<PAGE>   1
================================================================================

                                  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 December 31, 1998.

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
     EXCHANGE ACT OF 1934.
     
     For the period from ________ to ________.

     Commission File Number 0-11348

                           SILICON VALLEY GROUP, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

          DELAWARE                                      94-2264681
 (State of incorporation)                     (IRS Employer Identification No.)


             101 METRO DRIVE, SUITE #400, SAN JOSE, CALIFORNIA 95110
               (Address of principal executive offices) (Zip Code)

                                 (408) 441-6700
              (Registrant's telephone number, including area code)

                                      NONE
              (Former name, former address and former fiscal year,
                          if changed since last report)

        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 outstanding of the Registrant's Common Stock as of
 January 29, 1999 was 32,822,556

================================================================================

<PAGE>   2

                           SILICON VALLEY GROUP, INC.

                                      INDEX


PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
                                                                            PAGE NO.
                                                                            --------
<S>                                                                             <C>
        Consolidated Condensed Balance Sheets as of December 31,
        1998 and September 30, 1998                                             3

        Consolidated Condensed Statements of Operations for the
        Quarters Ended December 31, 1998 and 1997                               4

        Consolidated Condensed Statements of Cash Flows for
        the Quarters Ended December 31, 1998 and 1997                           5

        Notes to Consolidated Condensed Financial Statements                    6

        Management's Discussion and Analysis of Financial
        Condition and Results of Operations                                     8


PART II.  OTHER INFORMATION                                                    19


SIGNATURES                                                                     21
</TABLE>


                                       2
<PAGE>   3

                          PART I. FINANCIAL INFORMATION
                           SILICON VALLEY GROUP, INC.
                      CONSOLIDATED CONDENSED BALANCE SHEETS
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                           December 31,   September 30,
                                                              1998             1998
                                                           ------------   -------------
                                                           (Unaudited)
<S>                                                         <C>               <C>        
ASSETS

CURRENT ASSETS:
    Cash and equivalents                                    $ 132,970       $ 121,575
    Temporary investments                                      20,924          28,425
    Accounts receivable (net of allowance for doubtful
        accounts of $8,271 and $8,232 respectively)            99,599         121,562
    Refundable income taxes                                     6,466          15,000
    Inventories                                               212,034         212,975
    Prepaid expenses and other assets                           8,033           7,485
    Deferred taxes                                             26,553          22,740
                                                            ---------       ---------
        Total current assets                                  506,579         529,762
PROPERTY AND EQUIPMENT - NET                                  192,096         191,022
DEPOSITS AND OTHER ASSETS                                       5,982           6,070
INTANGIBLE ASSETS - NET                                         3,568           3,736
                                                            ---------       ---------
TOTAL                                                       $ 708,225       $ 730,590
                                                            =========       =========


LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
    Accounts payable                                        $  19,689       $  25,346
    Accrued liabilities                                       119,101         130,532
    Current portion of long-term debt                             526             640
    Income taxes payable                                        1,531           1,284
                                                            ---------       ---------
        Total current liabilities                             140,847         157,802
LONG-TERM DEBT                                                  5,815           5,865
DEFERRED AND OTHER LIABILITIES                                  5,634           5,393
STOCKHOLDERS' EQUITY:
    Common Stock - shares outstanding:

        December 31, 1998: 32,821,494
        September 30, 1998: 32,696,394                        405,501         404,462
    Retained earnings                                         153,352         160,384
    Accumulated other comprehensive income (loss)              (2,924)         (3,316)
                                                            ---------       ---------
    Stockholders' equity                                      555,929         561,530
                                                            ---------       ---------
TOTAL                                                       $ 708,225       $ 730,590
                                                            =========       =========
</TABLE>

            See Notes to Consolidated Condensed Financial Statements


                                       3
<PAGE>   4

                           SILICON VALLEY GROUP, INC.
                 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                             Quarters Ended
                                                              December 31,
                                                          1998           1997
                                                        ---------     ---------
<S>                                                     <C>           <C>      
NET SALES                                               $  85,487     $ 188,707

COST OF SALES                                              61,457       114,319
                                                        ---------     ---------

GROSS PROFIT                                               24,030        74,388

OPERATING EXPENSES:

    Research, development and
        related engineering                                16,001        21,069

    Marketing, general and administrative                  19,473        36,687
                                                        ---------     ---------

OPERATING INCOME (LOSS)                                   (11,444)       16,632

INTEREST AND OTHER INCOME                                   1,465         1,482

INTEREST EXPENSE                                             (374)         (254)
                                                        ---------     ---------

INCOME (LOSS) BEFORE INCOME TAXES                         (10,353)       17,860

PROVISION (BENEFIT) FOR INCOME TAXES                       (3,321)        5,715
                                                        ---------     ---------

NET INCOME (LOSS)                                       $  (7,032)    $  12,145
                                                        =========     =========

NET INCOME (LOSS) PER SHARE - BASIC                     $   (0.21)    $    0.38
                                                        =========     =========

SHARES USED IN PER SHARE
    COMPUTATIONS - BASIC                                   32,759        32,277
                                                        =========     =========

NET INCOME (LOSS) PER SHARE - DILUTED                   $   (0.21)    $    0.37
                                                        =========     =========

SHARES USED IN PER SHARE COMPUTATIONS -DILUTED             32,759        33,124
                                                        =========     =========
</TABLE>


