Chairman's Statement

Dear Shareholders,

The year 2020 has been a turbulent time and a year of uncertainty for global economic activities and social events. Due to the global impact of COVID-19, many cities and borders have been closed, and governments have imposed strict crowd-control measures. At present, companies are facing challenges in production, logistics, warehousing and retailing. There is also a steep decline in consumption as both regional economies and personal livelihood activities have been significantly affected. It has been an extraordinarily volatile year for everyone, including governments and companies.

As the virus began to spread, Delta set up a global anti-epidemic command center to closely monitor developments amid the epidemic and established anti-epidemic prevention teams to track operating conditions at its global factories and branches. At the same time, it also built its own mask production line to provide protective equipment such as masks for front-line employees. In times of emergency, Delta's first priority is to take care of employees and to ensure their safety and health.

Fortunately, Delta has continued to achieve growth in terms of annual revenue and gross profit, thanks to all of its team’s collective efforts. Delta’s consolidated revenue in 2020 was NT$282.6 billion, a 5% increase from the previous year; gross profit was NT$87.2 billion, and gross profit margin grew from 27.8% in the previous year to 30.9%. Net operating profit was NT$31.4 billion, with an increase in the net operating profit margin from 7.2% in the previous year to 11.1%. Net income after tax was NT$25.5 billion, with an increase in the net after-tax profit margin from 8.6% to 9.0%. In 2020, Delta’s earnings per share (EPS) was NT$9.80 and return on equity (ROE) ratio was 17.8%.

Here is a summary of Delta’s performance in various business fields in 2020, and future prospects:

Power Electronics

As the world's leading manufacturer of power supplies and brushless DC fans, Delta has contributed significantly to further improvements in the information industry. Due to the severity of the COVID-19 epidemic in 2020, many cities and companies around the world have implemented work-from-home protocols, and schools have adopted remote teaching, which has led to a surge in demand for information equipment. Delta's power supplies and fans for laptops, desktops, servers, and other related equipment have brought forth a new social norm in the COVID-19 era.

In 2020, Delta announced a strategic cooperation with GKN Automotive, the world's largest automotive transmission system supplier, to develop eDrive, which is an integrated electric drive system for next-generation electric vehicles. This three-in-one system combines Delta's motor drive with GKN Automotive’s drive motor and gear box, and is expected to reduce system weight and size, as well as effectively streamline the assembly process, improve quality, and further solidify both parties' leading position in the global market.

With its corporate mission “To provide innovative, clean, and energy-efficient solutions for a better tomorrow," Delta has continued to strive over the years to improve its product efficiency and create value for its shareholders, while contributing to environmental sustainability. Delta was recognized by the U.S. Environmental Protection Agency (EPA) as an ENERGY STAR® Partner of the Year for a fifth consecutive year in 2020 and received the Sustained Excellence Award for three consecutive years.

The Sustained Excellence Award is ENERGY STAR’s highest honor, recognizing outstanding companies whose product energy efficiency and energy conservation promotion have surpassed assessment standards. Delta has received this award three times, demonstrating its continuous implementation of a sustainable business philosophy based on extensive power electronics and control technology.

Automation

As a result of the COVID-19 outbreak, Delta plant employees were restricted from returning to work after the Chinese New Year in 2020. Although Delta's plant resumed work on February 10th in accordance with local government provisions, some employees were affected and could not return to work due to quarantine requirements in dormitories and travel restrictions in many cities.

Fortunately, Delta has been actively involved in the field of smart manufacturing for many years and is committed to enhancing the automation of its production lines. In exceptional times when the return-to-work rate was less than 40%, Delta was able to maintain the basic operation of its production lines. Delta’s in-house automation team quickly set up a mask production line and started production the following day with only the purchase of raw materials required. At the most critical moment in the epidemic, there were two driving factors that helped increase the return-to-work rate and production capacity: highly automated production lines and automation teams that could respond to emergencies and help factories start making their own masks in the shortest possible time. This achievement once again highlights the importance of the Delta's ability to respond quickly and to flexibly adjust production lines for resilient manufacturing under any circumstances. Delta believes that in the post COVID-19 era, this will accelerate the manufacturing industry’s pace of investment and transformation to smart manufacturing.

To strengthen the integrity of its smart manufacturing systems, in 2020 Delta acquired 100% of Trihedral Engineering Limited, a Canadian SCADA graphical control and industrial Internet of Things (IoT) software company. Trihedral has been developing SCADA graphical control software systems for more than 30 years, with major customers from the power, water treatment, and oil and gas industries. In recent years, it has been actively expanding its applications to new areas such as smart manufacturing. This acquisition integrates the experience and expertise of both companies in the automation business, which will help further enhance Delta's long-term competitiveness in the global automation market.

Although in the short-term there is a temporary slowdown in market demand due to the epidemic, Delta hasn’t stopped developing its building automation business. Following the launch of its global strategic alliance with Microsoft in 2019, Delta further combined its Azure cloud and IoT technologies in 2020 to jointly develop two major smart building solutions -- the "Chiller System Anomaly Detection" and the "Bluetooth Intelligent Control".

