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Power Integrations

Nasdaq: POWI
November 2010

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 forwardlooking 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 nonGAAP 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

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

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Nine Consecutive Years of Revenue Growth


$M
200

Revenue for first three quarters of 2010 already exceeds 2009 total revenue

150

100

50

2001
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2002 2003 2004 2005


4

2006 2007 2008 2009

2010
1st Nine Months

Our Opportunity

Power supplies have lagged the electronics market in the adoption of integrated circuits

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Highly Integrated Power Supplies Replacing Legacy Technologies

DVD power supply with 70 discrete components

Equivalent power supply with POWI: 36 components

Linear transformer: weighs 12 oz.

Adapter with POWI: weighs 2 oz.

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Relentless Innovation

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Multi-Level Innovation

System Design (External IP)

IC Packaging

Integrated Circuits/Topologies (LinkSwitch, TinySwitch, TOPSwitch)

High-Voltage Silicon Process

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Multi-Level Innovation

System Design IC Packaging Integrated Circuits/Topologies High-Voltage Silicon Process High-Voltage MOSFET Low-Voltage Controller

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Multi-Level Innovation

System Design IC Packaging Integrated Circuits/Topologies High-Voltage Silicon Process

Monolithic High-Voltage IC

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Multi-Level Innovation

System Design IC Packaging Integrated Circuits/Topologies High-Voltage Silicon Process

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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

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Multi-Level Innovation

System-Level Innovations IC Packaging Integrated Circuits/Topologies High-Voltage Silicon Process New, proprietary eSIP package vs. standard TO-220 package

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Multi-Level Innovation
Examples:
D25 2KBP06M 600 V
+

System Design IC Packaging Integrated Circuits/Topologies High-Voltage Silicon Process

C63 33 uF 400 V Q4 FQP13N50

C64 120 uF 400 V

R1 15 k

R3 10 M

R2 100 k

R73 3.9 M U12 LM431 R4 200 k 1% R65 2M

FillSwitch Circuit

L1 12mH

C70

D26 DL4007

SlimCore Transformer

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Multi-Level Innovation Delivers Value

System Design IC Packaging Integrated Circuits/Topologies High-Voltage Silicon Process

Ultra-simple power supplies



Fewer components Shorter design cycles Easy to manufacture Less raw materials

Highly energy-efficient Equal in cost compared to discrete solutions

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Cost-Effective Integration

36-watt adapter with discretes: 70 components


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Cost-Effective Integration

36-watt adapter with POWI chip: 25 components


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Creating Value Through Integration


Slashes eBOM, labor costs, factory capital investment Increases reliability of end product Increases factory throughput, reduces inventory exposure

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Leading the Transition to Highly Integrated Power Supplies


Fairchild Sanken ST Micro ON Semi Infineon

Integrated POWI
20%

Power Supply Unit Volume

Discretes

Fairchild Infineon ON Semi ST Micro NXP

iWatt BCD Active Leadtrend OnBright

80%

Linear Transformers
1970
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1994

1994 Today

Large, Diverse Markets All Electronic Products Need Power

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$1.6 Billion Addressable Market (0 50 watts)


White goods Air conditioners TV standby Small appliances Set-top boxes DVD players

Consumer LED general lighting Smart meters Industrial control Motor control UPS

Industrial Communications Computer Mobile phone chargers Cordless phone adapters Broadband modems VoIP phones

Desktop/server standby LCD monitors Printers

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Well Diversified Revenue Mix


2002
25% Consumer
9% In dustr ial

2010 through September


38% Consumer

23% Computer

43% Comms

20% Industrial 30% Communications 12% Computer

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Revenue Mix By Product Family


Q1 Q3 2010
LinkSwitch

37% 18%
1% Other TinySwitch TinySwitch TOPSwitch

24%

52%

38%

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Supply Chain for Power Supplies


Power Supply Manufacturers
Distribution (~65%)

OEMs
including Nokia, LG, Samsung Dell, HP, Apple, Lenovo Sony, Panasonic Mitsubishi, Electrolux

including Phihong Delta Liteon Sunlin Leader HiPro AcBel TenPao Dongdo RF Tech

Direct (~35%)

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Fabless Manufacturing Model

Wafers Japan: OKI, Epson Germany: X-Fab

Assembly Malaysia Philippines China Thailand

Test Malaysia China Thailand San Jose (in-house)

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Worldwide Technical Support


13 field labs with EMI test capability Rated #1 by customers for technical support

