Photon Control : MD&A Q1 2021

Management's Discussion and Analysis

For the three months ended March 31, 2021

(in Canadian dollars, amounts in thousands except number of shares and per share amounts)

DATED May 10, 2021

This Management's Discussion and Analysis ("MD&A") provides information for the three months ended March 31, 2021. This MD&A is prepared in accordance with National Instrument 51-102F1, and should be read in conjunction with Photon Control Inc.'s (the "Company" or "Photon Control") unaudited condensed interim consolidated financial statements and accompanying notes for the three months ended March 31, 2021, and the consolidated financial statements and accompanying notes for the years ended December 31, 2020 and 2019. These documents, along with additional information about the Company, including the Annual Information Form ("AIF"), are available at www.photoncontrol.com and www.sedar.com.

This MD&A contains forward-looking information within the meaning of Canadian securities laws, and the use of non-GAAP measures. Refer to "Cautionary Statement Regarding Forward-Looking Statements" and "Cautionary Statement Regarding Certain Non-GAAP Performance Measures" included within this MD&A.

The financial data contained in this report and in the unaudited condensed interim consolidated financial statements and accompanying notes of the Company for the three months ended March 31, 2021 have been prepared in accordance with International Financial Reporting Standards ("IFRS") and are stated in Canadian dollars, unless otherwise noted.

1 OVERVIEW AND HIGHLIGHTS

1.1 Photon Control

Photon Control was incorporated on September 6, 1988 and designs, manufactures and distributes a wide range of optical sensors and systems to measure temperature and position. These products improve performance and enable innovation for our customers and are used in the semiconductor industry. Photon Control's products provide industry-leading accuracy, reliability and quality in the most extreme conditions and are backed by a team of experts providing a variety of on-site and remote services including custom design, installation, training, and support. The Company is headquartered in an ISO 9001:2015 manufacturing facility in Richmond, British Columbia, Canada, has manufacturing, sales and research and development offices in California, and a sales distribution network across the globe. Photon Control is listed on the Toronto Stock Exchange (the "TSX"), trading under the symbol "PHO".

1.2 2021 Highlights and Outlook

On May 10, 2021, the Company announced that it had entered into an arrangement agreement (the "Arrangement Agreement") with MKSI Instruments, Inc. ("MKSI") (NASDAQ: MKSI), a global provider of instruments, systems, subsystems and process control solutions based in Andover, Massachusetts, pursuant to which MKSI will acquire the Company for $3.60 per common share in an all-cash transaction (the "Transaction") valued at approximately $387 million. The Board of Directors and its special committee of independent members of the board have unanimously recommended that the shareholders vote in favour of the Transaction. The Transaction is subject to customary closing conditions including approval by Photon Control securityholders, and is expected to close in the third quarter of 2021. For full Transaction details reference should be made to the Company's news release dated May 10, 2021.

2020 was a highly successful year for the Company as revenues nearly doubled year over year from $32,730 to $64,657. The following highlights the most recent significant corporate and financial events of the Company:

• In May 2021, the Company reported record quarterly revenues of $17,967 for the three months ended March 31, 2021 and net income of $2,964.
• In March 2021, the Company reported record annual revenues and net income of $64,658 and $14,074, respectively, and fourth quarter revenues of $14,917 and net income of $1,157.
• In March 2021, the Company was recognized for its fiber optic technology and engineering expertise as critical contributions to the International Thermonuclear Experimental Reactor ("ITER"), one of the most ambitious energy projects in the world today.

Achieving our stated growth strategy

Having nearly doubled our year over year revenue growth in 2020 and achieving another record quarter for revenue in Q1 2021, we remain well placed to leverage that momentum. Key drivers include growth in the underlying semiconductor industry, which is fast becoming a structural growth story, with demand drivers for advancements in data, artificial intelligence, 5G, and automotive sector. The etch segment in the semiconductor industry, in which the Company is most exposed, continues to be the fastest growing segment as the complexity and number of process steps continue to increase.

Other process steps such as deposition are expected to require technological benefits of fiber optic sensors which represents significant opportunity for future growth for Photon.

The company continues to invest in research and development ("R&D") to meet not only the current customer demand for innovative solutions but bring forward exciting new ideas and technological advancement. In 2020, the Company invested $5,710 in R&D or 9% of revenue and we have continued this strong investment in the company's future with a further $2,019 or 11% of revenue in Q1 2021. As part of this strategy, Fiber Bragg Grating ("FBG") is a key area of focus as opportunity exists to cost effectively add additional sensing points to enable improved yields and repeatability for end customers. We also continue to push the boundaries of our existing sensing technology as global requirements demand higher levels of precision and accuracy.

