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Power Integrations Nasdaq: POWI November 2010
Power Integrations
Nasdaq: POWI
November 2010
Forward-Looking Statements/Non-GAAP Metrics Our presentation and responses to questions may contain forward-looking
Forward-Looking Statements/Non-GAAP Metrics
Our presentation and responses to questions may contain forward-looking statements which
are based on current information that is, by its nature, subject to rapid and even abrupt
changes. Due to risks and uncertainties associated with the company's business, actual
results could differ materially from those projected or implied by management's forward-
looking statements. These risk factors are explained under the caption “Risk Factors” in the
company's most recent reports on Form 10-K and Form 10-Q. The company is under no
obligation to update or alter its forward-looking statements.
This presentation may also contain certain non-GAAP financial information that excludes
expenses (and the related tax effects thereof) recorded under Statement of Financial
Accounting Standards No. 123R, “Share-based Payment,” which requires the recognition of
expenses relating to share-based payments such as stock options. Also excluded from non-
GAAP financial results in certain periods are charges for the write-off of purchased in-process
research and development as well as certain intangible assets. Reconciliations of non-GAAP
financial metrics to GAAP results are available on the investor page of the Power Integrations
website, http://investors.powerint.com.
© Copyright 2009 Power Integrations
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Secular Growth Story in Analog Semis Leading transition to highly integrated AC-DC power supplies Energy
Secular Growth Story in Analog Semis
Leading transition to highly integrated AC-DC power
supplies
Energy efficiency driving market penetration
Strong position in LED lighting, smart meters
High-power products expand SAM to $2B
© Copyright 2009 Power Integrations
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Nine Consecutive Years of Revenue Growth $M Revenue for first three quarters of 2010 already
Nine Consecutive Years of Revenue Growth
$M
Revenue for first three quarters of 2010
already exceeds 2009 total revenue
200
150
100
50
0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
1 st Nine
Months
© Copyright 2009 Power Integrations
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Our Opportunity Power supplies have lagged the electronics market in the adoption of integrated circuits
Our Opportunity
Power supplies have
lagged the electronics
market in the adoption of
integrated circuits
© Copyright 2009 Power Integrations
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Highly Integrated Power Supplies Replacing Legacy Technologies DVD power supply with 70 discrete components Equivalent
Highly Integrated Power Supplies Replacing
Legacy Technologies
DVD power supply with 70
discrete components
Equivalent power supply with POWI:
36 components
Linear
transformer:
Adapter with POWI:
weighs 12 oz.
weighs 2 oz.
© Copyright 2009 Power Integrations
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Relentless Innovation © Copyright 2009 Power Integrations 7
Relentless Innovation
© Copyright 2009 Power Integrations
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Multi-Level Innovation System Design (“External IP”) IC Packaging Integrated Circuits/Topologies (LinkSwitch,
Multi-Level Innovation
System Design
(“External IP”)
IC Packaging
Integrated Circuits/Topologies
(LinkSwitch, TinySwitch, TOPSwitch)
High-Voltage Silicon Process
© Copyright 2009 Power Integrations
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Multi-Level Innovation System Design IC Packaging Integrated Circuits/Topologies High-Voltage Silicon Process
Multi-Level Innovation
System Design
IC Packaging
Integrated Circuits/Topologies
High-Voltage Silicon Process
High-Voltage
Low-Voltage
MOSFET
Controller
© Copyright 2009 Power Integrations
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Multi-Level Innovation System Design IC Packaging Integrated Circuits/Topologies High-Voltage Silicon Process
Multi-Level Innovation
System Design
IC Packaging
Integrated Circuits/Topologies
High-Voltage Silicon Process
Monolithic High-Voltage IC
