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Chairman's Statement
 
 
 
Dear Shareholders,

In 2018, the world economy was seriously affected by the US-China trade war and a steep rise in the cost of raw materials, which have caused a turbulent economic environment and weakened overall confidence in market investment. Despite the difficulties and challenges in the business environment, Delta achieved growth in both annual revenue and gross profit, thanks to the joint efforts of all of our Delta colleagues. Delta's consolidated revenue in 2018 was NT$237 billion, a 6% increase from the previous year; gross profit was NT$63.6 billion; and gross profit margin was 26.8%, 5% higher than the previous year. The net operating profit was NT$18.2 billion, with a net operating profit margin of 7.7% that decreased by 8% compared to the previous year. Net income after tax was NT$ 18.2 billion, with a net after-tax profit margin of 7.7%, which showed a slight decrease of 1% compared to the previous year. In 2018, Delta's earnings per share (EPS) was NT$7.00, and return on equity (ROE) ratio was 14.28%.

In response to increasing regional economic risks, Delta announced in 2018 that it would acquire the shares of Delta Electronics (Thailand) Public Company Limited (DET), listed in Thailand via Conditional Voluntary Tender Offer by its subsidiary DEISG. After obtaining approval by the government agencies of the relevant countries for the acquisition, Delta officially submitted a public acquisition document to DET. While Delta's production has been mainly concentrated in China and Taiwan, DET has its manufacturing base in Thailand, India and Slovakia. The acquisition allows Delta to strengthen its global production layout, improve manufacturing and shipping flexibility, reduce international trade war risks, as well as increase overseas sales and draw closer to customers in India and Southeast Asia. In addition, Delta has expanded its presence in Taiwan by adding new capacity in Taoyuan, Chungli, Taichung and Tainan. Through more flexible production arrangements and more in-depth service networks, Delta will be able to further expand its global business footprint.

Here is a summary of Delta's performance in various business fields in 2018, and future prospects:

 
 
Power Electronics

With sophisticated technology and excellent operations management, Delta has become an indispensable long-term strategic partner with many world-class manufacturers, winning customer praise for products such as Switch Mode Power Supplies (SMPS), brushless DC fans, cooling systems, and miniaturized key components. After decades of development, our business operations have gradually expanded from consumer products to industrial, medical, automotive, home appliance and other fields of application.

In addition to making continuous improvements in electronic component technology, Delta's developments in the field of video technology are unrivaled on the global stage. At the European International Audio-Visual and Integration System Exhibition held in the Netherlands in 2018, Delta released the world's first 25,000 lumens ultra-high brightness DLP 8K projector that presented the audience with 8K 33 megapixels of video clarity using Delta's proprietary optical and signal processing technology. Delta's video projection devices provide a new generation of visual quality, achieving technical excellence in power management and highly efficient heat dissipation, and fulfilling Delta's corporate mission: "To provide innovative, clean and energy-efficient solutions for a better tomorrow."

Delta is garnering the results of years of business development in the automobile industry. Besides supplying a variety of auto components, Delta is working closely with many of the world's leading car manufacturers to provide key solutions for power management systems and traction motor systems for electric vehicles. With the rapid growth of the electric vehicle market, this sector will become an important source of Delta's future growth.

The power electronics business has contributed to Delta's revenue and profits for many years. As Delta's business becomes more extensive, the future power supply and components sector will continue to be an important pillar supporting the development of Delta's operations.

Automation

Delta has developed its industrial automation business for more than 20 years and holds extensive practical experience in many markets and industries around the world. With the development of intelligent manufacturing applications, solutions that combine diverse industrial knowledge have gradually become the key to success for industrial automation manufacturers. With strong R&D capabilities and production line process experience, Delta provides intelligent solutions for machines, production lines and factories for customers in a variety of industries, helping them gradually move towards smart manufacturing.

In 2018, Delta assisted automotive industry customers in mastering energy applications for production lines, collecting and analyzing energy consumption data of equipment, and achieving energy-saving targets. Delta applied its DIAView graphic control system on CNC machine tools for data collection and analysis for device networking and intelligent monitoring. In addition, Delta has provided control and wireless communication solutions for automated guided vehicles (AGV) at food processing plants, and introduced SCARA industrial robots to the carton manufacturing industry to replace human labor. The SCARA robots provide high-precision, agile and flexible carton cover assembly while applying Delta's motion control system and smart energy detector to matrix sorting lines from the logistics industry to achieve fast and accurate parcel sorting operations.

