2011 was a year of significant accomplishment for Cymer. OnPulse® coverage expanded and our Installed Base Products (IBP) continued to deliver ongoing value enhancement to our customers’ light sources. Our deep ultraviolet (DUV) market position continued to strengthen as customers selected our XLR600ix for their advanced lithograph processes. In extreme ultraviolet (EUV), significant challenge remains, but notable progress was made as we completed installation of several 3100 sources at multiple chipmaker locations and received a sizeable order for 3300 source delivery. TCZ also received multiple orders for silicon crystallization tools in support of display maker production of advanced liquid crystal and OLED displays. Although DUV light source demand softened in the second half of the year, 2011 was a year of record revenue coupled with strong profits and operating cash flows.

Installed Base Products
We continued to increase the productivity and customer value of our installed light sources, with overall uptime exceeding our performance targets. Early in 2011, we purchased eDiag Solutions, which provides software for lithography source performance data mining and analytics, and integrated this technology into our most advanced DUV OnPulse® product offerings. We introduced four new advanced DUV OnPulse® enhancements: Focus Drilling, iGLX™, OnPulse™ Plus and SmartPulse™. Collectively, we believe these product introductions will contribute to increased operational efficiency and improved availability of our customers’ light sources, and they reinforce our commitment to deliver ongoing value enhancement.

During the year, we also added 382 light sources to OnPulse®, which now accounts for greater than 80 percent of all pulses and has been adopted by all top ten chipmakers globally. Our IBP business represents approximately 60 percent of total Cymer revenue and has grown steadily over the last several years, and with the recent and planned expansion of data products and enhancements coupled with our plan to extend OnPulse® to EUV and TCZ, we believe that IBP is well positioned for continued long-term growth.

Deep Ultraviolet
Our DUV market position continued to strengthen in 2011 due to the demonstrated performance and reliability of our ArF immersion light sources, which were instrumental towards helping chipmakers meet their advanced production requirements. We estimate that at the end of the fourth quarter of 2011, our rolling four quarter DUV installed value market share was approximately 70 percent. We also estimate that our rolling four quarter ArF immersion installed value market share was approximately 80 percent, which represents a 20 percentage point increase as compared to 2010. We believe we are competitively well positioned for 2012.

Extreme Ultraviolet
Chipmaker demand for EUV continues to be strong, as we believe EUV technology is the best path toward enabling Moore's law and scaling of semiconductors with features 22nm wide or smaller. To date, we have built eight 3100 sources, five of which are installed and exposing wafers at chipmakers, and one source is at ASML for NXE:3100 scanner development. Two remaining sources are located at our San Diego headquarters and are being actively used for EUV power upgrade and subsystem reliability testing. Our EUV performance development efforts have been focused on the key performance parameters of power, dose stability and collector lifetime. We are tracking significantly behind our original source performance roadmaps, as this is a very challenging and previously unrealized technology, but we believe we have made steady and significant progress recently in all these areas. In particular, engineering improvements to droplet generators for improved predictability and reliability, and collector protection improvements to provide longer collector lifetime have contributed to increased 3100 source availability at chipmakers. In the fourth quarter of 2011, we were pleased to receive customer acceptance on three of the six 3100 sources shipped to date. We also began production of EUV 3300 sources, in fulfillment of the initial order we received from ASML, valued at over $200 million dollars.

In 2011, we significantly increased our EUV investment, resource levels and manufacturing capability. We believe we are extending our EUV competitive leadership, and that the initial and sizeable order we received in support of 3300 source demand validates our increased investment in this future technology.

TCZ
Our TCZ product group increased its market penetration, receiving multiple orders in early 2011. In the second half of the year we shipped our first Gen 5 system to a large Asian panel maker and began manufacturing additional Gen 5 and Gen 4 systems. These orders included options for additional Gen 4 and Gen 5 systems. The tools are planned to be used by display makers for the production of advanced liquid crystal displays that are targeted for applications such as high-end smart phones and tablets. In support of our backlog of orders, we will continue our focus on ramping our TCZ manufacturing and support capabilities.

Looking Ahead
As we enter 2012, we believe our IBP business will continue its successful growth trend, driven by increased ArF pulses, installed base growth and the proliferation of DUV light source product enhancements. We expect that chipmaker investment in 2x nm and below manufacturing capacity will be the primary driver of DUV light source demand. We will continue to invest in EUV development resources, manufacturing capacity and field support. We view 2012 as a pivotal year towards advancing power and performance for EUV sources and meeting the initial EUV 3300 source demand. Our priorities in 2012 are: successful EUV development and commercialization; continued DUV market competitiveness; extended delivery of OnPulse® value and reliability; and development and manufacturing of TCZ silicon crystallization tools to fulfill demand and secure additional orders in support of advanced display manufacturing.

This is an exciting period for Cymer. In our view, there are an unprecedented number of technology inflections that present opportunities for us to collaborate more closely with our customers and increase our share of the market. We believe the creativity and hard work of our employees is helping to enable our customers’ success, and our customers’ drive towards continued technology leadership further positions Cymer as a driver of lithography light source solutions and innovator of display fabrication equipment. These trends provide a unique platform for us to extend our technology leadership, grow the company and create value for our stockholders.

Thank you for supporting our company and our vision.

Sincerely,