing  capacity,  including
hiring  additional  personnel  and substantially  increasing  the
number of systems in production.  This expansion has resulted  in
higher   materials  and  work-in-process  inventory  levels   and
significantly  higher operating expenses, and  has  required  the
Company  to  implement a variety of new systems,  procedures  and
controls.   If  orders received by the Company do not  result  in
sales,  or  if the Company is unable to sustain its  revenues  at
anticipated  levels,  the Company's operating  results  would  be
materially adversely affected.

     Due to the foregoing factors, as well as other unanticipated
factors,  it is likely that in some future quarter the  Company's
operating results will be below the expectations of public market
analysts or investors.  In such event, the price of the Company's
Common Stock would be materially adversely affected.

      Unpredictability of Future Operating Results.  The  Company
was  founded in 1986 and shipped its first prototype laser system
in 1988.  Although the Company's revenues have increased over the
last four years, and the Company has been profitable for each  of
the  last  eight  quarters, there can be no  assurance  that  the
Company's revenues will grow or be sustained in future periods or
that  the  Company will be profitable in any future period.   The
Company's  history of annual and quarterly operating losses,  its
substantial  expansion  in manufacturing  capacity,  its  limited
experience in supplying products in volume and the difficulty  of
predicting the demand for its products, among other factors, make
the  prediction  of  future operating results  difficult  if  not
impossible.

      Risks  Associated with Rapid and Substantial  Manufacturing
Expansion.   To  meet  current  and anticipated  demand  for  its
products, the Company must continue to increase the rate by which
it  manufactures and tests modules, spares and replacement  parts
for  its photolithography laser systems. Although the Company has
experienced  recent success in expanding production, the  Company
has   historically  been  unable  to  manufacture  and  test  its
photolithography laser systems fast enough to fill all orders and
has  been  behind on some of its delivery schedules.  Should  the
Company  fail  to  meet delivery orders in the future,  customers
could  cancel orders and seek to meet all or a portion  of  their
needs  for  illumination sources from the Company's  competitors.
The Company is also increasingly relying on outside suppliers for
the  manufacture of various components and subassemblies used  in
its  products and is dependent upon these suppliers to  meet  the
Company's manufacturing schedules.  The failure by one or more of
these  suppliers  to supply the Company on a  timely  basis  with
sufficient quantities of components or subassemblies that perform
to  the  Company's  specifications  could  affect  the  Company's
ability to deliver completed lasers to its customers on schedule.
Additionally, the Company may underestimate the costs required to
increase   its  manufacturing  capacity,  which  may   materially
adversely affect the Company's financial condition and results of
operations.

      In  addition  to increasing manufacturing capacity  at  its
facilities  in  San Diego, California, the Company has  qualified
Seiko   Instruments,  Inc.  ("Seiko")  of  Japan  as  a  contract
manufacturer of its photolithography lasers.  While  Seiko  began
limited production of lasers for the Company in the first quarter
of  1997,  there  can  be no assurance that  Seiko  can  maintain
production  on  schedule.   The  failure  of  Seiko  to  maintain
production  on schedule could have a material adverse  effect  on
the  Company's  business,  financial  condition  and  results  of
operations.

      Seiko  has  been  advised by Komatsu, Ltd.  ("Komatsu"),  a
competitor of the Company, that certain aspects of the  Company's
lasers  might infringe certain patents that have been  issued  to
Komatsu  in Japan and that Komatsu intends to enforce its  rights
under   such   patents  against  Seiko  if   Seiko   engages   in
manufacturing  activities for the Company.  In  the  event  that,
notwithstanding  its manufacturing agreement  with  the  Company,
Seiko   should  determine  not  to  continue  manufacturing   the
Company's  products until resolution of the matter with  Komatsu,
the  Company's  ability to meet the anticipated  demand  for  its
products   could  be  materially  adversely  affected.    See   -
"Uncertainty  Regarding  Patents and  Protection  of  Proprietary
Technology."

      Dependence on Key Suppliers.  Certain of the components and
subassemblies  included in the Company's  products  are  obtained
from  a  single  supplier or a limited group  of  suppliers.   In
particular, there are no alternative sources for certain  of  the
components   and   subassemblies,   including   certain   optical
components  and  pre-ionizer tubes used in the Company's  lasers.
In   addition,  the  Company  is  increasingly  outsourcing   the
manufacture  of  various subassemblies.   Although  to  date  the
Company  has  been  able  to  obtain  adequate  supplies  of  the
components  and  subassemblies used  in  the  production  of  the
Company's laser systems in a timely manner from existing sources,
the  Company has only recently commenced volume production of its
laser  systems,  which has caused many of its suppliers  to  also
commence  volume  production  of  the  Company's  components  and
subassemblies.