                   See Notes to Consolidated Condensed Financial Statements


                                       4
<PAGE>   5

                           SILICON VALLEY GROUP, INC.
                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                             Quarters Ended
                                                              December 31,
                                                         ----------------------
                                                            1998         1997
                                                         ---------    ---------
<S>                                                      <C>          <C>      
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net income (loss)                                    $  (7,032)   $  12,145
    Reconciliation to net cash provided by
        operating activities:
           Depreciation and amortization                    11,246        8,436
           Amortization of intangibles                         168          199
           Deferred income taxes                            (3,813)        (500)
           Changes in assets and liabilities:
               Accounts receivable                          21,963      (12,317)
               Inventories                                     941         (602)
               Prepaid expenses                               (548)         (15)
               Deposits and other assets                        88          576
               Accounts payable                             (5,657)      (2,410)
               Accrued and deferred liabilities            (11,290)      (1,949)
               Income taxes payable                          8,781        3,124
                                                         ---------    ---------
           Net cash provided by operating activities        14,847        6,687
                                                         ---------    ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchases of temporary investments                      (6,600)      (5,186)
    Maturities of temporary investments                     14,101       14,367
    Purchases of property and equipment                    (12,320)     (21,147)
                                                         ---------    ---------
           Net cash used for investing activities           (4,819)     (11,966)
                                                         ---------    ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
    Repayment of debt                                         (164)        (235)
    Proceeds from borrowings                                  --            250
    Sale of Common Stock                                     1,039          669
                                                         ---------    ---------
           Net cash provided by financing activities           875          684
                                                         ---------    ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH                        492       (3,001)
                                                         ---------    ---------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS             11,395       (7,596)
CASH AND EQUIVALENTS:
    Beginning of period                                    121,575      129,689
                                                         ---------    ---------
    End of period                                        $ 132,970    $ 122,093
                                                         =========    =========
</TABLE>


            See Notes to Consolidated Condensed Financial Statements


                                       5
<PAGE>   6

                           SILICON VALLEY GROUP, INC.
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

The accompanying consolidated condensed financial statements have been prepared
by the Company without audit and reflect all adjustments, consisting only of
normal recurring adjustments, which in the opinion of management are necessary
to present fairly the financial position and the results of operations for the
interim periods. The statements have been prepared in accordance with generally
accepted accounting principles for interim financial information and the
instructions to Form 10-Q and Article 10 of Regulation S-X. The interim
condensed 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 for the year ended
September 30, 1998. Results for fiscal 1999 interim periods are not necessarily
indicative of results to be expected for the fiscal year ending September 30,
1999.

The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries, after elimination of intercompany transactions
and balances.

2. INVENTORIES

   Inventories are comprised of:

<TABLE>
<CAPTION>
                                                  December 31,        September 30,
                                                      1998                1998
                                                  ------------        -------------
                                                           (In thousands)
<S>                                                 <C>                 <C>     
Raw materials                                       $106,121            $103,738
Work-in-process                                       99,025             103,362
Finished goods                                         6,888               5,875
                                                    --------            --------
                                                    $212,034            $212,975
                                                    ========            ========
</TABLE>

3. NET INCOME (LOSS) PER SHARE

Basic net income per share is computed by dividing net income by the weighted
average number of common shares outstanding.

The quarter ended December 31, 1998 was a loss period, therefore common stock
equivalents would be anti-dilutive and were not included in the calculation of
diluted net loss per share. Options to purchase 716,000 shares of common stock,
representing potentially dilutive securities, were outstanding at December 31,
1998. Diluted net income per share includes an additional 847,000 shares at the
quarter ended December 31, 1997 to reflect the potential dilution from shares
issuable upon the assumed exercise of dilutive stock options.


                                       6
<PAGE>   7

4.  REVENUE RECOGNITION

The Company recognizes revenue when the buyer accepts and takes title to the
equipment, generally upon shipment. During the quarter ended December 31, 1998,
the Company recognized approximately $20,000,000 of net sales to one customer
who accepted and took title to the related equipment, and agreed to normal
payment terms, but requested that the Company store the equipment until
predetermined shipment dates. At December 31, 1998, the Company was storing a
total of approximately $46,000,000 of such equipment from this customer with
shipment dates ranging through July 1999.

5. COMPREHENSIVE INCOME (LOSS)

In the first quarter of fiscal 1999, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income." SFAS
No. 130 establishes standards for the reporting and display of comprehensive
income. Components of comprehensive income (loss) include net income (loss),
foreign currency translation adjustments and minimum pension liability. As such,
Accumulated Other Comprehensive Income (Loss) in the Condensed Consolidated
Balance Sheets represents cumulative foreign currency translation adjustments
and minimum pension liability. Comprehensive income (loss) was ($6,640,000) and
$9,326,000 for the three months ended December 31, 1998 and 1997, respectively.
The adoption of SFAS No. 130 required additional disclosure but did not impact
the Company's consolidated financial position, results of operation or cash
flows.

6. RESTRUCTURING AND RELATED CHARGES

During the fourth quarter of fiscal 1998, the Company recorded restructuring and
related charges of $33,680,000. The charge included costs of $28,521,000
resulting from the termination of the Company's previously announced 200-APS
photoresist processing system (the "200-APS charge") and a provision of
$5,159,000 for reductions in the Company's workforce that included severance
compensation and benefit costs.

Changes to the restructuring accrual in fiscal 1999 (in thousands):

<TABLE>
<CAPTION>
                                        200-APS
                        Severance     Inventory and                     Other
                            and         Purchase       Customer         Exit
                         Benefits      Commitments    Obligations       Costs          Total
                        ---------     -------------   -----------       -----          -----
<S>                       <C>            <C>            <C>            <C>            <C>    
Balance at
September 30, 1998        $ 3,006        $ 1,832        $ 2,293        $   201        $ 7,332

Incurred in Q1 1999        (1,640)        (1,481)          (154)          (201)        (3,476)
                          -------        -------        -------        -------        -------

Balance at
December 31, 1998         $ 1,366        $   351        $ 2,139        $  --          $ 3,856
                          =======        =======        =======        =======        =======
</TABLE>

The Company expects to make cash payments of approximately $3,356,000 related to
the restructuring for the remaining nine months of fiscal 1999, with the
remaining $500,000 in cash payments to occur in fiscal 2000. Substantially all
employee terminations will be effective July 1999.


                                       7
<PAGE>   8

                           SILICON VALLEY GROUP, INC.

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS




The information in this discussion contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, as amended. Such statements are subject to
certain risks and uncertainties, including those discussed below, as well as
risk factors included in the Company's Annual Report on Form 10-K for the fiscal
year ended September 30, 1998, that could cause actual results to differ
materially from those projected. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
hereof. Forward-looking statements are indicated by an asterisk (*) following
the sentence in which such statement is made. The Company undertakes no
obligation to publicly release the results of any revisions to these
forward-looking statements which may be made to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events.

