Delta Electronics Inc (台達電) expects its US automation business to remain steady in the second half, with no signs of weakening client demand.
With demand from US clients remaining solid, its performance in the second half is expected to be similar to that of the first half, Andy Liu (劉佳容), general manager of the company’s industrial automation business group, said on the sidelines of the Taiwan Automation Intelligence and Robot Show in Taipei on Wednesday.
The company earlier reported that revenue from its automation business grew 7 percent year-on-year to NT$27.22 billion (US$889.98 million) in the first half, accounting for 11 percent of the company’s total revenue.
Photo courtesy of Delta Electronics Inc
Clients had placed some front-loading orders for its automation products in the first half, but the effect was not as pronounced as in consumer electronics, he said.
As most automation products are predesigned, excess inventory poses higher risks for clients, and instead of rushing urgent orders, clients have mainly requested quicker shipments, Liu said.
As Delta’s sales are mainly based on a business-to-business model, it does not expect to see dramatic seasonal changes, Liu said.
Geographically, the US is Delta’s second-largest automation market, with the company selling a full range of products, from motor drives to controllers, Liu said.
The US is the world’s second-largest manufacturing country by value, following China, Liu said.
Delta supplies US customers in the aerospace, defense and machinery segments, Liu said.
Those products carry higher unit prices and higher margins of 30 to 40 percent, he said.
Delta’s automation products shipped to its US clients are partly priced under the free-on-board method, he said, adding that the company also sells products under its own brand.
Tariff costs vary by client, depending on negotiations, with larger clients facing different terms than smaller ones, while the company bears the full costs for its own-brand products, he said.
As the US market is vast, establishing distribution channels there would require immense labor and production costs, which would not be sustainable without sufficient sales scale, he said.
As European markets are smaller and more scattered, the company can expand one market at a time, whereas in the US, development would require establishing multiple factories across several states, Liu said.
Delta operates subsidiaries and offices in Germany, Italy, France, the Netherlands and Poland, information on its Web site shows.
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