     Due  to  the  nature  of the Company's  product  development
requirements, it is often necessary for key suppliers to  rapidly
advance  their own technologies in order to support the Company's
new  product introduction schedule.  These suppliers may  or  may
not  be  able  to satisfy the Company's schedule requirements  in
providing new modules and subassemblies to the Company.   If  the
Company  is  unable  to  obtain  sufficient  quantities  of  such
materials, components or subassemblies, or if such items  do  not
meet  the  Company's quality standards, delays or  reductions  in
product  shipments could have a material adverse  effect  on  the
Company's   business,   financial  condition   and   results   of
operations.

      Dependence  on  Single Product Line.   The  Company's  only
product  line is excimer lasers, the primary market for which  is
for use in DUV photolithography equipment for manufacturing deep-
submicron   semiconductor  devices.   Demand  for  the  Company's
products  will  depend in part on the rate at which semiconductor
manufacturers adopt excimer lasers as the illumination source for
their  photolithography  tools.   Impediments  to  such  adoption
include  a  shortage  of engineers with experience  implementing,
utilizing  and  maintaining  DUV  photolithography  systems  that
incorporate  excimer laser illumination sources,  instability  of
photoresists  used  in DUV photolithography  and  a  shortage  of
specialized glass used in DUV optics.  There can be no  assurance
that such impediments can or will be overcome, and, in any event,
such  impediments  may  materially  reduce  the  demand  for  the
Company's  products.   In  addition,  to  the  extent  that  such
manufacturers  are  able to produce semiconductors  with  smaller
critical  feature sizes by extending the performance capabilities
of  mercury  lamp  illumination  sources  used  in  existing  DUV
photolithography  tools, the demand for  the  Company's  products
would  also  be  materially reduced.  Further, if  the  Company's
customers  experience  reduced demand  for  DUV  photolithography
tools,  or  if  the  Company's  competitors  are  successful   in
obtaining  significant orders from such customers, the  Company's
financial condition and results of operations would be materially
adversely affected.
     
     Limited Production Use of Excimer Lasers.  The Company first
shipped  its  lasers for photolithography applications  in  1988.
There  can be no assurance that the Company's products will  meet
production  specifications over time when subjected to  prolonged
and   intense   use   in  volume  production   in   semiconductor
manufacturing processes. If any semiconductor manufacturer is not
able  to successfully achieve or sustain volume production  using
the Company's lasers, the Company's reputation with semiconductor
manufacturers  or  the  limited number of  photolithography  tool
manufacturers  could  be damaged, which  would  have  a  material
adverse effect on the Company's business, financial condition and
results of operations.

      Dependence  on  Small Number of Customers.   The  Company's
primary   customer  base  is  composed  of  a  small  number   of
manufacturers of DUV photolithography tools.  Four  large  firms,
ASM  Lithography, Canon, Nikon and SVG Lithography (a  subsidiary
of  Silicon  Valley  Group, Inc.), dominate the  photolithography
tool  business and collectively accounted for approximately  90%,
94%,  and 97% of the Company's total revenues in 1996, 1997,  and
the  first  three  months of 1998, respectively.   Sales  to  ASM
Lithography,  Canon,  Nikon  and SVG  Lithography  accounted  for
approximately  34%,  27%,  28% and  8%,  respectively,  of  total
revenues for the first three months of 1998 and 24%, 25%, 39% and
6%, respectively, of total revenues in 1997.  The Company expects
that  sales  of its systems to these customers will  continue  to
account  for substantially all of its revenues in the foreseeable
future.*   None  of  the  Company's  customers  is  obligated  to
purchase a minimum number of the Company's products.  Loss of any
significant  business  from  any one  of  these  customers  or  a
significant reduction in orders from any one of these  customers,
including   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,  would  have  a  material
adverse effect on the Company's business, financial condition and
results of operations.