RESULTS OF OPERATIONS

The Company designs, manufactures, markets and services semiconductor processing
equipment used in the fabrication of integrated circuits. The Company's products
are used in photolithography for exposure and photoresist processing, and in
deposition for oxidation/diffusion and low pressure chemical vapor deposition
("LPCVD"). The Company manufactures and markets photolithography exposure SVGL
products, photoresist processing Track products, oxidation/diffusion and LPCVD
Thermco products and certain Tinsley precision optical components.

The semiconductor industry into which the Company sells its products is highly
cyclical and has, historically, experienced periodic downturns that have had a
severe effect on the semiconductor industry's demand for semiconductor
processing equipment. As a result of the Asian economic crisis, an oversupply of
certain semiconductor products, the impact of low cost personal computers, and
various other factors, semiconductor manufacturers have reduced planned
expenditures and cancelled or delayed the construction of new fabrication
facilities. This slowdown in demand began to impact the Company during the first
quarter of fiscal 1998 as the Company experienced lower customer new orders,
customer deferrals of scheduled equipment delivery dates and, to a lesser
extent, customer order cancellations. The result of the before mentioned
comprises the Company's bookings ("bookings") for the four fiscal 1998 quarters
of $137,253,000, $100,442,000, $123,641,000, and $65,936,000, respectively.
First quarter fiscal 1999 bookings of $87,286,000 showed improvement over fourth
quarter of fiscal 1998, but were significantly lower than either those of the
fourth quarter of fiscal 1997 bookings of $214,987,000, or the first quarter of
fiscal 1998. Although cancellations and rescheduling of orders have
significantly diminished, the result of last year's lower bookings, order
rescheduling and cancellations, have caused sales during the first quarter of
fiscal 1999 to decline and this trend will likely continue into the Company's
second quarter of fiscal 1999.* A continued decrease in sales could result in
further reductions in the Company's gross margin and net income in the second
quarter of fiscal 1999.* There can be no assurance that the Company will not
experience further customer delivery deferrals, additional order cancellations
or a prolonged period of customer orders at reduced levels, any or a combination
of which would have a material adverse effect on the Company's business and
results of operations.*


                                       8
<PAGE>   9

In an effort to lessen the impact of these lower sales volumes, the Company took
several steps to reduce operating expenses including a reduction in workforce,
temporary shutdowns and the restructuring of certain portions of the Company's
business. During the third quarter of fiscal 1998, the Company reduced its
workforce by approximately 200 employees and shut down the majority of its
operations for five days. During the fourth quarter of fiscal 1998, the Company
shut down the majority of its operations for ten additional days and recorded
restructuring and related charges of $33,680,000. The restructuring and related
charges include costs of $28,521,000 resulting from the termination of the
Company's previously announced 200-APS photoresist processing system (the
"200-APS charge") and a provision of $5,159,000 for the July and September 1998
reductions in the Company's workforce for approximately 950 employees.

Historically, the Company has relied on a limited number of customers for a
substantial percentage of its net sales. In fiscal 1998, the Company's two
largest customers accounted for 40% and 17% of net sales. In the first quarter
of fiscal 1999, this trend continued with these two customers accounting for 56%
and 8% of net sales. The Company believes that, for the foreseeable future, it
will continue to rely on a limited number of major customers for a substantial
percentage of its net sales.* As a result of delays in delivering initial
quantities of the subsequently terminated 200-APS Track product, one of the
Company's largest Track customers has decided to purchase systems with similar
capabilities from another supplier, which the Company expects will have an
adverse effect on Track's sales in future periods.* (See "Risks Inherent in the
Company's Business - Rapid Technological Change; Dependence on New Product
Development"). The loss of any other significant customer, further delays in
shipments due to rescheduling or additional reductions in orders by a
significant customer, including reductions in orders due to market, economic or
competitive conditions in the semiconductor industry, will further exacerbate
the adverse effect the customer order rescheduling and cancellations discussed
above have on the Company's business and results of operations.*

During the first quarter of fiscal 1999, the Company recognized net sales of
approximately $20,000,000 from one customer who accepted and took title to the
related equipment and agreed to normal payment terms, but requested that the
Company store the equipment until predetermined shipment dates. At December 31,
1998, the Company was storing a total of approximately $46,000,000 of such
equipment from this customer with shipment dates ranging through July 1999.

Net sales for the first fiscal quarter ended December 31, 1998 were $85,487,000,
down 21% from net sales for the preceding quarter of $107,661,000, and 55% below
first quarter fiscal 1998 net sales of $188,707,000. The decrease in net sales
compared to the preceding quarter was principally the result of lower shipments
of Track and SVGL products. In the comparison to the first quarter fiscal 1998,
shipments were lower primarily in the Company's SVGL and Track products.

The Company received new orders of $88,734,000 for the first quarter of fiscal
1999, which were approximately equal to the fourth quarter of fiscal 1998 of
$88,836,000 and significantly below those of the first quarter of fiscal 1998
new orders of $175,253,000. The Company includes in backlog only those orders to
which a purchase order number has been assigned by the customer, with all terms
and conditions agreed upon and for which delivery has been specified within
twelve months. The Company's backlog at December 31, 1998 totaled $255,928,000,
significantly below the December 31, 1997 backlog of $384,028,000 and slightly
higher than the backlog of $254,130,000 at September 30, 1998. At December 31,
1998, the backlog included orders for 36 Micrascan photolithography systems.
Additionally, the Company had orders for 12 additional systems with scheduled
delivery dates outside the twelve-month backlog window.


                                       9
<PAGE>   10

Gross margin was 28.1% in the first quarter of fiscal 1999, compared to 9.5%
during the preceding quarter and 39.4% in the first quarter of fiscal 1998.
Excluding the fourth quarter 1998 200-APS charge, gross margin was 27.3%. The
decline in adjusted gross margin to 28.1% in the first quarter of fiscal 1999
versus the first quarter of fiscal 1998 was primarily the result of lower
margins in SVGL and Track products resulting from declines in volume. The gross
margin remained approximately level from the prior quarter, as cost reduction
efforts offset the impact of reduced volume.