We continue to actively look outside the organization for new partnership and acquisition opportunities and will leverage the strength of our balance sheet to convert these opportunities into revenue growth and strategic positioning within the industry. Heading into the remainder of 2021 and beyond, we strive to get our sensors designed into new process tools from the leading OEMs in order to further grow our market share and look to capitalize on other opportunities presented by the rapid growth of the semiconductor industry.

Strengthening our underlying business

Our leadership team of Chief Executive Office ("CEO") Nigel Hunton, Chief Financial Officer ("CFO") Damian Towns, VP Semiconductor Sales Eva Valencia, and VP Technology & Operations Phil Schick have over 100 years of combined semiconductor, financial, and engineering and operational expertise. As a complement to our leadership team, we ramped up efforts to attract and retain key personnel throughout the organization that we believe are key in developing a strong success driven culture.

Critical to our success is maintaining quality, on-time deliveries, and furthering development initiatives for our semiconductor and other customers. As a result, we invested in key roles within our research and development and quality teams to develop and refine products and support customer requirements and change management. Additionally, we utilized new machinery and rapid prototyping equipment acquired in 2020 to expand our manufacturing capacity and capabilities as we manage through the rapidly changing industry and COVID-19 environment.

We remain committed to reducing our impact on the planet by safeguarding the natural habitat in which we operate and supporting the continuous improvement for sustainable waste management initiatives at both of our office locations. We also support various social initiatives including diversity in the workplace. In early 2021, as part of these ongoing initiatives we joined the Responsibility Business Alliance ("RBA"). The RBA is the world's largest industry coalition dedicated to corporate social responsibility in global supply chains where members, suppliers and stakeholders collaborate to improve working and environmental conditions and business performance through leading standards and practices.

Managing through COVID-19

In March 2020, the World Health Organization declared the novel coronavirus ("COVID-19") as a pandemic which led to a series of public health measures being implemented to combat the spread of the virus. These measures have continued into Q1 2021 as local health authorities react to growing numbers of positive cases and new variants of the disease. While these events cause significant uncertainties that could have a negative impact on business activity, the Company has been proactive

in taking immediate measures to reduce risk of disruption and protect the safety of our teams. Additionally, we have experienced minimal manufacturing, supply chain, and distribution disruptions which has allowed us to deliver on customer obligations and achieve another record quarter.

Our primary goal continues to be ensuring the health and safety of our employees, customers, suppliers, and their families. In response to the pandemic, we quickly adopted virtual collaboration tools and implemented social distancing measures, access restrictions throughout our manufacturing sites, additional safety and cleaning protocols, and other best practices as adopted by our customers and others.

Photon Control meets the definition of an essential service in British Columbia and the United States. Our customers along with their supply chains have been designated as critical companies and the semiconductor industry has stated that companies around the world involved in the semiconductor industry are considered essential.

1.3 Industry, Market and Products Temperature and Position Sensors

The semiconductor capital equipment industry offers several significant and growing applications for our technology and is the primary source of revenue for Photon Control. The Company designs and produces precision temperature and position sensors used by semiconductor wafer fabrication equipment ("WFE") manufacturers in our ISO-certified manufacturing facility. The manufacturing of silicon wafers for semiconductors involves a multitude of complex processes; monitoring and maintaining the correct wafer position and wafer temperature during these processes is critical to achieving the product yield and productivity required for high-volume manufacturing. The measurement accuracies required of such sensors are becoming more challenging as semiconductor devices scale to atomic level dimensions and become more three-dimensional ("3D") in nature. Furthermore, these sensors must maintain their accuracy in harsh environments encountered in critical semiconductor equipment, such as the strong radio frequency electromagnetic fields encountered in plasma etch and plasma-assisted deposition systems. Photon Control's fiber optic sensors are immune to radio frequency interference and are thus able to deliver the high accuracies required for state-of-the-art process control.

The need for scaling semiconductor devices to atomic level dimensions has also created a need for more measurement points inside the chamber. Temperature and position anomalies have a greater impact on yield at these atomic level dimensions and must be measured and controlled more precisely which increases the value and use of fiber optic sensors. In addition, as semiconductor process nodes go beyond sub-7nm, the number of measurement points and etch steps have increased more than four-fold. Similarly, the proliferation of 3D and advanced memory chip designs have become more common and comprises an increasingly significant percentage of total chips manufactured. These factors have driven and are expected to continue to drive demand for the Company's products.

Market Landscape

The global semiconductor industry is fast-paced, competitive and constantly innovating to increase processing speed and power of semiconductor devices. Memory bit density and logic transistor counts are increasing every year to meet the demands driven by the proliferation of artificial intelligence, high-performance computing, IoT, and 5G. The ability to anticipate these technological advances and

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