© Copyright 2009 Power Integrations
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Multi-Level Innovation System Design IC Packaging Integrated Circuits/Topologies High-Voltage Silicon Process ©
Multi-Level Innovation
System Design
IC Packaging
Integrated Circuits/Topologies
High-Voltage Silicon Process
© Copyright 2009 Power Integrations
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Multi-Level Innovation System-Level Innovations IC Packaging Integrated Circuits/Topologies High-Voltage Silicon
Multi-Level Innovation
System-Level Innovations
IC Packaging
Integrated Circuits/Topologies
High-Voltage Silicon Process
Advanced, feature-rich IC designs
minimize component count, complexity
and system cost
© Copyright 2009 Power Integrations
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Multi-Level Innovation System-Level Innovations IC Packaging Integrated Circuits/Topologies High-Voltage Silicon
Multi-Level Innovation
System-Level Innovations
IC Packaging
Integrated Circuits/Topologies
High-Voltage Silicon Process
New, proprietary eSIP™ package vs. standard
TO-220 package
© Copyright 2009 Power Integrations
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Multi-Level Innovation Examples: D25 2KBP06M 600 V C63 C64 2 3 33 uF System Design
Multi-Level Innovation
Examples:
D25
2KBP06M
600 V
C63
C64
2 3
33 uF
System Design
120
uF
R1
R3
400 V
400 V
15 k
10 M
R73
Q4
FillSwitch™
U12
3.9
FQP13N50
LM431
Circuit
IC Packaging
R2
100
k
R4
200 k
1%
L1
R65
D26
Integrated Circuits/Topologies
12mH
DL4007
2 M
C70
High-Voltage Silicon Process
SlimCore™
Transformer
© Copyright 2009 Power Integrations
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4
-
+
1
Multi-Level Innovation Delivers Value Ultra-simple power supplies System Design • Fewer components • Shorter
Multi-Level Innovation Delivers Value
Ultra-simple power
supplies
System Design
• Fewer components
• Shorter design cycles
IC Packaging
• Easy to manufacture
Integrated Circuits/Topologies
• Less raw materials
High-Voltage Silicon Process
Highly energy-efficient
Equal in cost compared to
discrete solutions
© Copyright 2009 Power Integrations
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Cost-Effective Integration 36-watt adapter with discretes: 70 components © Copyright 2009 Power Integrations 16
Cost-Effective Integration
36-watt adapter with discretes:
70 components
© Copyright 2009 Power Integrations
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Cost-Effective Integration 36-watt adapter with POWI chip: 25 components © Copyright 2009 Power Integrations 17
Cost-Effective Integration
36-watt adapter with POWI chip:
25 components
© Copyright 2009 Power Integrations
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Creating Value Through Integration Slashes eBOM, labor costs, factory capital investment Increases reliability of end
Creating Value Through Integration
Slashes eBOM, labor costs, factory capital investment
Increases reliability of end product
Increases factory throughput, reduces inventory exposure
© Copyright 2009 Power Integrations
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Leading the Transition to Highly Integrated Power Supplies • Fairchild • Sanken Integrated • ST
Leading the Transition to Highly Integrated
Power Supplies
• Fairchild
• Sanken
Integrated
• ST Micro
• ON Semi
POWI
• Infineon
20%
• Fairchild
• iWatt
• Infineon
• BCD
Discretes
• ON Semi
• Active
• ST Micro
• Leadtrend
• NXP
• OnBright
80%
Linear Transformers
1970
1994
Today
© Copyright 2009 Power Integrations
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Power Supply Unit Volume
Large, Diverse Markets – All Electronic Products Need Power © Copyright 2009 Power Integrations 20
Large, Diverse Markets –
All Electronic Products Need Power
© Copyright 2009 Power Integrations
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$1.6 Billion Addressable Market (0 – 50 watts) ● White goods ● Air conditioners ●
$1.6 Billion Addressable Market (0 – 50 watts)
● White goods
● Air conditioners
● TV standby
● Small appliances
Consumer
● Set-top boxes
● DVD players
● LED general lighting
● Smart meters
Industrial
● Industrial control
● Motor control
Communications
● UPS
● Mobile phone chargers
Computer
● Cordless phone adapters
● Broadband modems
● VoIP phones
● Desktop/server standby
● LCD monitors