Research, development and related engineering ("R&D") expenses are net of
funding received from outside parties under development agreements. Such funding
is typically payable upon the attainment of one or more development milestones
that are specified in the agreement. Neither the spending, nor the recognition
of the funding related to the development milestones is ratable over the term of
the agreements. For all the periods being compared, such funding was primarily
related to agreements between SVGL and certain customers for the development of
a 193 nanometer Micrascan system. (See "SVG Lithography Systems, Inc.
(SVGL)").

R&D expenses were $16,001,000 (19% of net sales) for the first quarter of fiscal
1999, $19,970,000 (19% of net sales) for the preceding quarter and $21,069,000
(11% of net sales) for the first quarter of fiscal 1998. For the first and
fourth quarters of fiscal 1998 and the first quarter of fiscal 1999, development
funding of $2,368,000, $2,762,000, and $2,277,000, respectively, was recognized
and offset against R&D. The decrease in R&D from the first and fourth quarters
of fiscal 1998 primarily resulted from the reduction in spending associated with
the fourth quarter 1998 cancellation of the 200-APS Track product.

Marketing, general and administrative expenses (MG&A) were $19,473,000 (23% of
net sales) for the first quarter of fiscal 1999 compared to $24,575,000 (23% of
net sales), net of restructuring, for the preceding quarter and $36,687,000 (19%
of net sales) for the first quarter of fiscal 1998. MG&A declined primarily due
to lower shipment related costs and reduced levels of employee headcount
resulting from the reductions in force of the fourth quarter of fiscal 1998.

The Company had an operating loss of $11,444,000 for the first quarter of fiscal
1999 compared to an operating loss of $48,869,000 for the preceding quarter and
an operating profit of $16,632,000 for the first quarter of fiscal 1998. Without
regard to the $33,680,000 restructuring and related charges of the fourth
quarter of fiscal 1998, the operating loss improvement was the result of lower
operating expenses offset in part by lower levels of shipments. In comparison to
the first quarter of fiscal 1998, operating profit declined due to significantly
lower sales offset in part by lower expenses.

Interest and other income of $1,465,000 for the first quarter of fiscal 1999 was
approximately equal to the amounts for the first and fourth fiscal quarters of
1998 of $1,482,000 and $1,432,000, respectively.

Interest expense was $374,000 during the first quarter of fiscal 1999, compared
to $254,000 and $282,000 for the first and fourth fiscal quarters of 1998.

The Company recorded a 32% income tax benefit for the first quarter of fiscal
1999 compared to a 50% tax benefit for fiscal 1998. Variations in the Company's
effective tax rate relate primarily to changes in the geographic distribution of
the Company's pretax income and certain tax free and tax advantaged interest
income.


                                       10
<PAGE>   11

The Company had a net loss of $7,032,000 ($0.21 diluted loss per share) for the
first quarter of fiscal 1999 compared to net income of $12,145,000 ($0.37
diluted earnings per share) for the first quarter of fiscal 1998 and a net loss
of $28,465,000 ($0.87 diluted loss per share) for the fourth quarter of fiscal
1998. The loss for the fourth fiscal quarter of 1998 included a $33,680,000
pretax restructuring and related charge for reductions in the Company's
workforce and cancellation of the 200-APS product.

RISKS INHERENT IN THE COMPANY'S BUSINESS

Fluctuations in Quarterly Results. The Company has, at times during its
existence, experienced quarterly fluctuations in its operating results. Due to
the relatively small number of systems sold during each fiscal quarter and the
relatively high revenue per system, customer order rescheduling or
cancellations, or production or shipping delays can significantly affect
quarterly revenues and profitability. The Company has experienced, and may again
experience, quarters during which a substantial portion of the Company's net
sales are realized near the end of the quarter.* Accordingly, shipments
scheduled near the end of a quarter, which are delayed for any reason, can cause
quarterly net sales to fall short of anticipated levels. Since most of the
Company's expenses are fixed in the short term, such shortfalls in net sales
could have an adverse effect on the Company's business and results of
operations.* The Company's operating results may also vary from quarter to
quarter based upon numerous factors including the timing of new product
introductions, product mix, level of sales, the relative proportion of domestic
and international sales, activities of competitors, acquisitions, international
events, currency exchange fluctuations, and difficulties obtaining materials or
components on a timely basis.* In light of these factors, the Company may again
experience variability in its quarterly operating results.*

Rapid Technological Change; Dependence on New Product Development. Semiconductor
manufacturing equipment and processes are subject to rapid technological change.
The Company believes that its future success will depend upon its ability to
continue to enhance its existing products and their process capabilities and to
develop and manufacture new products with improved process capabilities that
enable semiconductor manufacturers to fabricate semiconductors more
efficiently.* The Company is developing Track and Lithography products, and has
shipped limited quantities of Thermco products, capable of processing 300mm
wafers in anticipation of the industry's transition to this larger wafer
standard.* Failure to successfully introduce these or any other new products in
a timely manner could result in the loss of competitive position and could
reduce sales of existing products.* In addition, new product introductions could
contribute to quarterly fluctuations in operating results as orders for new
products commence and increase the potential for a decline in orders of existing
products, particularly if new products are delayed.*

From time-to-time, the Company has experienced delays in the introduction of its
products and product enhancements due to technical, manufacturing and other
difficulties and may experience similar delays in the future.* For example,
during fiscal 1996, the Company announced the subsequently terminated 200-APS
Track product. Initial shipments of the 200-APS were scheduled to commence
during the second quarter of fiscal 1997, and were delayed until the second
quarter of fiscal 1998. This delay, as well as industry developments, caused the
Company to implement a plan, which was announced on September 30, 1998, to
terminate future development and shipments of its 200-APS products, and to
concentrate its efforts on completing a new product which has been in
development for approximately one year. There can be no assurance that the
Company will not experience delays in development or manufacturing problems
related to its new product as a result of instability of the design of either
the hardware or software elements of the new technology, or be able to
efficiently manufacture the new product or other products.* These issues could
result in product delivery delays and a subsequent loss of future sales.*
Semiconductor manufacturers tend to select either a single supplier or a primary
supplier for a certain type 


