Delta joins Foxconn in betting on electric car riches

Delta Electronics Inc. predicted rapid growth at its fledgling electric-vehicle component business for this year and beyond, joining a bandwagon of Taiwanese suppliers bulking up their automotive muscles as tech giants including Apple Inc. venture into the car market.

“Our EV-related business will grow at least at a double-digit rate over the next few years," Delta Chairman Yancey Hai said in an interview on Wednesday. “We will further integrate our existing power products into modules and optimize them to make it easier for EV makers to build their vehicles."

Automotive customers accounted for a small fraction of Delta’s revenue in 2020, but are becoming increasingly important for growth. Delta and peers including Foxconn Technology Group are betting on electric cars as the next big thing as demand for PCs and smartphones, the main products that the Taiwanese suppliers have long depended on, is hitting a plateau.

A longtime power-product supplier to Apple, Dell Technologies Inc. and other global tech companies, Delta started to build its EV-component business more than a decade ago. It now supplies power products or powertrains to Tesla Inc., General Motors Co., Stellantis NV and other major carmakers. Chief Executive Officer Cheng Ping told reporters Wednesday its goal is to grab at least 10% of a $33 billion combined market for EV power and traction products in 2030.

Technology companies plotting forays into the EV business could provide an opening for their current suppliers. Apple has a team of engineers working on drive systems and vehicle designs, though its autonomous, electric auto is at least half a decade away, people familiar with the matter have said. The U.S. company has said little about the project.

Hai said global chip shortages won’t affect the company’s existing EV-related contracts as it has placed sufficient orders for semiconductors. EV makers whose sales are growing faster than expected will struggle to get enough chips to fulfill orders, he said.

Sales at Delta’s in-vehicle component business increased 70% to 80% last year from about NT$5 billion ($177 million) in 2019, Wang Wen-wen, an analyst at JihSun Securities Investment Consulting, wrote in a Feb. 26 note. The business is still losing money but is set to break even within two years, Wang wrote.

“The business will continue to grow significantly in 2021 with the launch of new EV models," the analyst wrote.

Demand for notebook computers, servers and EVs helped Delta boost sales 5.4% last year to a record NT$282.6 billion, while net income rose 10% to NT$25.5 billion. Shares of the company more than doubled over the past 12 months.

Delta will also seek growth by investing in local companies specialized in software and mechanical parts for EVs to complement its power-focused business, Hai said.

As part of its sustainability efforts, Delta is striving to have all manufacturing sites and offices use 100% renewable energy and reach carbon neutrality by 2030 following its recent entry into the global RE100 initiative. Delta is considering building and operating its own solar power plant in India, spokesman Jesse Chou told reporters on Wednesday.