● Printers
© Copyright 2009 Power Integrations
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Well Diversified Revenue Mix 2010 through September 2002 38% 25% Consumer Consumer 9% Industrial 43%
Well Diversified Revenue Mix
2010 through
September
2002
38%
25%
Consumer
Consumer
9% Industrial
43%
20% Industrial
23%
Comms
30%
Computer
Communications
12%
Computer
© Copyright 2009 Power Integrations
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Revenue Mix By Product Family Q1 – Q3 2010 LinkSwitch 37% 18% 1% Other TOPSwitch
Revenue Mix By Product Family
Q1 – Q3
2010
LinkSwitch
37%
18%
1%
Other
TOPSwitch
TinySwitch
24%
TinySwitch
38%
52%
© Copyright 2009 Power Integrations
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Supply Chain for Power Supplies Power Supply Manufacturers OEMs including including Distribution (~65%) Phihong
Supply Chain for Power Supplies
Power Supply
Manufacturers
OEMs
including
including
Distribution
(~65%)
Phihong
HiPro
Nokia, LG, Samsung
Delta
AcBel
Dell, HP, Apple, Lenovo
Liteon
TenPao
Direct
Sunlin
Dongdo
Sony, Panasonic
(~35%)
Leader
RF Tech
Mitsubishi, Electrolux
© Copyright 2009 Power Integrations
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Fabless Manufacturing Model Wafers Japan: OKI, Epson Germany: X-Fab Assembly Malaysia Philippines China Thailand
Fabless Manufacturing Model
Wafers
Japan: OKI, Epson
Germany: X-Fab
Assembly
Malaysia
Philippines
China
Thailand
Test
Malaysia
China
Thailand
San Jose (in-house)
© Copyright 2009 Power Integrations
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Worldwide Technical Support 13 field labs with EMI test capability Rated #1 by customers for
Worldwide Technical Support
13 field labs with EMI test capability
Rated #1 by customers for technical support
N. China
Chicago
UK
Germany
S. China
• Korea
Atlanta
• Japan
Italy
San Jose (HQ)
India
• Taiwan
Singapore
© Copyright 2009 Power Integrations
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Long-Term Secular Growth Drivers 1. Ongoing transition to IC-based power supplies • Integration saves labor,
Long-Term Secular Growth Drivers
1. Ongoing transition to IC-based power supplies
• Integration saves labor, materials, and design effort while improving
reliability and durability
2. Energy-efficiency
• Driven by standards and consumer awareness
3. LED lighting and smart meters
• Emerging applications for AC-DC power conversion
• Both require efficient, reliable power supplies
4. Rollout of high-power products (>50 W)
• Significant expansion of addressable market
© Copyright 2009 Power Integrations
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Energy Efficiency Becoming a Key Driver Inefficient power supplies (“energy vampires”) waste energy during normal
Energy Efficiency Becoming a Key Driver
Inefficient power supplies (“energy vampires”) waste energy during normal
operation and standby mode
Standby power is consumed when a product is in its lowest-power mode,
e.g., a computer or printer in sleep mode, a TV turned off by remote
control, an appliance with electronic controls and LED displays, or a
cellphone charger left plugged into an outlet
According to Berkeley National Laboratory, as much as 10% of residential
electricity is consumed by products in standby – about $4B worth per year
in the U.S. alone
© Copyright 2009 Power Integrations
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Tackling Standby Power Waste Standby power accounts for 5-10% of residential electricity use EcoSmart ®
Tackling Standby Power Waste
Standby power accounts
for 5-10% of residential
electricity use
EcoSmart ® technology
drastically cuts standby
with no added cost
European Union adopted
mandatory standby limits
on January 1, 2010
© Copyright 2009 Power Integrations
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Importance of Standby Efficiency Power supply standby efficiency Total input power Loss in Power supply
Importance of Standby Efficiency
Power supply
standby efficiency
Total input
power
Loss in
Power supply
Power used by
the product
33%
1.5 W
1.0 W
0.5W
67%
0.75 W
0.25 W
0.5W
Doubling standby efficiency cuts waste by factor of four
© Copyright 2009 Power Integrations
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A Solution: EcoSmart ® Technology • ON/OFF control skips cycles when less power needed (e.g.