                                       11
<PAGE>   12

of equipment. The Company believes that prolonged delays in delivering initial
quantities of newly developed products to multiple customers, whether due to the
protracted release of product from engineering into manufacturing or due to
manufacturing difficulties, could result in semiconductor manufacturers electing
to install competitive equipment in their fabrication facilities and could
preclude industry acceptance of the Company's products.* For example, the
Company's largest Track customer has decided to secure deliveries from another
source, a decision the Company believes is primarily due to the delay and
subsequent termination of the 200-APS. The release into the market of a new
technology Track product will not be accomplished for a number of quarters.* As
a result, competitors will increase their market share, and it will be
increasingly more difficult for the Company to regain market position.* The
Company's inability to effect the timely production of new products or any
failure of these products to achieve market acceptance could have a material
adverse effect on the Company's business and results of operations.*

Historically, the unit cost of the Company's products has been the highest when
they are newly introduced into production and cost reductions have come over
time through engineering improvements, economies of scale and improvements in
the manufacturing process.* As a result, new products have, at times, had an
unfavorable impact on the Company's gross margins and results of operations.
There can be no assurance that the initial shipments of new products will not
have an adverse effect on the Company's profitability or that the Company will
be able to attain design improvements, manufacturing efficiencies or
manufacturing process improvements over time.* Further, the potential
unfavorable effect of newly introduced products on profitability can be
exacerbated when there is intense price competition in the marketplace.*

Competition. The semiconductor equipment industry is intensely competitive. The
Company faces substantial competition both in the United States and other
countries in all of its products. The Company's competitors include Tokyo
Electron, Ltd. ("TEL") and DaiNippon Screen Mfg. Co., Ltd. in photoresist
processing equipment; TEL and Kokusai Electric Co., Ltd. in oxidation/diffusion
and LPCVD equipment; and Nikon, Canon, ASM Lithography and other suppliers of
photolithography exposure equipment, and projection aligners. The trend toward
consolidation in the semiconductor processing equipment industry has made it
increasingly important to have the financial resources necessary to compete
effectively across a broad range of product offerings, to fund customer service
and support on a worldwide basis and to invest in both product and process
research and development. Significant competitive factors include technology and
cost of ownership, a formula which includes such data as initial price, system
throughput and reliability and time to maintain or repair. Other competitive
factors include familiarity with particular manufacturers' products, established
relationships between suppliers and customers, product availability and
technological differentiation. Occasionally, the Company has encountered intense
price competition with respect to particular orders and has had difficulty
establishing new relationships with certain customers who have long-standing
relationships with other suppliers. The Company believes that outside Japan and
the Pacific Rim it competes favorably with respect to most of these factors.*
(See "Importance of Japanese and Pacific Rim Markets".)

Many of the Company's competitors are Japanese corporations. In light of the
recent economic downturn in certain Asian countries that represent significant
markets for such competitors, the Company believes that an over supply of
equipment from certain Japanese competitors may cause more severe price
competition in its non-Asian markets. * To compete effectively in these markets,
the Company may be forced to reduce prices, which could cause further reduction
in net sales and gross margins and, consequently, have a material adverse effect
on the Company's financial condition and results of operations.*


                                       12
<PAGE>   13

Importance of the Japanese and Pacific Rim Markets. The Company's customers are
heavily concentrated in the United States and Europe. The Japanese and Pacific
Rim markets (including fabrication plants located in other parts of the world
which are operated by Japanese and Pacific Rim semiconductor manufacturers)
represent a substantial portion of the overall market for semiconductor
manufacturing equipment. To date, neither the Company's shipments into Japan nor
the Pacific Rim have been significant. The Company believes that the Japanese
companies with which it competes have a competitive advantage because their
dominance of the Japanese and Pacific Rim semiconductor equipment market
provides them with the sales and technology base to compete more effectively
throughout the rest of the world. The Company is not engaged in any significant
collaborative effort with any Japanese or Pacific Rim semiconductor
manufacturers. As a result, the Company may be at a competitive disadvantage to
the Japanese equipment suppliers that are engaged in such collaborative efforts
with Japanese and Pacific Rim semiconductor manufacturers. The Company believes
that it must substantially increase its share of these markets if it is to
compete as a global supplier.* Further, in many instances, Japanese and Pacific
Rim semiconductor manufacturers fabricate devices such as dynamic random access
memory devices ("DRAMs"), with potentially different economic cycles than those
affecting the sales of devices manufactured by the majority of the Company's
U.S. and European customers. Failure to secure customers in these markets may
limit the global market share available to the Company and may increase the
Company's vulnerability to industry or geographic downturns.* Recent economic
difficulties in certain Asian countries, particularly Korea, will adversely
affect the Company's ability to penetrate such markets.*

In the past, several of the Company's larger customers have entered into joint
ventures ("JV") with European, Japanese or Pacific Rim semiconductor
manufacturers. In such cases, the Company has encountered intense price
competition from foreign competitors who are suppliers to the non-U.S. member of
the JV. Further, in certain instances the Company has not secured the equipment
order when the non-U.S. member has had the responsibility for selecting the
equipment to be used by the JV in its U.S. operations. There can be no assurance
that as the Company's customers form additional alliances, whether in the U.S.
or in other parts of the world, that the Company will be successful in obtaining
equipment orders or that it will be able to obtain orders with sufficient gross
margin to generate profitable transactions, either of which could have an
adverse effect on the Company's results of operations.*

Throughout the Pacific Rim, the Company is attempting to compete with major
equipment suppliers having significant market share and established service and
support infrastructures in place. Although the Company has invested in the
staffing and facilities that it believes are necessary to sell, service and
support customers in the Pacific Rim, it anticipates that it will encounter
significant price competition as well as competition based on technological
ability.* There can be no assurance that the Company's Pacific Rim operations
will be profitable, even if it is successful in obtaining significant sales into
this region.* Further, due to recent economic issues in certain Asian countries,
particularly Korea, the Company's ability to penetrate such markets has been
more difficult. Failure to secure customers in these markets would have an
adverse effect on the Company's business and results of operations.*

