The U.S. Business and Industry Council--a non-profit business organization that claims to have some 1,500 members--this month has been distributing a video tape to high-level government officials in an attempt to convince the U.S. to block the proposed ASML-SVG merger. Last October, ASML, based in the Netherlands, announced plans to buy San Jose-based SVG for about $1.6 billion in stock to become the world's largest supplier of lithography tools for chip manufacturing.

The existence of the video tape---entitled "Why the Sale of SVG Co. is bad for the United States"--has angered top SVG executives, who called the move by the non-profit business organization a "smear campaign."

While ASML was moving ahead to close the deal in the first quarter of this year, a 45-day review of the acquisition was instituted by the U.S. Congress' Committee on Foreign Investment under the Exon-Florio review process because of concerns about national security (see March 8 story). Much of the concern centers on SVG's Tinsley Laboratories unit, which had supplied the U.S. government with lens-polishing capabilities for defense satellites in the 1990s (see March 20 story).

In an attempt to highlight those concerns, the U.S. Business and Industry Council group has sent 650 copies of the 15-minute tape to members of Congress, the Departments of Defense and Commerce, and other U.S. government offices, said Kevin Kearns, president of the organization, which is based in Washington.

Orchestrated and distributed by the non-profit business organization, the tape includes brief testimonials about potential problems with the ASML-SVG merger from three individuals--Kearns; David Markle, who is chief technology officer of Ultratech Stepper Inc., and Edward Dohring, the former president of Silicon Valley Group's Lithography Division.

Dohring, who was president of the Wilton, Conn.-based operation until his retirement in 1998, could not be reached by SBN for comment. But in separate telephone interviews this week, Kearns and Markle confirmed the existence of the tape--as well as the intent to block the proposed ASML-SVG merger.

"We have no vested interest in the proposed ASML-SVG merger," Kearns told SBN. "We are a non-profit organization."

"But we're opposed to the deal," he declared. "We would also like President Bush to oppose the deal. The administration has not been served well by pressure from ASML, SVG, and Intel to rush ahead and push the merger through."

Intel Corp. and all the board members of the U.S.-based Semiconductor Industry Association have expressed unanimous support of the acquisition, according to Craig Barrett, president and CEO of Intel (see March 15 story).

But Markle said the main problem with the ASML-SVG merger involves national security issues, particulary SVG's Tinsley Laboratories unit. "Tinsley has an unmatched reputation for aspheric optics," he said. "They are also the only company in the world that has developed the complete optics for EUV."

Markle was referring to extreme ultraviolet (EUV) technology, a next-generation lithography (NGL) tool that promises to develop chips at linewidth geometries at 0.07-micron.

Because of the planned AMSL-SVG merger, ASML will eventually gain rights to sell a EUV tool that is being developed by the EUV Limited Liability Co. (LLC) consortium. This consortium that includes Advanced Micro Devices, IBM, Infinion, Intel, Micron, Motorola, and several U.S. government labs.

"With the acquisition SVG by ASML, I suppose the Tinsley technology will be transferred to Ziess," Markle said, referring to ASML's lithography-lens making partner in Karl Ziess of Germany.

"Then, this technology will be lost to the United States for good," Markle warned.

But the proposed ASML-SVG merger, including the Tinsley technology, has already been under scrutiny for some time, it was noted.

The review clock is ticking for the ASML-SVG merger. The U.S. 45-day review period is set to expire within the next week, Markle said. So one of the main reasons for sending the tape at the 11th hour is to force the U.S. government to review the merger--instead of putting its "rubber stamp" on the deal, Markle added.

The existence of the tape came to light at last week (April 11), during interviews at a press event hosted by the EUV LLC consortium in Livermore, Calif. The U.S.-led consortium said it has demonstrated the world's first EUV prototype tool. Eventually, ASML will be able to market and sell systems based on technology developed by the consortium if it's acquisition of SGV is approved, according to some industry officials.

Papken S. Der Torossian, president and chief executive of SVG--who was present at the EUV press event--expressed his anger about the tape, and, of course, the people involved.

Ironically, Markle was also present at the EUV event, which also upset the SVG executive. "If I knew (Markle) was here, I would not have shown up," Der Torossian said in an interview with SBN.

Der Torossian called the tape a simple "smear campaign" to derail the ASML-SVG merger. "We don't believe there are any national security issues involved here," he said.

In the meantime, he added that the delay in the merger is already causing problems for SVG. "We think the merger will close in the middle of May, he said. "But I'm losing business and momentum in the market," he said.

He also insisted that the ASML-SVG merger is a "win-win" for the companies involved as well as the industry as a whole.

AMSL officials could not be reached for comment.