jurisdiction in which we conduct business. Regulations include but are not limited to those related to environment, corruption, bribery, import and export controls, competition, product safety, workplace health and safety, employment, labor and data privacy. The following describes certain significant regulations that may have a material effect on our capital expenditures, earnings and competitive position. For additional information about risks related to government regulations, please refer to “Risk Factors – Legal, Tax, Regulatory and Compliance Risks” in Part I, Item 1A of this Annual Report on Form 10-K.

Trade Compliance

We are subject to trade compliance laws in both the United States and other jurisdictions where we operate, including export regulations such as the U.S. Export Administration Regulations, administered by the U.S. Department of Commerce’s Bureau of Industry and Security, and the International Traffic in Arms Regulation, administered by the Department of State’s Directorate of Defense Trade Controls.

Environmental Regulations

We are subject to various, federal, state, local and international regulations relating to the protection of the environment, including those governing discharges of pollutants into the air and water, the management and disposal of hazardous substances and waste and the cleanup of contaminated sites.

Human Capital

In order to compete and succeed in highly competitive markets and industries that are subject to rapid technological change, we believe it is critical to attract, motivate and retain a dedicated, talented and innovative team of employees. As part of these efforts, we strive to foster a diverse, equitable and inclusive community, invest in continuous learning and development, offer a competitive compensation and benefits program and provide a safe and healthy workplace.

As of December 31, 2019,2020, we employedhad a total workforce of approximately 5,500 persons.5,800 individuals across 19 countries, with 26% located in the Asia-Pacific region, 25% located in Europe and the Middle East and 49% located in North America. Of our total workforce, approximately 5,400 were employees and approximately 400 were temporary workers. Of our total workforce, 13% work in research and development, 64% work in operations, manufacturing, service and quality assurance, and 23% work in sales, order administration, marketing, finance, legal, information technology, general management and other administrative functions.

Diversity, Equity and Inclusion

At MKS, our commitment to diversity, equity and inclusion is core to our culture. We believe that diversity of gender, race, ethnicity, sexual orientation, culture, education, background and experience fuels innovation and results as well as enables our employees to succeed. Our Board of Directors is comprised of 50% female members and is 25% racially diverse, and our Lead Director is a woman. We have been recognized for our commitment to advancing women’s representation on the boards of directors of public companies. In addition, our executive team is comprised of 20% female members and is 20% racially diverse. In 2020, as part of our commitment to diversity, equity and inclusion, over 120 of our leaders around the world completed a six-week diversity, equity and inclusion program hosted by a consulting firm recognized as best-in-class in the area of diversity, equity and inclusion capability building. We plan to expand the diversity, equity and inclusion program to our next level of leaders as well as offer diversity, equity and inclusion training for all employees in 2021. We also proactively provide our hiring managers with diverse candidate slates in our employee recruiting process.

Learning and Development

MKS is committed to investing in learning and professional development. Our employees have access to a wide range of programs, classes and resources to help them excel in their careers and share what they learn with their colleagues. Our performance management process includes performance feedback and career development discussions that are dynamic and actionable throughout the year. In 2020, we introduced a pilot course to develop our focus on employee engagement, change management and leadership excellence, which will be broadly rolled out in 2021. In 2020, our leaders also completed the diversity, equity and inclusion course described above. In addition, we provide financial support for college education and access to online learning for all employees in local languages to help further the careers of our entire workforce.

Compensation and Benefits

MKS is committed to providing total compensation packages that attract, motivate and retain our employees.  Additionally, MKS is committed to recognizing and rewarding each employee’s sustained performance and results. In 2020, we launched a recognition program for all U.S. employees that allows peer-to-peer recognition and recognition by managers; this program will be expanded globally by the end of 2021. In 2020, we also introduced a global flexible work policy that will extend beyond the ongoing success depends uponCOVID-19 pandemic. We are committed to ensuring that our total compensation packages are externally competitive while supporting our business plans and strategies. As employee turnover is an indicator of employee satisfaction, we monitor turnover globally. MKS has a very stable and committed workforce, as evidenced by low voluntary turnover. Our 12-month rolling average for voluntary turnover at the end of 2020 was 6.6%. Our employee average tenure is more than 10 years.