Year 2000. As the Year 2000 approaches, a universal issue has emerged regarding
how existing application software programs and operating systems can accommodate
date values. The Company has completed the modification of its internal-use
computer software for the Year 2000. The third party costs associated with such
modifications were not material and were expensed in fiscal 1998. The Company
does not segregate internal costs incurred to assess and remedy deficiencies
related to the Year 2000 problem or modifications to its products, however, the
Company has incurred approximately $124,000 with third parties to identify and
modify its internal-use computer systems. Although the Company believes that the
solutions, which were extensively tested, have resulted in its internal-use
systems being 


                                       13
<PAGE>   14

Year 2000 compliant, there can be no assurance that unforeseen problems that
could disrupt operations will arise, or that the Company could be required to
expend further cost and effort to solve such problems.*

The Company has evaluated its products and identified those areas containing
date sensitive Year 2000 issues. The Company has informed its customers of ship
dates for Year 2000 compliant products and has made available for potential sale
the necessary modifications to bring previously shipped products into
compliance. The Company is in the process of contacting its suppliers and
service providers to ascertain their state of readiness and compliance for Year
2000 issues. The Company will continue to monitor their progress and compliance
for these issues. There can be no assurance, however, that the Company's
suppliers and service providers will timely provide the Company with products or
services which are Year 2000 compliant. Any failure to do so by such third
parties could have a material adverse impact on the Company's results of
operations. *

At this time the Company does not feel it is necessary to develop a contingency
plan. As risks are identified, plans will be developed and implemented as
required.

Although the Company believes its Year 2000 plans will be successful, there can
be no assurance that unforeseen problems will not happen which could have a
material adverse effect on the Company.*

Business Interruption. The Company manufactures its Track products in San Jose,
California and substantially all of its Thermco products in Orange, California.
Tinsley's optical components are manufactured in Richmond and North Hollywood,
California. These California facilities are located in seismically active
regions. SVGL's photolithography exposure products are manufactured in Wilton
and Ridgefield, Connecticut. If the Company were to lose the use of one of its
facilities as a result of an earthquake, flood or other natural disaster, the
resultant interruptions in operations would have a material adverse effect on
the Company's results of operations and financial condition.*

SVGL - Uncertain Market for Micrascan Products. The Company believes that the
photolithography exposure equipment market is one of the largest segments of the
semiconductor processing equipment industry.* To address the market for advanced
photolithography exposure systems, the Company has invested and expects to
continue to invest substantial resources in SVGL's Micrascan technology and its
family of Micrascan DUV step-and-scan photolithography systems, capable of
producing line widths of .18 micron and below. The development of a market for
the Company's Micrascan step-and-scan photolithography products will be highly
dependent on the continued trend towards finer line widths in integrated
circuits and the ability of other lithography manufacturers to keep pace with
this trend through either enhanced technologies or improved processes. The
Company believes DUV lithography will be required to fabricate devices with line
widths below 0.3 micron.* Semiconductor manufacturers can purchase DUV steppers
to produce product at .25 micron line widths. However, the Company believes that
as devices increase in complexity and size and require finer line widths, the
technical advantages of DUV step-and-scan systems, as compared to DUV steppers,
will enable semiconductor manufacturers to achieve finer line widths with
improved critical dimension control which will result in higher yields of faster
devices.* The Company also believes that the transition to DUV step-and-scan
systems will accelerate in calendar 1999 and that advanced semiconductor
manufacturers are beginning to require volume quantities of production equipment
as advanced as the current and pending versions of Micrascan to produce both
critical and to some degree sub-critical layers of semiconductor devices.*
Currently, competitive DUV step-and-scan equipment capable of producing .25
micron line widths is available in limited quantities from two competitors, and
the Company believes that at least one other manufacturer of advanced
photolithography systems will begin limited shipments of step-and-scan machines
in the near 


                                       14
<PAGE>   15

future.* There can be no assurance that the Company will be successful in
competing with such systems.* Further, if manufacturers of DUV steppers are able
to further enhance existing technology to achieve finer line widths sufficiently
to erode the competitive and technological advantages of DUV step-and-scan
systems, or other manufacturers of step-and-scan systems are successful in
supplying sufficient quantities of product in a timely manner that are
technically equal to or better than the Micrascan, demand for the Micrascan
technology may not develop as the Company expects.*

The Company believes that advanced logic devices and DRAMs will require
increasingly finer line widths.* Consequently, SVGL must continue to develop
advanced technology equipment capable of meeting its customers' current and
future requirements while offering those customers a progressively lower cost of
ownership.* In particular, the Company believes that it must continue its
development of future systems capable of printing line widths finer than .18
micron and processing 300mm wafers.* Any failure by the Company to develop the
advanced technology required by its customers at progressively lower costs of
ownership could have a material adverse impact on the Company's financial
condition and results of operations.*

The Company believes that for SVGL to succeed in the long term, it must sell its
Micrascan products on a global basis. The Japanese and Pacific Rim markets
(including fabrication plants located in other parts of the world which are
operated by Japanese and Pacific Rim semiconductor manufacturers) represent a
substantial portion of the overall market for photolithography exposure
equipment. To date, the Company has not been successful penetrating either of
these markets. (See "Importance of the Japanese and Pacific Rim Markets".)

SVGL - Need to Increase Manufacturing Capacity and System Output. The Company
believes that its ability to supply systems in volume will be a major factor in
customer decisions to commit to the Micrascan technology.* Based upon its
forecast of continued growth in demand, the transition from steppers to
step-and-scan equipment for photolithography equipment, and potential future
demand for advanced lithography products, the Company has been in the process of
increasing SVGL's production capacity under an extremely aggressive expansion
schedule. In August 1996, as part of this expansion, the Company purchased from
The Perkin-Elmer Corporation a 243,000 square foot facility occupied by SVGL in
Wilton, Connecticut and an additional 201,000 square foot building, which SVGL
now occupies, in Ridgefield, Connecticut. Through fiscal 1998, the Company has
invested in significant capital improvements related to the buildings purchased
and the equipment required to expand the production capabilities of SVGL. While
the Company intends to continue certain of the expansion activities, it may not
invest in all of the metrology and other equipment required to maximize
manufacturing capacity until industry demand recovers.* However, the Company
plans to continue increasing capacity to produce optical components, thus
enabling it to quickly respond to customer requirements. Once demand recovers,
the timely construction and equipping of facilities to successfully complete the
increase in capacity will require the continued recruitment, training and
retention of a high quality workforce, as well as the achievement of
satisfactory manufacturing results on a scale greater than SVGL has attempted in
the past. There can be no assurance that the Company can manage these efforts
successfully. Any failure to successfully manage such efforts could result in
product delivery delays and a subsequent loss of future revenues. In particular,
the Company believes that protracted delays in delivery quantities of current
and future Micrascan products could result in semiconductor manufacturers
electing to install competitive equipment in their advanced fabrication
facilities, which could impede acceptance of the Micrascan products on an
industry-wide basis.* This could result in the Company's operating results being
adversely affected by the increase in fixed costs and operating expenses related
to increases in production capacity if net sales, for any reason, do not
increase commensurately.*