A Solution: EcoSmart ® Technology
• ON/OFF control skips cycles when less power needed
(e.g. standby mode)
• Provides constant efficiency independent of load
© Copyright 2009 Power Integrations
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Innovation For Energy-Efficiency EcoSmart ® technology meets all energy efficiency standards Practically constant
Innovation For Energy-Efficiency
EcoSmart ® technology meets all energy efficiency standards
Practically constant efficiency across the load range
Recognized leader in green power supply solutions
EcoSmart
© Copyright 2009 Power Integrations
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No-load Power Savings Based on standard 5W Adapter © Copyright 2009 Power Integrations 33
No-load Power Savings
Based on standard 5W Adapter
© Copyright 2009 Power Integrations
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Making a Difference to the Environment Sales of EcoSmart Chips (Cumulative units, in millions) 3500
Making a Difference to the Environment
Sales of EcoSmart Chips
(Cumulative units, in millions)
3500
3000
More than 3 billion
EcoSmart ® ICs shipped
2500
2000
1500
1000
Estimated standby power
savings of $4 billion between
1998 and 2009
500
0
© Copyright 2009 Power Integrations
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34
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Recognized Leader in Energy Efficiency Member of clean-tech stock indices • The Cleantech Index (Ticker:
Recognized Leader in Energy Efficiency
Member of clean-tech stock indices
• The Cleantech Index (Ticker: CTIUS)
• Nasdaq Clean Edge Green Energy (CELS)
• Ardour Global Index (AGIGL)
Twice named a top 20 sustainable stock
by SustainableBusiness.com
ENERGY STAR ® award recipient
Star of Energy Efficiency award winner
© Copyright 2009 Power Integrations
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Global Push for Tighter Efficiency Standards A wide range of governmental programs are addressing the
Global Push for Tighter Efficiency Standards
A wide range of governmental programs are addressing the
efficiency of energy-using products
EC EcoDesign Directive
EC Code of Conduct
EISA 2007
Korea KEMCO
Calif. Energy
Commission
Japan ECCJ /
Top Runner
China CECP
ENERGY STAR ®
© Copyright 2009 Power Integrations
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Tight Specs for External Power Supplies EcoDesign Directive (2010) CEC (2007) Code of EISA (July
Tight Specs for External Power Supplies
EcoDesign
Directive (2010)
CEC (2007)
Code of
EISA
(July 2008)
ENERGY STAR ® 2.0
(Nov. 2008)
Conduct
(Jan. 2009)
China CECP
Australia
(Dec. 2008)
Linear power supplies are rapidly disappearing
New Zealand
(April 2009)
Voluntary specifications in italics; all others are mandatory standards
© Copyright 2009 Power Integrations
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Five-Star Efficiency for Cellphone Chargers Two-thirds of cellphone energy use is “no-load” consumption by
Five-Star Efficiency for Cellphone Chargers
Two-thirds of cellphone
energy use is “no-load”
consumption by chargers
Top 5 handset OEMs
introduced rating scale for
no-load efficiency
EcoSmart® easily delivers
five-star performance
© Copyright 2009 Power Integrations
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Energy Vampire vs. EcoSmart ® © Copyright 2009 Power Integrations 39
Energy Vampire vs. EcoSmart ®
© Copyright 2009 Power Integrations
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Replacing Linears: POWI vs. Discretes Charger With Discretes • More than 50 components • Protection
Replacing Linears: POWI vs. Discretes
Charger With Discretes
• More than 50 components
• Protection features require
external components
Charger With LinkSwitch ® -LP
• Only 14 components
• Integrated protection
features
© Copyright 2009 Power Integrations
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LED Lighting and Smart Meters Incandescent lights becoming obsolete/illegal Smart grid deployment gaining momentum
LED Lighting and Smart Meters
Incandescent lights becoming
obsolete/illegal
Smart grid deployment gaining
momentum
Both require efficient, durable
power supplies
LED and Metering Combined Revenues
($M)
18
12
6
0
2006
2007
2008
2009
2010 YTD
© Copyright 2009 Power Integrations
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New Products Add Lighting-Specific Features Garnered strong share of market to-date with standard products –
New Products Add Lighting-Specific Features
Garnered strong share of market
to-date with standard products –
no lighting-specific features
LinkSwitch™-PH and -PL are the
only integrated chips with dimming
and single-stage PFC
Eliminate optocoupler and
electrolytic capacitors - weak links
that limit power-supply lifetime
Dimmable PAR38 LED spotlight with
LinkSwitch-PH
© Copyright 2009 Power Integrations