Health and Safety and Pandemic Response

MKS is committed to providing a safe and healthy workplace for all employees. We accomplish this through strict compliance with applicable laws and regulations regarding workplace safety, including recognition and control of workplace hazards, tracking injury and illness rates, utilizing a global travel health program and maintaining detailed emergency and disaster recovery plans.

MKS’ top priority during the ongoing COVID-19 pandemic has been and continues to be protecting the health and safety of our employees and their families, our customers and our community. The commitment to this effort is evidenced by the extensive planning and numerous actions MKS swiftly took to respond to the pandemic, including the development and implementation of an infectious disease playbook, a work from home program, health check protocols and screenings for all employees working on site, new process workflows at physical sites to ensure reduced contact for employees working on site, contact tracing processes and protocols, quarantining and testing protocols for exposure and positive tests, travel guidelines and protocols to ensure employees who must travel for work can do so safely, and phased return-to-work plans and approval processes to enable non-manufacturing employees to return to work when permitted by local government regulations. MKS continues to maintain workplace flexibility such as working remotely where possible to reduce the number of people who are on site each day. In May 2020, MKS launched a worldwide survey of its people to better understand how remote workers were doing during the pandemic. The results of this survey have informed our continued abilityresponse to attractthe COVID-19 pandemic and retain highly skilledwere shared with all of our employees. Outside

Additional information regarding MKS’ activities related to its people and sustainability can be found in our Corporate Social Responsibility Brochure, which is accessible through the Corporate Social Responsibility section of our website at https://www.mksinst.com/corporate-social-responsibility. Our Corporate Social Responsibility Brochure is updated periodically. This website address is intended to be an inactive textual reference only. None of the United States, there are certain countries where our employees are representedinformation on, or accessible through, MKS’ website is part of this Annual Report on Form 10-K or is incorporated by works councils or trade unions, as is common practice or required by law. We believe our employee relations are good.

This section describes certain risks we face in our business. Additional risks that we do not yet know of or that we currently believe are immaterial may also impair our business. If any of the events or circumstances described in the following risksthis section actually occurs, our business, financial condition or operating results wouldcould suffer, and the tradingmarket price of our common stock could decline. In assessing these risks, investors should also refer to the other information contained or incorporated by reference in this report and our other filings with the Securities and Exchange Commission.

Risks Related to the COVID-19 Pandemic

The COVID-19 pandemic may have a materially adverse effect on our business, financial condition and operating results, as well as on the operations and financial performance of our customers and suppliers. We are unable to predict the extent to which the pandemic and related restrictions will impact our business, operations, financial performance and the achievement of our strategic objectives.

The COVID-19 pandemic has subjected, and continues to subject, our operations, financial performance and financial condition to a number of risks, including, but not limited to, those discussed below.

Impact of Governmental Regulatory Actions to Combat the COVID-19 Pandemic

As a result of the COVID-19 pandemic, governmental authorities across the world have implemented and are continuing to implement numerous and constantly evolving mandates to try to contain the virus, including manufacturing restrictions, limits on gatherings, quarantines, shelter-in-place orders, and business shutdowns. Mandates providing for business shutdowns generally exclude certain essential services, and those essential services commonly include critical infrastructure and the businesses that support such critical infrastructure, as well as healthcare-related businesses and defense. These regulatory mandates have impacted and may further impact our workforce and operations, as well as those of our customers and suppliers. While all of our facilities are currently operational, in some cases they have operated at a diminished capacity, as certain portions of our business have not met applicable exclusion requirements, and were temporarily halted. Some customers have had highly limited operations during the pandemic. For example, our research and defense market was negatively impacted in the first half of 2020 by university and research lab closures resulting from COVID-19. Further, some of our facilities and some of our suppliers’ facilities have been constricted by government mandates restricting the number or percentage of personnel that are permitted to work at a facility. Although many government mandates have had specific expiration dates, some of those mandates have been extended multiple times or lifted and then re-imposed when new cases of the virus have increased substantially. As a result, there is considerable uncertainty regarding the duration of such government mandates and potential future restrictions, and complexity in ensuring compliance. Restrictions on our manufacturing, support operations or workforce, or similar limitations for our vendors and suppliers, could limit our ability to meet customer demand and could have a material adverse effect on our business, financial condition and operating results.