N. China Chicago

San Jose (HQ)

Atlanta

UK

Germany Italy

S. China

Korea

India

Taiwan

Japan

Singapore

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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

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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

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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

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Importance of Standby Efficiency


Power supply standby efficiency Total input power Loss in Power supply Power used by the product

33% 67%

1.5 W 0.75 W

1.0 W 0.25 W

0.5W 0.5W

Doubling standby efficiency cuts waste by factor of four

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A Solution: EcoSmart Technology

ON/OFF control skips cycles when less power needed (e.g. standby mode) Provides constant efficiency independent of load

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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

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No-load Power Savings

Based on standard 5W Adapter


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Making a Difference to the Environment


Sales of EcoSmart Chips
(Cumulative units, in millions)
3500 3000 2500 2000 1500 1000 500 0

More than 3 billion EcoSmart ICs shipped Estimated standby power savings of $4 billion between 1998 and 2009

19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09
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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

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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 Calif. Energy Commission ENERGY STAR China CECP Korea KEMCO Japan ECCJ / Top Runner

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Tight Specs for External Power Supplies

CEC (2007) EISA (July 2008) ENERGY STAR 2.0 (Nov. 2008)

EcoDesign Directive (2010) Code of Conduct (Jan. 2009) China CECP

Australia (Dec. 2008) Linear power supplies are rapidly disappearing


Voluntary specifications in italics; all others are mandatory standards

New Zealand (April 2009)

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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

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Energy Vampire vs. EcoSmart

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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


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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

2006

2007

2008

2009

2010 YTD
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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


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Mass-Production LED Design Wins

GE accent light GU-10 Floodlight

E27 Floodlight

Fluorescent Tube Replacement


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OSRAM Replacement Bulb

High-Power Products Expand SAM by $400M+


LOW POWER HIGH POWER

Hiper family
CAPZero, SENZeroTM

TOPSwitchTM-JX TinySwitchTM-III LinkSwitchTM-II


LED LIGHTING PRODUCTS

LinkSwitch-PL
0W 2W

LinkSwitch-PH
5W 20W 50W 200W 500W

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High-Power Products Expand Addressable Market to $2B (0 500 watts)


White goods Air conditioners TV standby / TV main Small appliances Set-top boxes DVD players Game consoles

Consumer LED general lighting LED street lights Smart meters Industrial control Motor control UPS

Industrial Communications

Computer

Mobile phone chargers Cordless phone adapters Broadband modems VoIP phones

Desktop/server standby Desktop main Notebook adapters LCD monitors Printers


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High-power applications in orange

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+

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Power Integrations
Nasdaq: POWI

Financial Overview

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
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Faster Growth Driven by Energy Efficiency


Revenues $M
75

17% CAGR 2007 Q3 2010


50

8% CAGR 2001 - 2006

25

Q1 2001

Q1 2003

Q1 2005

Q1 2007

Q1 2009

Q3 2010

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Outperforming the Analog Peer Group


Annual Revenue Growth
50% 40% 30% 20% 10% 0% -10%

2007
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2008
POWI
50

2009

2010 YTD

Analog Semis (SIA)

Gross Profit Margin (GAAP)


60%

50%

40%

30%

20%

10%

0%

2004

2005

2006

2007

2008

2009

YTD 2010

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Track Record of Profitability, Strong Cash Flow


Strong earnings leverage derived from highly focused business model Core power conversion
technologies applicable across broad addressable market enables highly efficient R&D effort
Earnings Per Share (Non-GAAP)
$0.60

$0.40

$0.20

$0.00

Q1 2008

Q3 2008

Q1 2009

Q3 2009

Q1 2010

Q3 2010

Cash Flow

Fabless manufacturing model enables high free cash flow

$M

75

50

25

2008

2009

2010 YTD CAPEX

Cash flow from operations


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Strong Balance Sheet


At Sept. 30, 2010
250

Cash and Investments ($M)

$224M cash and investments

200 150 100 50

$7.65 per share


No debt $125M used for repurchases since 2008

Q3 2008

Q1 2009

Q3 2009

Q1 2010

Q3 2010

Diluted Shares Outstanding (M)


35 30

Share count down 10%


Quarterly dividend of $0.05/share

25 20 15 10 Q3 2008 Q1 2009 Q3 2009 Q1 2010 Q3 2010

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Power Integrations
Nasdaq: POWI

Reconciliation of Non-GAAP EPS

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