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Mass-Production LED Design Wins GE accent light GU-10 Floodlight E27 Floodlight Fluorescent Tube Replacement OSRAM
Mass-Production LED Design Wins
GE accent light
GU-10 Floodlight
E27 Floodlight
Fluorescent Tube
Replacement
OSRAM
Replacement Bulb
© Copyright 2009 Power Integrations
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High-Power Products Expand SAM by $400M+ LOW POWER HIGH POWER Hiper™ family CAPZero™, SENZero TM
High-Power Products Expand SAM by $400M+
LOW POWER
HIGH POWER
Hiper™ family
CAPZero™, SENZero TM
TOPSwitch TM -JX
TinySwitch TM -III
LinkSwitch TM -II
LED LIGHTING PRODUCTS
LinkSwitch-PL
LinkSwitch-PH
0W
2W
5W
20W
50W
200W
500W
© Copyright 2009 Power Integrations
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High-Power Products Expand Addressable Market to $2B (0 – 500 watts) ● White goods ●
High-Power Products Expand Addressable
Market to $2B (0 – 500 watts)
● White goods
● Air conditioners
● TV standby / TV main
● Small appliances
Consumer
● Set-top boxes
● DVD players
● LED general lighting
● Game consoles
● LED street lights
Industrial
● Smart meters
Communications
● Industrial control
● Motor control
● Mobile phone chargers
● UPS
● Cordless phone adapters
● Broadband modems
Computer
● VoIP phones
● Desktop/server standby
● Desktop main
● Notebook adapters
● LCD monitors
High-power applications in orange
● Printers
© Copyright 2009 Power Integrations
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SemiSouth Targets Solar, Auto with SiC Announced strategic investment in SemiSouth Laboratories • Silicon carbide
SemiSouth Targets Solar, Auto with SiC
Announced strategic investment in SemiSouth Laboratories
• Silicon carbide (SiC) transistors superior to silicon for very high-power
• Enables 99%-efficient solar inverters
• Also targeting hybrid/electric vehicles, wind, servers
• 20+ patents
Acquired equity stake
plus exclusive license
Extends addressable
power range to 100 kW+
© Copyright 2009 Power Integrations
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Power Integrations Nasdaq: POWI Financial Overview
Power Integrations
Nasdaq: POWI
Financial Overview
Financial Overview Revenue growth outpacing analog peer group Target gross margin of 50%+ Significant earnings
Financial Overview
Revenue growth outpacing analog peer group
Target gross margin of 50%+
Significant earnings leverage
Fabless model enables strong free cash flow
Debt-free balance sheet
Track record of returning cash to stockholders
© Copyright 2009 Power Integrations
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Faster Growth Driven by Energy Efficiency Revenues $M 75 17% CAGR 2007 – Q3 2010
Faster Growth Driven by Energy Efficiency
Revenues
$M
75
17% CAGR
2007 – Q3 2010
50
8% CAGR
2001 - 2006
25
0
Q1 2001
Q1 2003
Q1 2005
Q1 2007
Q1 2009
Q3 2010
© Copyright 2009 Power Integrations
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Outperforming the Analog Peer Group Annual Revenue Growth 50% 40% 30% 20% 10% 0% -10%
Outperforming the Analog Peer Group
Annual Revenue Growth
50%
40%
30%
20%
10%
0%
-10%
2007 2008
2009
2010 YTD
POWI
Analog Semis (SIA)
© Copyright 2009 Power Integrations
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Gross Profit Margin (GAAP) 60% 50% 40% 30% 20% 10% 0% 2004 2005 2006 2007
Gross Profit Margin (GAAP)
60%
50%
40%
30%
20%
10%
0%
2004
2005
2006
2007
2008
2009
YTD 2010
© Copyright 2009 Power Integrations
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Track Record of Profitability, Strong Cash Flow Earnings Per Share (Non-GAAP) Strong earnings leverage derived
Track Record of Profitability, Strong Cash Flow
Earnings Per Share (Non-GAAP)
Strong earnings leverage
derived from highly focused
business model
$0.60
$0.40
• Core power conversion
technologies applicable across
broad addressable market –
enables highly efficient R&D effort
$0.20
$0.00
Q1
Q3
Q1
Q3
Q1
Q3
2008 2008
2009
2009 2010
2010
Cash Flow
$M
Fabless manufacturing model
enables high free cash flow
75
50
25
0
2008 2009
2010 YTD
Cash flow from operations
CAPEX
© Copyright 2009 Power Integrations
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Strong Balance Sheet Cash and Investments ($M) At Sept. 30, 2010 250 $224M cash and
Strong Balance Sheet
Cash and Investments ($M)
At Sept. 30, 2010
250
$224M cash and investments
200
• $7.65 per share
150
100
No debt
50
Q3
Q1
Q3
Q1
Q3
2008
2009
2009
2010
2010
$125M used for repurchases
since 2008
Diluted Shares Outstanding (M)
• Share count down 10%
35
30
25
Quarterly dividend of $0.05/share
20
15
10
Q3
Q1
Q3
Q1
Q3
2008
2009
2009 2010
2010
© Copyright 2009 Power Integrations
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Power Integrations Nasdaq: POWI
Power Integrations
Nasdaq: POWI
Reconciliation of Non-GAAP EPS © Copyright 2009 Power Integrations 55
Reconciliation of Non-GAAP EPS
© Copyright 2009 Power Integrations
55