Power Integrations Announces Second Quarter 2001 Results

July 19, 2001

2Q2001 Financial Statements

SAN JOSE, Calif., July 19 -- Power Integrations, Inc. (Nasdaq: POWI) a leading supplier of high-voltage analog integrated circuits for use in AC to DC power conversion, today announced financial results for its second quarter ended June 30, 2001.

Net revenues for the second quarter were $21.2 million compared with net revenues of $29.0 million in the second quarter of 2000. Net income for the second quarter of 2001 was $0.67 million, or $0.02 per diluted share on approximately 28.5 million shares outstanding. This compares with second quarter 2000 net income of $5.2 million, or $0.18 on approximately 28.7 million shares outstanding.

"In light of what has been called the most severe semiconductor decline in decades, we are pleased with the results of the quarter," said Howard Earhart, chairman and chief executive officer of Power Integrations. "While our visibility remains poor as a result of lower than normal order rates, we believe we have seen the worst and are encouraged by the stabilization that we are seeing in the markets we serve."

"During the quarter we saw increased acceptance of our recently introduced TinySwitch II and TOPSwitch GX product families. We continued to make strategic investments in our future, focusing on broader product offerings and increased market penetration. In addition, we were issued a company record of five new patents, bringing our already deep patent portfolio to 36 U.S. and 56 foreign patents. Accelerated new product development protected by a strong intellectual property portfolio are key elements in our strategy to maintain the lead we have in the high-voltage power conversion IC market that we pioneered."

Change in Business Description
In an effort to more accurately reflect the nature of its business, Power Integrations has reclassified its revenue mix into five categories: Consumer, Communications, Computer, Industrial and Other. Based on this reclassification, first half revenues for year 2001 were derived from these markets as follows: Consumer -- 34 percent, Communication -- 31 percent, Computer -- 20 percent, Industrial -- 8 percent, Other -- 7 percent. For a detailed description of the types of end-products that are included in each category, please refer to the end of this press release or visit the company's website at http://www.powerint.com.

Third Quarter 2001 Outlook
The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially. Revenue for the third quarter is expected to be flat to 4 percent sequential growth. As a result of lowered production volume and a very competitive pricing environment, gross margin is expected to be in a range of 43 to 45 percent. Operating expenses will increase by approximately 2 to 5 percent, driven primarily by increased investment in new product and market development. Based on the foregoing, third quarter earnings are expected to be in the range of $0.02 to $0.03 per share.

Conference Call
Power Integrations will broadcast its conference call discussion of its second quarter 2001 results and other developments for the company live over the Internet on Thursday, July 19, 2001, 1:30 p.m. PDT (4:30 p.m. EDT). Interested parties may access the conference call over the Internet through the Investor Relations section of the Power Integrations web site at http://www.powerint.com . To listen to the live call, please go to the web site at least 15 minutes early to download and install any necessary audio software. A replay of the conference call will be indexed and archived on the company's site two hours following completion of the event.

Safe Harbor Statement
This press release contains forward-looking statements, which reflect management's current forecast of certain aspects of the Company's future business. These forward looking statements are based on current information which we have assessed, but which by its nature, is subject to rapid and even abrupt changes. Forward looking statements are denoted by the use of such words and phrases as "will," "expects," "believe," "should" and similar words and phrases that look toward future events or performance. The Company's actual results could differ materially from those projected or implied by our forward looking statements due to risks and uncertainties associated with the Company's business. These include, but are not limited to, changes and shifts in customer demand away from products that integrate the Company's ICs to products that do not. Other factors include, but are not limited to, our ability to maintain and establish strategic relationships; the effects of competition; the risks inherent in the development and delivery of complex technologies; our ability to attract, retain and motivate qualified personnel; the emergence of new markets for our products and services, and our ability to compete in those markets based on timeliness, cost and market demand; and our limited financial resources. Acceleration in new product introductions are subject to the risks and uncertainties that typically accompany accelerated development and delivery of complex technologies to the market place, including product development delays and defects. We more fully discuss these and other risk factors in the Company's most recent reports on Form 10-K and Form 10-Q filed with the Securities and Exchange Commission.

About Power Integrations
Power Integrations, Inc. is a leading supplier of high-voltage analog integrated circuits for use in AC to DC power conversion. For more information, visit the company's web site at: http://www.powerint.com or contact the company at 5245 Hellyer Ave., San Jose, Calif. 95138; 408-414-9200.

NASDAQ: POWI $119.08 -1.23
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