A (0:02)

Delta Electronics is a Taiwanese company in the power management and energy efficiency space. With $14 billion in sales and an $80 billion market cap, Delta is, as of this writing, Taiwan's third most valuable company, behind only TSMC and Foxconn. The stock has skyrocketed 150% so far this year. Guess why? It starts with A and ends with I. Delta's climb to its current heights took over half a century. In this video, we talk about a quiet Taiwanese power supply giant. Bruce Cheng, or Chang Chonghua, was born in 1936 in Fujian Province. His father was a traditional Chinese doctor and his mother a teacher, descended from a line of prosperous scholars. Soon after Bruce was born, the family relocated to a small town in Fujian called Shuiji to avoid the dangers of the ongoing war with the Japanese. There, Bruce spent his formative years in relative safety, a time he fondly recalls in his memoirs titled Solid Power, which was one of this video's major resources regarding Delta's early years and in many cases literally the only source for certain happenings in the company. After World War II ended, the Chinese Civil War began. Classes were suspended, so in 1948 the 12 year old Bruce was sent to Fuzhou to be with his uncle. Soon afterwards, Cui Ji fell to the communists and Bruce would not see his parents again for another 35 years. Chaos reigned in Fuzhou as the Nationalists started to lose the war. Bruce's uncle found a job in Taichung, Taiwan, as a teacher for a high school. So Bruce came along, his parents having no idea Taiwan was very poor back then. Due to the evacuation, a million people came to Taiwan island, causing its population to surge 13% in a single year. Conflicts between these newcomers and the natives abounded. Bruce worked hard and kept to himself and won a seat to study electrical engineering at the prestigious National Chenggong University in Tainan. After graduating, he struggled to find work. Cheng recalled being so poor that he did not dare get married to his fiance. Fortunately, he found work with a Taiwanese air maintenance company called AirAsia, unrelated to the Malaysian airline today. After five years there, he then became a production manager at TRW, an American electronic components company. TRW had bought several US factories and was moving production to Taiwan. So TRW paid for Bruce to travel to a small town in Illinois to train. The factory workers there knew that they were training their replacements and but nevertheless treated Bruce and his cohorts with kindness and grace. After working at TRW for five years and seeing their labor practices firsthand, Bruce quit to start his own company. Determined to take advantage of the then booming Taiwanese television set market. In the mid-1960s, intense competition in the US television set space for forced American companies to go overseas. For those companies, Taiwan offered a massive pool of cheap but trainable and productive labor. Women's wages there were 1 15th that of America's, a third of Japan's or Mexico's, and half that of Hong Kong's. Beyond just low wages, however, the Taiwanese government also produced an environment that was politically stable thanks to American aid, plus was friendlier to foreign investment than geographically closer locales like Mexico. Notably, the government had devalued the Taiwanese currency in the 1950s, and a 1954 foreign investment law allowed 100% foreign ownership of companies, plus the ability to repatriate profits made without significant restrictions. In 1964, the American company General Instrument set up a $1 million factory in Taipei's Xindian district to produce TV tuners and deflection yokes. All products were for export rather than domestic consumption. Zenith and RCA soon followed thereafter. Once the Americans started producing in Taiwan, the Japanese electronics companies had to do the same, lest they lose on cost advantages. Thus, Sanyo, Sampo, and Panasonic pivoted from selling TVs to domestic consumers to producing for exports as well. Between 1969 and 1981, TV production in Taiwan, black and white at first and then color sets, grew at a staggering annual rate of 41.9%. At the time, Taiwan had a few electronics companies of their own. The most well known was datong. Founded in 1918 during the Japanese colonial era as a construction company, Datong expanded into iron and steel. In the 1950s, they started selling electric fans, their famous rice cookers, and TVs. Analog televisions depend on finely produced electrical components to catch the TV signal out of the air, clean it up, and amplify it for presentation on the screen. These machines depend on coils. Though mostly made of simple copper wire, the coils must be wound with precision and with consistency at high volume. There was no local supplier in Taiwan, so Datong imported their coils and other components from their Japanese partners, like Toshiba. While he was still at trw, Bruce