                                       15
<PAGE>   16

The time required to build a Micrascan system is significant. If SVGL is to be
successful in supplying increased quantities of Micrascan systems, it will not
only need to be able to build more systems, it will need to build them faster.*
SVGL will require additional trained personnel, additional raw materials and
components and improved manufacturing and testing techniques to both facilitate
volume increases and shorten manufacturing cycle time.* To that end, SVGL is
continuing to develop its vendor supply infrastructure, and implement
manufacturing improvements.* Additionally, the Company believes that once
industry demand recovers, it must resume increasing its factory, field service
and technical support organization staffing and infrastructure to support the
anticipated customer requirements.* There can be no assurance that the Company
will not experience manufacturing difficulties or encounter problems in its
attempt to increase production and upgrade or expand existing operations.*

One of the most critical components of the Micrascan systems is the projection
optics, which are primarily manufactured by SVGL. As part of its overall
investment in capacity, the Company has increased SVGL's optical manufacturing
floor space. The Company believes that in order for SVGL to be a viable supplier
of advanced lithography systems in the future, it must successfully reduce the
cycle times required to build projection optics.*

On November 26, 1997, the Company acquired Tinsley Laboratories, Inc. ("TLI") in
exchange for approximately 1,091,000 shares of Company Common Stock. TLI
designs, manufactures and sells precision optical components, assemblies and
systems to customers in a variety of industries and research endeavors. The
primary reasons for the acquisition were TLI's technology and expertise relating
to aspherical lenses, a key component of SVGL's photolithography products, the
adaptation of certain of TLI's manufacturing processes by SVGL and TLI's
commencement of the fabrication of non-aspherical lenses which are currently
produced by SVGL. However, there can be no assurance that TLI's manufacturing
technology is scaleable, or that such expertise can be transferred without
substantial time or expense, if at all.* The inability of SVGL to transfer this
production technology for use in processes of a substantially larger scale or
the inability of TLI to manufacture non-aspherical lenses for SVGL in sufficient
quantities to realize efficiencies of scale could adversely affect the Company's
ability to realize any significant benefits from the acquisition of TLI.*

The Company believes that protracted delays in delivering quantities of both
current and future generations of Micrascan products to multiple customers could
result in semiconductor manufacturers electing to install competitive equipment
in their advanced fabrication facilities, and could preclude industry acceptance
of the Micrascan technology and products.* In addition, the Company's operating
results could also be adversely affected by the increase in fixed costs and
operating expenses related to increases in production capacity and field service
and technical support activities if net sales do not increase commensurately.*

SVGL - Sole Source Materials and Components. Most raw materials and components
not produced by the Company are available from more than one supplier. However,
certain raw materials, components and subassemblies are obtained from single
sources or a limited group of suppliers. Although the Company seeks to reduce
its dependence on these sole and limited source suppliers, and the Company has
not experienced significant production delays due to unavailability or delay in
procurement of component parts or raw materials to date, disruption or
termination of certain of these sources could occur and such disruptions could
have at least a temporary adverse effect on the Company's business and results
of operations.* Moreover, a prolonged inability to obtain certain components
could have a material adverse effect on the Company's business and results of
operations and could result in damage to customer relationships. *


                                       16
<PAGE>   17

The raw material for a proprietary component of the optical system for the
Micrascan is available from only one supplier. The supplier has expanded its
capacity to meet SVGL's projected long-term requirements and has created and
stored agreed upon quantities of safety stock. There can be no assurance that
the supplier will be able to provide acceptable quantities of material required
by SVGL.* Additionally, a version of the Company's Micrascan III
photolithography system utilizes an Excimer laser that is manufactured in volume
by only one supplier, which until the first quarter of fiscal 1998 was the only
supplier the Company had determined could meet its specifications. SVGL has
recently qualified an additional source of lasers for its current and future
versions of Micrascan products, allowing the potential for the integration of
such lasers into its system configurations.* However, there can be no assurance
that its customers will be receptive to procuring products with lasers from this
supplier, or the supplier will be able to provide product of sufficient quantity
and quality. If these suppliers were unable to meet their commitments, SVGL
would be unable to manufacture the quantity of products required to meet the
anticipated future demand, which would have a material adverse effect on the
Company's business and results of operations.*

SVGL - Research and Development Funding. Historically, the Company has depended
on external funding to assist in the high cost of development in its
photolithography operation. Beginning in fiscal 1996, the Company entered into
agreements with certain customers (the "Participants") whereby each agreed to
assist in funding the Company's development of an advanced technology 193
nanometer Micrascan system. In exchange for such funding, each Participant
received the right to purchase one such system and, in addition, received a
right of first refusal (ratable among such Participants) to all such machines
manufactured during the first two years following the initial system shipments.
For each initial system ordered, each Participant agreed to fund $5,000,000 in
such development costs. The agreements call for each Participant to pay
$1,000,000 of initial development funding and four subsequent payments of
$1,000,000 upon the completion of certain development milestones. The
Participants may withdraw from the development program without penalty, but
payments made against completed development milestones are not refundable and
all rights to future equipment are forfeited. At December 31, 1998, the Company
had received $20,000,000 in funding from Participants and had recognized
$21,690,000 of the program's total $24,000,000 against research and development
expenditures. There can be no assurances that the Participants will remain in
the program.* In the event that the Company does not receive the funding
anticipated under the agreements, it would be required to replace the shortfall
from its own funds or other sources. If the Company were required to use its own
funds, its research and development expenses would increase and its operating
income would be reduced correspondingly. The agreements with the Participants
stipulate that if the Company receives funding for the development program in
excess of $25,000,000, it will issue, ratably to the Participants, credits
totaling such excess in the form of a cash discount which can be applied to the
purchase of additional products by each Participant. There is no assurance that
the Company will receive all funding which it currently anticipates or that it
will be able to obtain future outside funding beyond that which it is currently
receiving, and any failure to do so could have a material adverse impact on the
Company's results of operations.*