      Need  to  Manage a Changing Business.  The Company recently
has  dramatically  expanded the scope of its operations  and  the
number  of  employees  in  most of  its  functional  areas.   For
example,  the Company increased the number of its employees  from
136  at December 31, 1995 to 336 at December 31, 1996, to 809  at
December  31,  1997  and to 828 at March 31, 1998.   The  Company
installed  new  management  information  systems  and  has   also
substantially expanded its facilities and manufacturing capacity.
For  example,  since December 31, 1996 the Company  has  occupied
three  additional buildings covering approximately 187,000 square
feet.   If  demand for the Company's products continues to  grow,
the  Company  will be required to continue this  expansion.   The
management  of such growth, if such growth occurs,  will  require
the  Company  to  continue to improve and expand its  management,
operational and financial systems, including accounting and other
internal  management systems, its quality control,  delivery  and
field  service and customer support capabilities.*   The  Company
will  be  required  to  attract, train and retain  key  technical
personnel,  including  both hardware and software  engineers,  in
order  to  support the Company's growth.*  The  Company  will  be
required   to  manage  effectively  its  expanding  international
operations, including the operations of its Japan, Korea, Taiwan,
Singapore  and  Netherlands subsidiaries, its field  service  and
support  presence  in Asia and Europe and its  relationship  with
Seiko  as  a  manufacturer of its photolithography lasers.*   The
Company  must  also effect timely deliveries of its products  and
maintain  the  product quality and reliability  required  by  its
customers.  Any failure to manage the Company's growth,  if  such
growth  occurs, would materially adversely effect  the  Company's
financial condition and results of operations.

      Risks  Associated  with Laser Warranty;  Need  to  Increase
Production of Component Modules.  The Company's growing installed
base  will require it to increase production of replacement parts
and  component  modules.   Because the  Company  prioritizes  the
reliable  operation  of  its  installed  units  at  semiconductor
manufacturers above all other requirements, it typically utilizes
available component modules first to support existing systems  in
the field.  Accordingly, the failure to rapidly expand production
of component modules could result in the delay in shipment of new
laser systems, which could have a material adverse effect on  the
Company's   business,   financial  condition   and   results   of
operations.

     Need to Expand Field Service and Support Organization.   The
Company  believes  that the need to provide fast  and  responsive
service  to the semiconductor manufacturers using its  lasers  is
critical  and  that it will not be able to depend solely  on  its
direct   customers   to   provide  this   specialized   service.*
Therefore,  the  Company believes it is essential  to  establish,
through trained third-party sources or through its own personnel,
a  rapid response capability to service its lasers throughout the
world.   Accordingly,  the  Company is  currently  expanding  its
direct support infrastructure in Japan, Europe, Korea, Singapore,
Taiwan and Southeast Asia.  This expansion entails recruiting and
training qualified field service personnel and building effective
and  highly  trained  organizations that can provide  service  to
customers  in  various countries in their assigned regions.   The
Company  has historically experienced difficulties in effectively
training field service personnel. There can be no assurance  that
the Company will be able to attract and train qualified personnel
to  establish these operations successfully or that the costs  of
such  operations will not be excessive.  A failure  to  implement
this plan effectively could have a material adverse effect on the
Company's   business,   financial  condition   and   results   of
operations.
     
      Competition.   The  Company currently has  two  significant
competitors   in  the  market  for  excimer  laser  systems   for
photolithography applications,  Lambda-Physik and Komatsu.   Both
of  these  companies are larger than the Company, have access  to
greater  financial, technical and other resources than  does  the
Company  and  are  located in closer proximity to  the  Company's
customers  than  is the Company.  Although the  Company  believes
that  these competitors are not yet supplying excimer  lasers  in
volume  for  photolithography applications, the Company  believes
that  both  companies  are aggressively seeking  to  gain  larger
positions  in  this  market.   The  Company  believes  that   its
customers  have  each purchased one or more products  offered  by
these  competitors  and  that  its  customers  will  continue  to
actively qualify these competitors' lasers in their search for  a
second source.*  If competitors successfully qualify their lasers
for  use  with  the Company's customers, the Company  could  lose
market  share and its growth could slow or even decline.  In  the
future, the Company will likely experience competition from other
technologies,  such  as  EUV,  X-ray,  electron  beam   and   ion
projection   processes.   To  remain  competitive,  the   Company
believes  that  it  will be required to manufacture  and  deliver
products  to  customers on a timely basis and without significant
defects  and  that it will also be required to  maintain  a  high
level of investment in research and development and in sales  and
marketing.*  There can be no assurance that the Company will have
sufficient   resources  to  continue  to  make  the   investments
necessary to maintain its competitive position.  In addition, the
market  for excimer lasers is still small and immature and  there
can  be  no  assurance that larger competitors with substantially
greater  financial  resources, including other  manufacturers  of
industrial  lasers, will not attempt to enter the market.   There
can be no assurance that the Company will remain competitive.   A
failure  to  remain  competitive would have  a  material  adverse
effect on the Company's business, financial condition and results
of operations.