Chang visited Datong for a meeting and helped them troubleshoot a technical problem they were then having. This turned into a consulting agreement. And then the Datong people suggested that Bruce start a supplies company. While mulling it over, Bruce came across the perfect factory site at the edge of some rice fields While cycling in the Xinzhuang district of Taipei. The rent was not expensive, and he took the place on the spot. Thus, in 1971, began Delta Electronics. Despite being a small factory of about 10 to 15 employees, Bruce, having before heard what foreigners at TRW said about Chinese workmanship pushed hard to meet international standards of quality. Delta's first products were coils and intermediate frequency transformers, A coil based component that transfers a TV signal from one amplifier to another to produce at high volume and quality. Delta produced their own automated factory lines, including sophisticated coil winding machines. The hard work paid off. Delta's products were found to be as good as Japan's, not to mention half the price. And Datong became Delta's customer in 1973. The company faced troubles due to the economic turmoil of the first oil crisis, but was saved thanks to orders from foreign companies like trw, rca, Zenith and the Dutch electronics giant Philips. Growth returned and by the mid-1970s, millions of televisions were shipped out with Delta's coils. In its first decade, Delta's growth compounded at an average of 69%. Bruce Chang named his company Delta to imbue the concept of change right into its guiding principles. In a Financial times interview in 2011, he we strive for change because it brings new opportunities, new challenges and greater success. Successful entrepreneurs must have the agility and flexibility to respond to market changes. In 1978, the Taiwanese, along with the Japanese and Koreans, agreed to limit exports of TVs to the United States. TV volumes collapsed, so Taiwan's electronics industry pivoted to producing calculators and interestingly enough, video game consoles for a little bit. One hit product, however, were Apple II microcomputer clones. Simple to make, but popular, these illegal items boomed. But in 1983, Apple successfully sued to stop this, forcing the industry to pivot to PC clones and thus took off Taiwan's PC industry. Delta electronics had to change too. Competition in the coil and IFT businesses were intensifying, forcing Delta to cut prices 2 to 5% each year. Delta's response was to improve designs and manufacturing processes. But eventually they knew they had to introduce new products in a new space. Their first PC related products were EMI RFI noise filters. One issue with early PCs was that their power and signals lines emitted high frequency electromagnetic noise signals that interfered with other electronics like TVs. The noise got so bad that European authorities banned imports from certain US Companies. EMI filters help remove that noise while letting through normal signals or power. Digital Equipment Corporation's Taiwan affiliate reached out to Delta to see if they can supply them with filters. Delta jumped at the chance to enter a new product category. The dominant EMI filter Supplier at the time was an American company called Corcomm. Bruce and Delta studied Corcomm's products, made improvements and designed a broad range of models to cater to different customers, 150 in total. Delta's products were not only cheaper than Corcomms, but also suffered ten times fewer defects. They started selling EMI filter components to companies like the now forgotten Wang Computer, Xerox and IBM. Delta then branched into a new opportunity. Power supplies. The power supply unit's core job is to convert AC power from the wall plug into low voltage DC power that your electronic system can eat. The first type of power supplies to emerge are linear types of it uses a large iron core transformer to first step down the AC wall power to a safer, lower voltage. Then a rectifier diode circuit converts that AC to low voltage DC current. Then finally a linear regulator drops the voltage to the desired output. Linear power supplies are cheap, dead simple to implement and low noise, but are also physically large and heavy due to that iron cored transformer. They also need a heat sink because that linear regulator dissipates excess voltage as heat. This reduced efficiencies to a low 40 to 60%. So people looked to a new type of power supply. Switched types. The ideas behind them have been around since the 1930s, but it was during the Apollo space program of the 1960s that NASA scientists finally cracked the design. Switched power supplies use MOSFETs to rapidly turn a current on and off hundreds of thousands of times per second. It is significantly more complex to do, but physically smaller, lighter and more efficient. Which is why the Apple II microcomputer hit the market in 1977 with one Steve Wozniak recalled that a