SVGL - Market Penetration. The Company believes that for SVGL to succeed in the
long term, it must expand its customer base and sell its Micrascan products on a
global basis.* The Japanese market (including fabrication plants operated
outside Japan by Japanese semiconductor manufacturers), the Taiwanese market and
the Korean market represent a substantial portion of the overall market for
photolithography exposure equipment. To date, the Company has not been
successful penetrating any of these markets. Recent economic difficulties in
certain Asian economies, particularly Korea, may adversely effect the Company's
ability to penetrate such markets.*


                                       17
<PAGE>   18

SVGL - Future Profitability. If SVGL is to attain its objective of being a
volume supplier of advanced photolithography products, the Company believes that
it must expand its customer base to include additional customers from whom it
secures and successfully fulfills orders for production-quantities of Micrascan
products.* The Company believes that in light of the downturn in industry
demand, costs associated with the continued development of the Micrascan
technology, the expansion of SVGL's manufacturing capacity, the related increase
in manpower and customer support, and the potential difficulties inherent in
manufacturing sub-.25 micron Micrascan products, in particular the projection
optics required for these products, there can be no assurance that SVGL will be
able to operate profitably in the future.*

LEGAL PROCEEDINGS

On or about August 12, 1998, Fullman International and Fullman Company
(collectively, "Fullman") initiated a lawsuit in the United States District
Court for the District of Oregon alleging a cause of action for fraudulent
transfer in connection with a settlement the Company had previously entered into
resolving its claims against a Thailand purchaser of the Company's equipment. In
its complaint against the Company, the plaintiff, another creditor of the
Thailand purchaser, alleges damages of approximately $11,500,000 plus interest.
The Company has successfully moved to transfer the case to the United States
District Court for the Northern District of California.

While the outcome of such litigation is uncertain, the Company believes it has
meritorious defenses to the claims and intends to conduct a vigorous defense.
However, an unfavorable outcome in this matter could have a material adverse
effect on the Company's financial condition.*

In addition to the above, the Company, from time to time, is party to various
legal actions arising out of the normal course of business, none of which is
expected to have a material effect on the Company's financial position or
operating results.


LIQUIDITY AND CAPITAL RESOURCES

At December 31, 1998, cash and cash equivalents and temporary investments
totaled $153,894,000, up $3,894,000 from the September 30, 1998 balance of
$150,000,000. The increase was primarily attributable to a reduction of
receivables caused by lower business volumes, the refund of income taxes,
depreciation and amortization offset in part by a net loss, the purchase of
capital equipment and the reduction of accounts payables and accrued liabilities
associated with lower business volumes.

On June 30, 1998, the Company entered into an unsecured $150,000,000 bank
revolving line of credit agreement that expires June 30, 2001. Advances under
the line bear interest at the prime rate or 0.65% to 1.50% over LIBOR. The
agreement includes covenants regarding liquidity, profitability, leverage, and
coverage of certain charges and minimum net worth and prohibits the payment of
cash dividends. On October 23, 1998, certain of the covenants were amended, in
part to allow for the Company's fourth quarter fiscal 1998 net loss. At December
31, 1998, the Company was in compliance with the covenants as amended. At
January 31, 1999, there were no borrowings outstanding under the facility.

The Company believes that it has sufficient working capital and available bank
credit to sustain operations and provide for the expansion of its business for
the next twelve months.*


                                       18
<PAGE>   19

                           PART II. OTHER INFORMATION

                           SILICON VALLEY GROUP, INC.




ITEM 1.        LEGAL PROCEEDINGS.

               On or about August 12, 1998, Fullman International and Fullman
               Company (collectively, "Fullman") initiated a lawsuit in the
               United States District Court for the District of Oregon alleging
               a cause of action for fraudulent transfer in connection with a
               settlement the Company had previously entered into resolving its
               claims against a Thailand purchaser of the Company's equipment.
               In its complaint against the Company, the plaintiff, another
               creditor of the Thailand purchaser, alleges damages of
               approximately $11,500,000 plus interest. The Company has
               successfully moved to transfer the case to the United States
               District Court for the Northern District of California.

               While the outcome of such litigation is uncertain, the Company
               believes it has meritorious defenses to the claims and intends to
               conduct a vigorous defense. However, an unfavorable outcome in
               this matter could have a material adverse effect on the Company's
               financial condition.*

               In addition to the above, the Company, from time to time, is
               party to various legal actions arising out of the normal course
               of business, none of which is expected to have a material effect
               on the Company's financial position or operating results.


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.


                                       19
<PAGE>   20
ITEM 6.        EXHIBITS AND REPORTS ON FORM 8-K.

(a)  Exhibits.

     27.0 Financial Data Schedule for the fiscal quarter ended December 31, 
     1998.

(b)  Reports on Form 8-K.

     None.


                                       20
<PAGE>   21

                           SILICON VALLEY GROUP, INC.
                                   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.



                                    SILICON VALLEY GROUP, INC.
                                    --------------------------
                                           (Registrant)




Date:   February 08, 1999           By:/s/ Papken S. Der Torossian 
                                           ------------------------------
                                           Papken S. Der Torossian
                                              Chief Executive Officer and
                                              Chairman of the Board



Date:   February 08, 1999           By:/s/  Russell G. Weinstock
                                            -----------------------------
                                            Russell G. Weinstock
                                               Vice President Finance and
                                               Chief Financial Officer


                                       21
<PAGE>   22
            
                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NO.

<S>            <C>
   27.0        Financial Data Schedule for the fiscal quarter ended December 31,
               1998.
</TABLE>