Impact of the COVID-19 Pandemic on the Global Economy

The COVID-19 pandemic has caused declines in industry and global economic conditions, resulting in adverse regional, and sometimes global, economic conditions. In the event of a widespread recession or other significant downturn in the worldwide economy, demand for our products would likely decline and our business would likely be adversely affected, as our revenue is primarily dependent upon demand from semiconductor manufacturers and other industrial technologies manufacturers, and these markets are largely driven by demand for electronic products, which demand declines in a recession.

Operations-Related Risks

Across all of our business units, we have faced increased operational challenges stemming from the need to protect our employees’ health and safety, site closures, workplace disruptions and restrictions on the movement of people, raw materials and goods, both at our own facilities and at the facilities of our customers and suppliers. A substantial portion of our shipments occurs shortly after an order is received, and therefore we generally operate with a relatively low level of backlog. While orders during the COVID-19 pandemic have been strong, the high volume of orders may be attributable to customers increasing their inventory to reduce their exposure to risks of future supply disruptions, which could result in a sudden and significant decrease in future customer demand for our products. Our failure to anticipate any sudden decrease in order patterns, and reduce our costs accordingly, could result in significant excess inventory, and our business, financial condition and operating results could be harmed.We may also experience customer requests for order delays or cancellations, payment deferrals or other contract modifications, supply chain liquidity issues, and delayed deliveries and other factors related directly and indirectly to the COVID-19 pandemic. In addition, any inability to timely perform our obligations under any contract due to government restrictions, or otherwise as a result of the pandemic, could harm our relationship with customers, result in lost business to unconstrained competitors or expose us to disputes or potential litigation, which could be costly and have an adverse effect on our business. Extended periods of disruption to the economy and global supply chain will have a material adverse impact on our business, financial condition and operation results.  

Supply Chain Risks

We have experienced supply chain interruptions as a result of the COVID-19 pandemic. We expect that these interruptions will continue as long as the pandemic is widespread in our suppliers’ locations. Certain of our suppliers have faced difficulties maintaining operations in light of government-ordered restrictions and shelter-in-place mandates. If our suppliers or sub-suppliers are unable to maintain their operations or operating restrictions become more severe, we may encounter difficulties obtaining supplies, which may cause us to fail to meet customer demand or require us to pay higher prices for these materials, either of which could harm our business and profitability. For example, some of our key suppliers located in Malaysia and Mexico have experienced capacity restrictions as a result of government mandates limiting employee headcount in order to maintain social distancing, as well as employee absenteeism due to fear of contracting COVID-19. Further, we rely on sole and limited source suppliers for some of our components and subassemblies that are critical to the manufacturing of our products due to unique component designs as well as specialized quality and performance requirements needed to manufacture our products, which increases our exposure to supply chain disruptions of these components.

Additionally, an economic slowdown caused by the COVID-19 pandemic could harm the financial health of our suppliers and sub-suppliers. Although we regularly monitor the financial health of the companies in our supply chain, financial hardship on our suppliers or sub-suppliers or their bankruptcy, liquidation or closure, could disrupt our ability to obtain raw materials or components required to manufacture our products, adversely affecting our operations. Such incidents could also require us to alter our payment terms with certain suppliers to include certain unfavorable terms to us, including prepaying for raw materials, which could negatively impact our cash flow.

Employee Productivity Risks

In response to the COVID-19 pandemic, we have modified our business practices with respect to our employees, including restricting employee travel, requiring employees to telecommute if they can perform their jobs from home, implementing social distancing measures, enhancing sanitary measures in our facilities, implementing shift changes, and cancelling attendance at events and conferences. Many of our suppliers and service providers have made similar modifications. Further, we have required self-isolation for personnel who were, or may have been, exposed to the COVID-19 virus and required full or partial facility closures in order to implement additional sanitary measures, thus reducing our on-site capacity at these facilities for periods of time. There is no certainty that these measures will be sufficient to mitigate the risks posed by the virus, in which case our employees may contract the COVID-19 virus, our ability to perform critical functions could be harmed, and we may be unable to respond to the needs of our global business. With respect to those employees who are now working remotely, the resources available to them may not enable them to maintain the same level of productivity and efficiency, and these and non-remote employees may face additional demands on their time, such as increased responsibilities resulting from school closures or the illness of family members. While we have experienced only limited absenteeism from those employees who are required to be on-site to perform their jobs, absenteeism may increase in the future and may harm our productivity. Further, our increased reliance on remote access to our information systems increases our exposure to potential cybersecurity breaches. We may take further restrictive actions to mitigate the spread of COVID-19 as government authorities require or recommend or as we determine to be in the best interests of our employees, customers, partners and suppliers, which actions may negatively impact our business and results of operations.