     Risk  of  Excessive  Inventory Buildups by  Photolithography
Tool Manufacturers.  Substantially all of the Company's customers
are photolithography tool manufacturers, which in turn sell their
systems to semiconductor manufacturers.  Over the past year,  the
Company's customers have substantially increased their forecasted
shipments  of  DUV photolithography tools.  The Company  believes
that  the increase in competitive demand for DUV photolithography
tools may have caused and may continue to cause a degree of over-
ordering of the Company's products.  The Company is working  with
its  customers  to  better understand end  user  demand  for  DUV
photolithography tools.  However, there can be no assurance  that
the  Company  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
the Company's revenues and operating results in future periods as
such inventories are brought into balance.

      Dependence on Semiconductor Industry.  Substantially all of
the  Company's  revenues are derived from  photolithography  tool
manufacturers  that  in  turn depend  on  the  demand  for  their
products   from   semiconductor   manufacturers.    Semiconductor
manufacturers   correspondingly  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,
which  often  have  had  a  severe  effect  on  the  demand   for
semiconductor manufacturing equipment, including photolithography
tools.   The Company believes that downturns in the semiconductor
manufacturing industry will occur in the future, and will  result
in  decreased demand for semiconductor manufacturing  equipment.*
In  addition,  the  Company believes that its ability  to  reduce
expenses in a future downturn will be constrained by the need for
continual investment in research and development, and the need to
maintain   extensive   ongoing  customer  service   and   support
capability.*   Accordingly,  any downturn  in  the  semiconductor
industry  could have a material adverse effect on  the  Company'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.  The Company believes  that  its
future  success will depend in part upon its ability to  continue
to   enhance  its  excimer  laser  products  and  their   process
capabilities  and  to develop and manufacture new  products  with
improved  capabilities.*   In order to enhance  and  improve  its
products  and  develop  new products,  among  other  things,  the
Company must work closely with its customers, particularly in the
product  development  stage, to integrate  its  lasers  with  its
customers'  photolithography tools.  There can  be  no  assurance
that  future technologies, such as EUV, X-ray, electron beam  and
ion  projection processes, will not render the Company's  excimer
laser  products  obsolete or that the Company  will  be  able  to
develop  and  introduce  new  products  or  enhancements  to  its
existing  products and processes in a timely manner that  satisfy
customer needs or achieve market acceptance.  The failure  to  do
so  could  materially  adversely affect the  Company's  business,
financial condition and results of operations.

      Uncertainty Regarding Patents and Protection of Proprietary
Technology.   The  Company  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 the Company may depend  in
part  on patents, and as of March 31, 1998, the Company owned  24
United  States  patents  covering certain aspects  of  technology
associated with excimer lasers which expire from January 2008  to
March  2016  and  had applied for 37 additional  patents  in  the
United States, three of which have been allowed.  As of March 31,
1998,  the  Company owned one foreign patent  and  had  filed  95
patent  applications  in  other  countries.   There  can  be   no
assurance that the Company's pending patent applications  or  any
future  applications  will be approved,  that  any  patents  will
provide  it with competitive advantages or will not be challenged
by  third parties, or that the patents of others will not have an
adverse  effect on the Company's ability to do business. In  this
regard, due to cost constraints, the Company 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 recently and has therefore lost the  right  to
seek  patent  protection in those countries for  certain  of  its
inventions.   Additionally, because foreign  patents  may  afford
less  protection under foreign law than is available under United
States  patent  law,  there can be no  assurance  that  any  such
patents  issued  to  the  Company  will  adequately  protect  the
Company's proprietary information.  Furthermore, there can be  no
assurance  that  others  will not independently  develop  similar
products,  duplicate the Company's products or,  if  patents  are
issued  to the Company, design around the patents issued  to  the
Company.

