At a glance. The base rate. In March 2024, AI server power was roughly 2% of Delta's revenue — a rounding error at Taiwan's largest power company. The forward-looking claim was about DC-DC converters, where Delta said only about two companies worldwide could mass-produce for AI servers, and guided that line to grow 100%.
What changed this quarter
Margin improved while revenue fell. Q4 revenue dropped 5% year on year on weak macro demand, but gross margin rose to 30.4% as inventory charges eased and EV losses diluted less.
A hydrogen option was added. Delta signed a technology licence with UK fuel-cell company Ceres Power, planning to produce solid-oxide fuel cell stacks and hydrogen production equipment within a few years.
Microgrids were named as the next long-term growth engine beyond EV and AI server power.
The numbers
| FY2023 | Value | Change |
|---|---|---|
| Revenue | NT$401.2bn (~US$12.7bn) | +4% |
| Gross margin | 29.2% | from 28.8% |
| Operating margin | 10.2% | — |
| Net income | NT$33.4bn (~US$1.06bn) | +2% |
| EPS | NT$12.86 (~US$0.41) | — |
Q4 2023: revenue NT$100.0bn (~US$3.2bn), −5% YoY and −7% QoQ; gross margin 30.4%; operating margin 10.4%; net income NT$9.0bn, +13%; EPS NT$3.46.
Q4 non-operating income of NT$2.6bn was well above the prior year's NT$0.7bn, mostly from converting LELON Electronics convertible bonds into equity — an unrealised valuation gain that will move with the market.
The dividend was NT$6.43 per share. Operating expense ratio rose to 19.0% from 18.0%.
NVIDIA 800V read-through
There is no 800 V content on this call, and the absence is the point. What Delta did stake out was the conversion stage:
- AI server power was about 2% of total revenue. High specifications kept competition thin, but the base was tiny.
- DC-DC converters were called the larger opportunity than AC-DC, technically harder, with only about two companies worldwide able to mass-produce them for AI servers — Delta being one. Growth of roughly 100% was guided for 2024.
In NVIDIA's eventual 800 VDC architecture, the DC-DC stage is where a 64:1 LLC converter takes 800 V straight to 12 V beside the GPU. Delta was claiming that ground before the bus voltage was decided.
Segments that moved
Power electronics grew revenue 9% and profit 12% for the year, covering AI and general server power, cooling fans, and passives. Within 2023 revenue, power supplies were about 30%, cooling fans 9–10%, and passives 11–12%.
Automation was flat on revenue but profit fell 53% on weak industrial and building automation. Strategy is shifting from machine automation toward process and production automation, with more software aimed at the electronics industry.
Infrastructure revenue fell 4% and profit 43%, dragged by telecom power. Energy storage was the bright spot.
Guidance
- 2024 steady growth overall, with the five-year double-digit annual growth target maintained.
- Power electronics to keep growing across most lines.
- Automation weak but not deteriorating further.
- Infrastructure to grow steadily after a telecom-hit 2023.
- EV growth cut from the original 50% assumption but still expected to be profitable on existing scale.
- AI server DC-DC guided to roughly 100% growth.
Management Q&A
Q: Given the recent noise in the EV market, has this year's EV guidance changed?
A: Near-term headwinds are real, mainly because EV selling prices are still above those of conventional cars. The 2024 growth assumption was cut from the earlier 50%, though a specific new figure was not given and the near-term market remains uncertain. The business is still expected to be profitable this year on existing scale; it grew about 80% in 2023, and falling battery-material and manufacturing costs support the long-term case.
Q: What is the main purpose of the corporate-bond issue?
A: The board approved a ceiling, not a final issue size. One principal use is capex, including two new office buildings near the Neihu headquarters, because the company still needs more office space as the business expands.
Q: What is the outlook by segment, and is the annual double-digit growth target still achievable?
A: Automation demand is poor but is not expected to deteriorate further; most of Power Electronics should keep growing; Infrastructure is expected to grow steadily after a telecom-power-hit 2023. The company still expects stable growth this year and is holding to the longer-term target of double-digit growth each year for five years.
Q: What is the future strategy for industrial automation?
A: The business has traditionally focused on machine automation. The plan is to put more weight on process automation and production automation, and to develop more software and solutions, especially for the electronics sector.
Q: What is the status and outlook for AI-server power?
A: AI-server power is about 2% of total revenue, with strong growth potential. High specifications keep the competitor set small. Besides front-end AC-DC supplies, DC-DC converters are seen as the larger prize — harder to build, with perhaps two capable suppliers globally — and DC-DC for AI power is guided to roughly 100% growth this year.
Q: How should this year's consumer-electronics recovery be read?
A: Delta's exposure is mainly console power, smartphone chargers, and notebook power and cooling. Console power is at the end of this generation's cycle against a high base, so demand is expected to weaken this year. Absent a breakthrough consumer application, the market is not expected to recover in a meaningful way even with annual product refreshes.
Q: What is the China-market strategy, and how does Delta compete locally?
A: Major customers are still Western OEMs, though work with Chinese OEMs is starting. Competing in China on a single discrete product is difficult, so the strategy is to offer integrated solutions in industries where Delta has an advantage.
Q: After EV and industrial automation, what is the next growth engine?
A: EV penetration is only around 15%, so the long-term runway is still large; the job as a supplier is to keep raising product efficiency and helping customers cut cost. Beyond EV, microgrids are seen as a large long-term opportunity, even if there are bottlenecks along the way.
Q: What were last year's revenue shares for power supplies, fans and passives?
A: In 2023, power supplies were about 30% of revenue, cooling fans about 9–10%, and passive components about 11–12%.
Q: What is the recent status of the EV-charger business, and what are the challenges?
A: The charger business grew about 20% in 2023. Two constraints stand out: US federal subsidies exist, but the time from application to disbursement for customers can be very long; and installing high-power DC chargers requires real technical skill, which is also a safety concern.
Disclaimer
English notes on Delta Electronics' investor conference of 1 March 2024, covering Q4 and full-year 2023. Figures are as presented by management and have not been independently verified. USD equivalents are approximate at about NT$31.5 to the dollar. For reference only; not investment advice.