Risks Related to Operating a Global Business

We face significant risks from doing business internationally.

Our business is subject to risks inherent in conducting business globally. International revenues account for a significant portion of total net revenues, with a substantial portion of such sales to customers in Asia (especially China, South Korea, Japan, Israel, and Taiwan) and Europe (especially Germany). We expect that international revenues will continue to account for a significant percentage of total net revenues for the foreseeable future, and that in particular, the proportion of our sales to Asian customers will continue to increase. Additionally, we have substantial international manufacturing, sales and administrative operations, with significant facilities and employee populations in Europe and Asia, and a substantial portion of our manufacturing in China, Israel, Mexico and Singapore. Our international operations expose us to various risks, which include:

If we experience any of the risks associated with international business, our business, financial condition and operating results could be significantly harmed.

We have significant facilities and operations and a considerable number of employees in Israel. A number of our products are manufactured in facilities located in Israel. The Middle East remains a volatile region, and the future of peace efforts between Israel and neighboring countries remains extremely uncertain. Any armed conflicts or significant political instability in the region is likely to negatively affect business conditions and could significantly disrupt our operations in Israel, which would negatively impact our business. Further, many of our employees in Israel are subject to being called for active military duty under emergency circumstances. If a military conflict or war arises, these individuals could be required to serve in the military for extended periods of time, and our operations in Israel could be disrupted by the absence of one or more key employees or a significant number of other employees for a significant period of time. Any such disruption could adversely affect our business.

The U.S. government has taken actions against certain of our customers, particularly in Asia, including indictments for various criminal charges, and in some cases, restrictions on doing business with these customers, including the suspension of our ability to fill outstanding orders. These actions by the U.S. government have caused us, and may in the future cause us, to lose anticipated revenue from these product sales, the amount of which could be significant. In addition, these or other customers could elect to purchase products from unaffected non-U.S. competitors, even when trade restrictions are not in place, jeopardizing our future long-term relationship with them. Further, compliance with regulatory restrictions may cause us to breach contractual obligations, which could result in costs, penalties and litigation.

Additionally, potential customers in certain countries, particularly in Asia, have a strong preference for technology and products developed by suppliers based in their home countries. The trade dispute between the U.S. government and the Chinese government has reinforced and broadened this preference, as these customers and some of our existing customers seek to avoid the uncertainty related to the trade dispute. While we have attempted to mitigate these issues by establishing a significant local presence in many of these countries, companies like us that are based outside of these countries remain at a disadvantage.

Unfavorable currency exchange rate fluctuations may lead to lower operating margins or may cause us to raise or reduce prices, which could result in reduced sales.

A significant portion of our net revenues are from customers in international markets. For the years 2020, 2019 and 2018, international net revenues accounted for approximately 55%, 53% and 51% of our total net revenues, respectively. We also have production facilities where costs are denominated in currencies other than the U.S. dollar. Currency exchange rate fluctuations could have an adverse effect on our net revenues, expenses and operating results and we could experience losses with respect to our hedging activities. Unfavorable currency fluctuations could require us to increase or decrease prices to foreign customers, which could result in lower net revenues from such customers. Alternatively, if we do not adjust the prices

for our products in response to unfavorable currency fluctuations, our operating results would be adversely affected by declining net revenues or profit margins for our products in international markets when the sales are translated into U.S. dollars. Such exchange rate fluctuations could also increase the costs and expenses of our non-U.S. operations when translated into U.S. dollars or require us to modify our current business practices. In addition, most sales made by our foreign subsidiaries are denominated in the currency of the country in which these products are sold and the currency they receive in payment for such sales could be less valuable at the time of receipt as a result of exchange rate fluctuations. We enter into foreign exchange forward contracts to reduce a portion of our currency exposure arising from intercompany sales of inventory as well as intercompany accounts receivable and intercompany loans. However, we cannot be certain that our efforts will be adequate to protect us against significant currency fluctuations or that such efforts will not expose us to additional exchange rate risks.

Risks Related to Our Industries and Markets

Our business depends significantly on capital spending in the semiconductor and consumer electronics industries, which are characterized by periodic fluctuations that may cause a reduction in demand for our products.