      Others  may  have filed and in the future may  file  patent
applications  that  are  similar or identical  to  those  of  the
Company.   To  determine the priority of inventions, the  Company
may  have to participate in interference proceedings declared  by
the  United States Patent and Trademark Office that could  result
in  substantial cost to the Company.*  No assurance can be  given
that  any  such  patent application will not have  priority  over
patent applications filed by the Company.

      The  Company  also  relies  upon trade  secret  protection,
employee  and  third-party  nondisclosure  agreements  and  other
intellectual   property  protection  methods   to   protect   its
confidential and proprietary information.  Despite these efforts,
there  can  be  no  assurance that others will not  independently
develop  substantially  equivalent  proprietary  information  and
techniques  or  otherwise  gain access  to  the  Company's  trade
secrets  or  disclose  such technology or that  the  Company  can
meaningfully protect its trade secrets.

      The Company has in the past funded a significant portion of
its   research   and  development  expenses  from  research   and
development   revenues   received  from   photolithography   tool
manufacturers   and  from  SEMATECH,  a  semiconductor   industry
consortium,  in  connection with the design  and  development  of
specific  products.   Although  the Company'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 the Company, there can  be
no assurance that disputes over the ownership or rights to use or
market  such  intellectual property will not  arise  between  the
Company  and  such  parties.  Any such dispute  could  result  in
restrictions on the Company's ability to market its products  and
could  have a material adverse effect on the Company's  business,
financial condition and results of operations.

      The Company has in the past been, and may in the future be,
notified  that it may be infringing intellectual property  rights
possessed   by   third   parties.*    The   Company's    Japanese
manufacturing partner, Seiko, has been notified by  Komatsu,  one
of  the  Company's  competitors,  that  certain  aspects  of  the
Company's  lasers  might infringe three patents  that  have  been
issued  to Komatsu in Japan, and that Komatsu intends to  enforce
its  rights  under  the Komatsu Patents against  Seiko  if  Seiko
engages   in  manufacturing  activities  for  the  Company.    In
connection  with  its  manufacturing agreement  with  Seiko,  the
Company  has agreed to indemnify Seiko against such claims  under
certain  circumstances.  The Company has engaged  in  discussions
with  Komatsu with respect to the Komatsu Patents, in the  course
of  which Komatsu has also identified to the Company a number  of
pending  applications and additional patents.  The  Company,   in
consultation   with  Japanese  patent  counsel,   has   initiated
oppositions to the Komatsu Patents and  the applications  in  the
Japanese Patent Office.  However, there can be no assurance  that
litigation will not ensue with respect to these claims, that  the
Company and Seiko would ultimately prevail in any such litigation
or  that  Komatsu  will  not  assert  infringement  claims  under
additional patents.

     Any patent litigation would at a minimum be costly and could
divert the efforts and attention of the Company's management  and
technical  personnel, which could have a material adverse  effect
on  the  Company's business, financial condition and  results  of
operations.   Furthermore, there can be no assurance  that  other
infringement  claims  by  third  parties  or  other  claims   for
indemnification  by  customers or  end  users  of  the  Company's
products  resulting from infringement claims will not be asserted
in the future or that such assertions, if proven to be true, will
not materially adversely affect the Company's business, financial
condition  and  results of operations.  If any  such  claims  are
asserted  against the Company, the Company may seek to  obtain  a
license  under  the third party's intellectual  property  rights.
There  can  be  no  assurance, however, that a  license  will  be
available  on  reasonable terms or at  all.   The  Company  could
decide,  in the alternative, to resort to litigation to challenge
such  claims  or to design around the patented technology.   Such
actions  could  be  costly  and  would  divert  the  efforts  and
attention  of  the Company's management and technical  personnel,
which  would materially adversely affect the Company's  business,
financial condition and results of operations.

     The Company has registered the trademark CYMER in the United
States  and  certain  other countries and is  seeking  additional
registrations  in  certain countries.  In  Japan,  the  Company's
application for registration was rejected on the grounds that  it
is  similar  to a trademark previously registered by  a  Japanese
company for a broad range of products.  The Company is seeking  a
partial  nullification of the other registration with respect  to
laser  devices and related components and does not  believe  that
the  holder  of  the other trademark is engaged in  any  business
similar to that of the Company.  For this reason, the Company  is
continuing to use the trademark CYMER in Japan and believes  that
it  will  ultimately be permitted to register such mark  for  use
with  its  products  and  that it is  not  infringing  the  other
company's trademark.*  There can be no assurance that the Company
will  ultimately succeed in its efforts to register its trademark
in  Japan  or  that  it will not be subjected to  an  action  for
trademark infringement, which could be costly to defend  and,  if
successful,  would require the Company to cease use of  the  mark
and, potentially, to pay damages.