The Chiller System Anomaly Detection is one of Delta energy online monitoring solutions. It is set up in Microsoft's real-time cloud monitoring system, that is used to detect and monitor conditions in real-time through running big data analysis, as well as handle abnormalities and reduce damage at the earliest possible times, thus helping improve operational efficiency and reduce costs. The Bluetooth Intelligent Control combines data analysis and AI applications to create a personalized lighting environment according to customer requirements with matching the changes of light in day and night. Through a comprehensive strategic cooperation and execute sales plans with Microsoft, both companies can further enhance their competitiveness in the global market by leveraging their respective strengths.

Infrastructure

To help promote the transition to low-carbon transportation and address climate change, Delta announced its membership in the International Electric Vehicle Initiative EV100 in 2018 and became not only the first member in Taiwan, but also the first electronics vehicle charging solutions provider member in the world. In 2020, Delta installed more than 100 electric vehicle chargers at its major operating locations, providing employees and customers with incentives to use low-carbon transportation. Due to the impact of the epidemic, many infrastructure projects around the world, such as 5G networks and electric vehicle charging facilities, have fallen behind schedule. However, as many social and business activities move online, companies are accelerating their digitalization and increasing their reliance on data centers in various industries. The importance of data centers is becoming increasingly apparent as these centers become a new type of public utility.

In 2020, Delta also made significant achievements in data center business development. Delta's data center POD solution (Point of Delivery) has been certified by the Uptime Institute TIER III, a prominent advisory organization which entails rigorous uptime requirements and long-term viability for IT equipment. Delta developed its POD solution by leveraging pre-engineering designs of in-house IT racks, aisle air containment, in-row precision cooling, modular UPS systems, a monitoring system and redundant distribution with high flexibility and fast implementation. With the doubling of global data traffic, the demand for modular data center solutions continues to grow, and the birth of Delta's POD system is the best solution to meet the trend of this digital wave.

Stable power supplies play a vital role in the development of industries. With the growth of population and industries, the demand for electricity is bound to increase in the future. However, conventional fossil fuel power generation has many negative impacts on the environment and ecology. In response to the global consensus on carbon reduction, Delta has been actively developing smart grids in recent years, hoping to contribute to the transformation of the energy through energy storage and control.

To achieve the smart grid vision, Delta and the Taiwan Power Company jointly built and announced completion of the largest energy storage system in Taiwan in 2020, which was the first to be integrated into the grid and actually receive real-time dispatching. The system is located at the Xia Xing of Kinmen’s Tashan Power Plant, and includes a 1MWh lithium-ion Power Station battery energy storage system, a 2MW capacity power conditioning system, energy management system, and environmental management system. The total solution was designed, manufactured, and built by Delta to specialize in one-stop integrated services that can quickly supply backup power within 200 ms after an unplanned generator outage takes place and provide a 30-minute buffer time to the power plant to help stabilize the grid. Delta chose Kinmen as a demonstration island for smart grid, and plans to apply the successful experience of the system to future smart grid installations on the main island. Delta is taking practical steps to help Taiwan's smart grid evolve further.

In the face of climate change and global sustainable development, Delta has seriously responded with concrete actions to ESG (Environmental, Social, Governance) issues. In 2020, Delta was selected to the Dow Jones Sustainability Indices (DJSI) World Index for the tenth consecutive year and was distinguished from other benchmark companies by being honored as an Industry Leader for the fifth time. In addition, Delta received the top “A” leadership award in the 2020 CDP's “climate change” and “water security” ratings, making it one of the first companies in Taiwan to receive a double “A” in recognition of Delta's concrete actions.

After setting a scientific carbon intensity reduction target of 56.6% in 2017, Delta has achieved its milestone carbon intensity targets for three consecutive years. In 2018, Delta actively engaged the Task Force on Climate-related Financial Disclosures (TCFD) to regularly assess the risks and opportunities brought by climate change. Delta discloses information in its annual report and ESG report in accordance with the TCFD framework as a basis for improving climate readiness. It is worth mentioning that Delta was selected as the best international brand in Taiwan for the tenth consecutive year in 2020, and its brand value has grown for eight consecutive years, reaching US$331 million, an 11% increase from 2019.

In recent years, international affairs, technology development, the natural environment, and even social patterns have all changed rapidly. As a company, the only way to stand firm in an ever-changing business environment is to keep an eye on external changes and remain flexible at all times. In 2021, our 50th anniversary, Delta would like to thank our customers, shareholders and partners for their support over the past half-century. With the world still experiencing turmoil due to the epidemic we have taken determined steps to bring our employees through the fog. Looking to the future, we are committed to sustainable development as our core value and will continue to guide our colleagues amid new challenges as we create new opportunities.

Sincerely,
Yancey Hai, Chairman