linear power supply would have melted the plastic case. So Steve Jobs tapped an Atari engineer named Rod Holt to implement a fanless switched power supply manufactured by the Hong Kong company Astek. He was quite proud of this, saying somewhat bombastically in his biography that switching power supply was as revolutionary as the Apple II logic board was. Rob doesn't get a lot of credit for this in the history books, but he should. Every computer now uses switching power supplies and they all rip off Rod Holt's design. The wonderful Ken Scherf wrote. Sheriff wrote a blog post addressing this claim. I recommend it. As usual, Jobs was wrong. The IBM PC's power supplies had little in common with the Apple IIs, but it marks the trend. Switched over linear. Anyway, getting back on topic, Delta produced large volumes of items like coils and EMI filters, but with each item priced at Just a few cents. The company did not make a lot of revenue, about 2.9 million USD. In 1979, realizing that the unit prices of these EMI filters were not going to grow very much, Bruce directed Delta into power supplies in 1981. They hired a team of ex RCA engineers and worked on a design for over two years. Released in 1983, the new switched power supply leveraged Delta's EMI filter expertise to filter out electrical noise, one of the more technically challenging parts of producing a good switched power supply. The new product attracted buyers like Acer, NEC, Epson and IBM. Revenue that year surged 87.5%. Several years later, Delta adopted IBM's strategy, surface mounting technology to put electronic components directly onto the surface of a printed circuit board, thus shrinking the power supplies sizes yet further. In 1988, Delta's revenue reached 100 million USD. In just five years after their first switched power supply, revenues had grown nine times over. That same year they went public, Taiwan's eighth company to do so. Though Bruce and his family retained control of Delta and its affiliates, Delta's first foray abroad was with sales offices in the US in 1980, Switzerland in 1987 and Japan in 1989. A power supply is tightly integrated with the rest of the system. Such collaboration often requires a local office. Moreover, manufacturing costs in Taiwan were rising due to an appreciating currency, improving lifestyles and declining birth rates. So in 1987 Delta built their first overseas factory producing switching power supplies in the Mexican state of sonora. In a November 1989 interview, a senior Delta manager said labor costs in Mexico are only one third to one half of those in Taiwan. The workers are not inefficient and we save transportation costs when our products enter the US market. Bruce recalls that the factory had been built at the request of their customers, Apple and Hewlett Packard, apparently to help with their trade imbalances in Latin America. Unfamiliar with the area, they found a Mexican studying Chinese at National Taiwan Normal University who ended up helping to lead the expansion. Shortly afterwards, in 1988, Delta launched its first factory in Thailand. Bruce apparently visited Malaysia too. While he found the native Malays outwardly polite, he was dissuaded from investing there due to anti Chinese sentiments. Thailand, on the other hand, felt far friendlier. I don't want to say anything more other than that there is a spectacular rant from Bruce about Thai men that I will not quote. Delta Electronics Thailand grew to employ tens of thousands of Thai to produce power supplies, adapters, thermal fans, automotive electronics and other components. Most of which are for export abroad. The subsidiary later went public on the Thai stock markets in 1995, where thanks to conservative financial management and export revenue, it seemed to have rode out the turmoil of the Asian financial crisis without much trouble. In 1990, they opened a factory in Scotland for the Europe market to service local customers DEC and IBM, and they still maintain a presence there today. And in 1992 they entered mainland China with their first factory in Dongguan of Guangdong. Again for labor cost reasons. The region has since become one of their larger manufacturing sites. This became a problem during the first Sino American trade war in the late 2000s. Delta responded by expanding capacity in Texas and shifting production out of China to Southeast Asia, the keystone move being a $2 billion tender in 2018 that eventually gave them 63% ownership of the Thai subsidiary. A savvy move because as of this writing, Delta Electronics, Thailand's market cap is over $78 billion dollars, making it Thailand's most valuable publicly traded company by a wide margin. Something that stands out to me about Delta is its staggeringly broad array of products. By the late 1980s, you could say they had just two big product categories. EMI filters and switching power supplies. But the lineup has since rapidly expanded, first in