       Dependence  on  Key  Personnel.   The  Company  is  highly
dependent on the services of a number of key employees in various
areas, including engineering, research and development, sales and
marketing and manufacturing.  In particular, there are a  limited
number  of  experts  in  excimer laser technology  and  there  is
intense competition for such personnel, as well as for the highly-
skilled  hardware  and software engineers the  Company  requires.
The  Company  has  in  the  past experienced,  and  continues  to
experience, difficulty in hiring personnel, including experts  in
excimer laser technology.  The Company believes that, to a  large
extent,  its  future  success  will  depend  upon  the  continued
services of its engineering, research and development, sales  and
marketing  and  manufacturing and service personnel  and  on  its
ability to attract, train and retain highly skilled personnel  in
each  of  these  areas.*  The Company does  not  have  employment
agreements  with any of its employees, and there is no  assurance
that  the Company will be able to retain its key employees.   The
failure  of the Company to hire, train and retain such  personnel
could  have a material adverse effect on the Company's  business,
financial condition and results of operations.

      Risks of International Sales and Operations.  Approximately
81%,  89% and 90% of the Company's revenues in 1996, 1997 and the
three  months  ended March 31, 1998, respectively,  were  derived
from  customers  located outside the United  States.   Because  a
significant  majority  of the Company's principal  customers  are
located  in  other  countries,  particularly  Asia,  the  Company
anticipates that international sales will continue to account for
a  significant portion of its revenues.*  In order to support its
overseas customers, the Company maintains subsidiaries in  Japan,
Korea,  Taiwan, Singapore and the Netherlands, is  expanding  its
field service and support operations worldwide, and will continue
to  work  with Seiko as a manufacturer of its products in Japan.*
There can be no assurance that the Company will be able to manage
these operations effectively or that the Company's investment  in
these  activities  will  enable it  to  compete  successfully  in
international markets or to meet the service and support needs of
its  customers.   Additionally,  a  significant  portion  of  the
Company's sales and operations could be subject to certain risks,
including  tariffs and other barriers, difficulties  in  staffing
and  managing foreign subsidiary and branch operations,  currency
exchange  risks  and exchange controls, potentially  adverse  tax
consequences  and  the  possibility  of  difficulty  in  accounts
receivable  collection.  Because many of the Company's  principal
customers,  as  well as many of the end-users  of  the  Company's
laser  systems, are located in Asia, the recent economic problems
and  currency fluctuations affecting that region could  intensify
the Company's international risk.  Further, while the Company 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 the Company to  export  its
products  to  various countries.  There can be no assurance  that
any  of these factors will not have a material adverse effect  on
the  Company's  business,  financial  condition  and  results  of
operations.

       The  Company's  results  of  operations  are  subject   to
fluctuations  in the value of the Japanese yen against  the  U.S.
dollar  due  to  sales by the Company to its Japanese  subsidiary
being  dominated  in  dollars, and sales  by  the  subsidiary  to
customers  in  Japan  being  dominated  in  yen.   The  Company's
Japanese subsidiary manages its exposure to such fluctuations  by
entering  into foreign currency exchange contracts to  hedge  its
purchase  commitments.   Although  management  will  continue  to
monitor  the  Company's exposure to currency  fluctuations,  and,
when  appropriate, use financial hedging techniques  to  minimize
the  effect of these fluctuations, there can be no assurance that
exchange  rate  fluctuations will not  have  a  material  adverse
effect  on  the  Company's  results of  operations  or  financial
condition.  In the future, the Company could be required to  sell
its products in other currencies, which would make the management
of currency fluctuations more difficult and expose the Company to
greater risks in this regard.*

      The  Company's  products are subject  to  numerous  foreign
government  standards and regulations that are continually  being
amended.    Although  the  Company  endeavors  to  meet   foreign
technical  and  regulatory standards, there can be  no  assurance
that  the Company's products will continue to comply with foreign
government standards and regulations, or changes thereto, or that
it  will  be  cost  effective for the  Company  to  redesign  its
products  to  comply  with such standards and  regulations.   The
inability of the Company to design or redesign products to comply
with  foreign standards could have a material adverse  effect  on
the  Company's  business,  financial  condition  and  results  of
operations.

