The acquisition of U.S.-based semiconductor manufacturing equipment maker Silicon Valley Group Inc. (SVG) by its Dutch counterpart ASM Lithography Holding NV (ASML) has received approval from the Committee on Foreign Investment in the United States (CFIUS), allowing the US$1.6 billion merger to move ahead, the companies announced Thursday.
ASML's main concession to the CFIUS will be a "good faith" effort to sell SVG subsidiary Tinsley Laboratories Inc. within the next six months, ASML Chief Executive Officer Doug Dunn said in a telephone conference call on Thursday.
The deal between the Veldhoven, Netherlands-based ASML and San Jose, California-based SVG -- both manufacturers of lithography equipment for the semiconductor industry -- had been put on hold in March pending a 45-day security review by the U.S. government, which was conducted by the CFIUS under the Exon-Florio Act. Tinsley Laboratories designs and manufactures precision optical components, assemblies and sub-systems, Dunn said. The lens-polishing technology is used in both lithography and defense projects, such as spy satellites. Dunn pointed out that any potential buyer of Tinsley will have to agree to continue supplying ASML.
If ASML is unable to sell Tinsley within the time frame, the company has agreed to continue the run the Richmond, California-based company under certain regulations and security conditions established by the CFIUS, Dunn said. That would include complying with the standard U.S. export controls, Dunn said.
"The issue facing all lithography suppliers is the increase in size and complexity and cost in the next generation (semi-conductor) technology. It will take about $1 billion in investment to develop the extreme ultra violet systems that will be required for the next generation technology," Dunn said. ASML believes that the efforts of the combined companies will allow for such investment, benefiting the semiconductor industries in both the U.S. and abroad, he said.
Intel Corp., a customer of both ASML and SVG, said it was pleased by the prospect of a combined ASML and SVG. "We have been working closely with both companies and will continue to do so," an Intel spokeswoman told the IDG News Service on Friday.
The combined ASML/SVG will increase its total share of the lithography/semiconductor market, with its closest competitors being Nikon Corp. and Canon Inc., Dunn said.
ASML has also agreed to make unspecified investments in its U.S.-based facilities and to keep the research and development activities of SVG projects inside of the U.S. Also, ASML has agreed to appoint a U.S. citizen to its advisory board, and has already named Michael Attardo for that position, Dunn said.
The deal was originally announced last October, but was put on hold in March due to the CFIUS investigation, initiated after Republicans in Congress raised concerns about putting such semiconductor technology into the hands of a foreign company. The CFIUS is a national security panel made up of 11 government agencies, including the U.S. Department of Defense (DoD), which had been holding out on approving the merger due to the security concerns.
As a result, the CFIUS had been unable to make a formal recommendation upon its deadline, and under the Exon-Florio guidelines, U.S. President George Bush would have had to accept or reject the deal by May 8, 15 days after the deadline for the CFIUS approval. The CFIUS approval announced Thursday saves Bush from having to formally wade into the controversial deal.
The European Commission warned the U.S. last week that it was keeping a close eye on the acquisition. The Dutch government also warned that the deal could potentially cause damage to the relationship between the U.S. and the Netherlands.