direct current brushless fans for cooling a power supply and then networking. The networking division was later spun off as its own company, Delta networks, in 1999 at the peak of the bubble. Ouch. Delta later brought them back in 2018. Then throughout the 1990s, Delta went into power supplies for notebooks, DC Power Systems for telecom installations and uninterruptible power systems. The latter are backup power systems that provide critical infrastructure like data centers or hospital equipment with instant switchover to some form of backup power like a battery. And apparently they even produced color monitors at one point, but pulled out when the market got too difficult. They still produce high performance projector systems today, which is a bit strange. This diversification seems to be due to the company's chaebol like tendency to to go into a business whenever an opportunity arises. For instance, entry into brushless fans happened because they suddenly received a big order from IBM for power supplies. But fan supplier Panasonic let them down and with uninterruptible power supplies. Delta got into this business because another company in Tainan failed and they acquired the team. Bruce Cheng retired from Delta in 2011. He splits his job between chairman Yan Cihai and CEO Ping Cheng, but not before orienting the sprawling conglomerate towards green sustainability. Bruce seems genuinely concerned about energy efficiency and greener ways of life. In his memoirs and interviews, he recalls environmental damage being done in Taiwan from factories as well as energy struggles during the second oil crisis of the 1970s. In the 2000s, he pushed the company to enter the solar power and EV spaces. First in solar he had Delta partner with a solar cell production team at Taiwan's ITRI Research Institute, founding a subsidiary called Dell Solar, producing a complete solar system product. Dell Solar grew well during the 2010s, but fell afoul of the Chinese solar cell overproduction bubble. With revenues on the decline, the Delta Electronics merged dell Solar in 2012 with another Taiwanese solar cell maker, Neo Solar Power Corporation. The efforts in the EV space have gone somewhat better, but still took a great deal of time. They entered the space in 2008 and it took until 2023 for that segment to become profitable 15 years. They produce a wide range of subsystems for EVs and hybrid cars like charging poles or an all in one electric drive system, combining a traction motor and gearbox with an inverter for cost and space savings. In April 2023, Nikkei Asia quoted Chairman Hai saying about the then mushrooming generative AI boom. Everyone is so excited about generative AI at the moment, but the basic question is how do you make money from it? The traditional data center is already very expensive. A generative AI data center embedding tens of thousands of servers will be three to ten times more expensive. Unless these companies can find a sustainable business model, I doubt many would invest much in building generative AI data centers at this stage. After one to two years, the turntables have turned. Now it is the EV category that is in a slump and AI data centers have replaced them as Delta's key growth engine, going from 2% of revenue in 2023 to an estimated 11% this year and 20% the next. As mentioned, AI data centers require a whole lot more power delivered to the chips, and delivering these levels of power density while also retaining energy efficiency and preventing failures is very important. Delta offers several AI data center products across the whole stack, including products to bring high voltage power right to the racks, both air and liquid thermal cooling solutions and networking. They also offer a prefabricated containerized AI data center that can be shipped to the data center site. I myself solved this one at Computex 2025 and reckon it's for those who want to get going very, very fast. I will leave the deep analysis of such offerings as compared to competitors like Schneider Electric to professional firms like Semianalysis. I'm just a deer with a microphone when starting this video. I had not expected Delta Electronics to be such a sprawling conglomerate. I get the sense of a company built around the vision of a single, very driven founder. Bruce regularly works with engineers and scientists at universities in both Taiwan and abroad to discover and fast track new efforts. The company is now over 50 years old and loads more valuable than it ever has been. Bruce is obviously still around, but it seems like the company, like tsmc, has smoothly transitioned to a new generation of leadership. Can it keep its dynamism without him? Can it make the most of the AI opportunities ahead of it? Tune in next time and we shall find out together. All right, everyone, that's it for tonight. Thanks for watching. Subscribe to the channel. Sign up for the Patreon and I'll see you guys next time.