      Environmental  and Other Government Regulations.   Federal,
state  and  local  regulations impose  various  controls  on  the
storage, handling, discharge and disposal of substances  used  in
the Company's manufacturing process and on the facility leased by
the Company.  The Company believes that its activities conform to
present governmental regulations applicable to its operations and
its current facilities, including those related to environmental,
land  use,  public  utility utilization and  fire  code  matters.
There can be no assurance that such governmental regulations will
not  in  the  future  impose  the  need  for  additional  capital
equipment  or  other  process requirements upon  the  Company  or
restrict  the  Company's ability to expand its  operations.   The
adoption of such measures or any failure by the Company to comply
with  applicable  environmental and land use  regulations  or  to
restrict the discharge or hazardous substances could subject  the
Company  to  future  liability or could cause  its  manufacturing
operations to be curtailed or suspended.

      Risks  of  Product Liability Claims.  The Company  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,  and there can be no assurance that the Company  will  not
experience material product liability losses in the future.   The
Company maintains insurance against product liability claims, but
there can be no assurance that such coverage will continue to  be
available  on  terms  acceptable to  the  Company  or  that  such
coverage  will  be  adequate for liabilities  actually  incurred.
Also, in the event that any of the Company's products prove to be
defective, the Company may be required to recall or redesign such
products.   A  successful claim brought against  the  Company  in
excess  of available insurance coverage, or any claim or  product
recall that results in significant adverse publicity against  the
Company,  could have a material adverse effect on  the  Company's
business, financial condition and results of operations.

     Possible Price Volatility of Common Stock.  The market price
of  the Company's Common Stock has been, and may continue to  be,
extremely  volatile.   The market price of Common  Stock  may  be
significantly  affected by factors such as actual or  anticipated
fluctuations in the Company's operating results, announcements of
technological innovations, new products or new contracts  by  the
Company  or its competitors, developments with respect to patents
or  proprietary rights, conditions and trends in the laser device
and  other  technology industries, changes in financial estimates
by  securities  analysts, general market  conditions,  and  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 and  that  have
often  been  unrelated  to  the operating  performance  of  these
companies.   The market price of the Company's Common  Stock  has
fluctuated  substantially in recent periods, rising from  $4  3/4
(all  prices are adjusted to reflect the Company's 2-for-1  stock
split  effective as of August 21, 1997) at the Company's  initial
public  offering on September 18, 1996 to $48 3/4 on  August  22,
1997, and declining to $14 7/8 on January 16, 1998.  In the past,
following  periods  of  volatility  in  the  market  price  of  a
particular   company's   securities,  securities   class   action
litigation  has  often been brought against that  company.   Such
litigation,  if  brought  against the Company,  could  result  in
substantial  costs and a diversion of management's attention  and
resources.

     Anti-Takeover  Effect of Nevada Law and  Charter  and  Bylaw
Provisions; Availability of Preferred Stock for Issuance.  Nevada
law  and  the  Company's  Articles of  Incorporation  and  Bylaws
contain provisions that could discourage a proxy contest or  make
more  difficult  the acquisition of a substantial  block  of  the
Company's  Common Stock.  In addition, the Board of Directors  is
authorized  to  issue,  without  shareholder  approval,   up   to
5,000,000  shares of Preferred Stock with 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  issuance  of
Preferred Stock or of rights to purchase Preferred Stock could be
used to discourage an unsolicited acquisition proposal.
     
     
                   PART II.  OTHER INFORMATION
                                
ITEM 1.   Legal Proceedings

          None.

ITEM 2.   Changes in Securities

          None.

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

                 Financial Data Schedules (submitted for SEC use only)
     
          (b)  Reports on Forms 8-K.

            1.   Current Report on Form 8-K filed on January 30, 1998,
                 reporting the information set forth in the Company's press
                 releases dated January 29, 1998, which announced the Company's
                 results of operations and stock repurchase program.
               

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



                                   CYMER, INC.
                                   (Registrant)


Date:  May 8, 1998                 By: ___/s/________________________
                                       William A. Angus, III
                                       Sr. Vice President and
                                       Chief Financial Officer