To improve manufacturing quality and achieve the long-term goal of intelligent manufacturing, Delta began introducing its own intelligent factory transformation project in 2016. The project was executed step-by-step, from equipment, production line, and logistics, to the entire factory. By the end of 2018, 77% of Delta's China production lines had implemented processes and systems for introducing intelligent manufacturing. Using a variety of intelligent production equipment made by Delta, the proportion of process stations that rely on manual operations dropped 40% compared with the baseline year of 2015.

In the field of building automation, Delta has acquired Loytec and Delta Controls in recent years, and acquired the Taiwan-listed company Vivotek Inc. through Public Tender Offer, gradually achieving a business master plan for Delta's building automation. In 2018, Delta built a high-end food research and development center for the leading dairy in Asia. Delta provided Loytec IoT, a building management platform, and constructed an integrated management center spanning different buildings and subsystems, simultaneously decentralizing and controlling a range of electromechanical equipment, effectively assisting customers in reducing system integration time and saving at least 20% in construction costs.

With the US-China trade war having a definite affect, the Chinese market is slightly cooling in 2018. However, with rigid demand in the market due to an improving industrial structure and intelligent manufacturing, we believe Delta's automation business will continue to be a main source of growth for the company for the long term.

Infrastructure

Benefitting from the rapid pace of data center investment and construction by global conglomerates, Delta's data center solution business is expanding in 2018. Delta designed the largest high-speed data center corridor for the MYTHIC International Submarine Cable Project using its modular containerized data center solution. Delta's modular containerized data center not only reduces construction cost significantly, but also fits any geographical environment while utilizing a short construction time. A traditional fixed-point data center takes two years to build, while construction of the Delta modular containerized data center takes only weeks. The modular containerized data center is also highly energy efficient with an average annual PUE of less than 1.43, which meets the Green Grid's gold level standard.

In communication power supplies, Delta already offers high-end energy solutions in countries such as Japan and the U.S. to meet commercial 5G mobile communication needs and assist telecommunication operators installing the 5G internet. In the U.S., Delta is successfully promoting a high efficiency energy system as well as a high performance DC generator for backup power supply to ensure stable and quality communication services. In Taiwan and Japan, Delta has introduced power systems that accommodate cell sites and utilize communication power supply systems that yield 98% energy conversion efficiency. In addition, these systems are equipped with Delta made lithium batteries to effectively assist the client in saving energy, reducing carbon emissions, and contributing to environmental sustainability.

On the infrastructure side, Delta focuses on the application of distributed energy systems. Compared to a centralized power plant where a large-scale power outage may occur during an emergency, distributed energy systems offer the opportunity to dispatch energy whenever needed and are not restricted by geographical location. To support distributed energy system applications, Delta offers two-way charging devices for electric vehicles, wind power conversion units, solar inverters and energy storage related products.

Delta recently participated COP24 conference through the Delta Electronics Foundation. The company engaged in conversations with leaders of the city governments of Milan, Italy and Paris, France as well as the Deutsche Post DHL. Delta shared its infrastructure solutions for distributed energy grids and offered to assist the cities in their low carbon energy transformations.

At Delta, we not only care about developing new business and new technologies, but also about managing our company in accordance with Environmental, Social, and Governance (ESG). Last year, Delta received the Best ESG Communications Award in Greater China from IR Magazine which recognized Delta's ESG efforts and results. Delta was also listed in "The Dow Jones Sustainability™ World Index" for the eighth consecutive year. In 2018, Delta was recognized as an industry leader and included in an honor list for the corporate social responsibility category from Global Views Monthly magazine. Delta also received the top "CSR Corporate Citizen Award" from Commonwealth Magazine, five awards from the 2018 Taiwan Corporate Sustainability Awards, as well as recognition as a "top 5% listed company" in the management evaluation carried out by the Taiwan Stock Exchange. Delta was also listed as one of Taiwan's top 20 international brands for the eighth consecutive year. Delta's brand value reached USD 266 million in 2018 after six years of growth.

Serving diverse industries over the years, Delta is dedicated to maintaining our long-term strategic vision regardless of the challenges ahead. We thank all of our loyal clients, shareholders and partners for your years of support. Delta's management team continues to work alongside our colleagues, leading the company as a model enterprise, influencing the world for the better, and providing a positive impact on our environment and society.

Sincerely yours,
Yancey Hai, Chairman
 
 
 
 
 
 
 
 
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