Thanks to a favorable product mix and reduced impact from inventory provisions, our GP in Q1 improved by 5% year-on-year, despite being moderated by 11% QoQ. GP margin in Q1 expanded to 29.5% from 27.5% a year ago, but contracted from 30.4% in Q4. Q1 expense increased by 14% year-on-year, and decreased by 2% QoQ. With an unfavorable scale, the OpEx ratio in Q1 expanded to 21.4%, compared to 20% in Q4, and 18.5% a year ago. R&D expenditure ratio was 9.8%, compared to 9.9% in Q4, and 8.3% a year ago.
SG&A spending to the sales was 11.6%, compared to 10.1% in Q4, and 10.2% a year ago. As a result, Q1 OP margin was 8.1%, compared to 10.4% in Q4, and 9.1% a year ago. In terms of the sales of each segment, sequentially, all segments experienced a seasonal decline from the previous quarter. Year-on-year, despite a lackluster macro demand, we saw growth in the Power Electronics and Mobility segments. While the Automation and Infrastructure segments contracted from a high base last year. Earnings-wise, the Mobility department showed the most substantial improvement compared to Q4 and a year ago. Power Electronics also found a moderate year-on-year expansion and a seasonal profit contraction.
Despite the fact that Automation and Infrastructure experienced profit contractions from a year ago, Automation's profitability improved in Q1 compared to the previous quarter. Q1, now, operating profit was TWD 1.4 billion, decreased from TWD 2.6 billion in Q4, and around TWD 1.6 billion a year ago. In Q1, we had TWD 8.8 billion profit before tax, down 12% year-on-year, and 32% quarter-on-quarter. Our EBITDA was TWD 14.9 billion, down 2% year-on-year, and 21% quarter-on-quarter. Q1 tax expense was about TWD 1.8 billion, representing a 20.5% effective tax rate. Net profit after tax was about TWD 5.8 billion, down 17% year-on-year, and 36% from the previous quarter. Q1 EPS was 2.22.
I got two questions here. The first one is, can you share your view on the macro demand, especially on the AI-related business and on the electric vehicle business? I think, a nd then the second question is related to, can you comment, what's the potential impact from the rising electricity price in Taiwan on your business?
For your first question, I think we have been talking about this in previous earnings calls for many, many times. Because I am not a scholar in economy, so I don't think I have the position to comment the macro economy. I don't have any specific comment on the economy. W hat all we need to do here is we need to continue to improve our technology, and focus on our business development. Recently, I heard from one of my friends talking about their company is actually working on a technology which is bio-related technology. It sounds very promising, but I think besides the technology development, also the customer relations and market access, and the management of operations are also very critical parts when it comes to a successful business.
A lso, the supply chain management can be one of the bottlenecks when it comes to, I mean, developing a new business. I think from my point of view, what we need to focus on is actually always the quality of our products, and then also the productivity of our operations. T aking our onboard EV business, for example, even though, I mean, as everybody knows, there were some headwinds in the electric vehicle market, but still we managed to grow by 18% year-on-year, so it is still a growing business for us. But indeed, the electric vehicle market is highly competitive, and also has become increasingly crowded.
Of course, I think nobody can achieve like maybe 100% year-on-year forever, but still 20%, 30-some %, 20%-30% growth rate, we think is still achievable for us. T hen speaking of the profitability of this business, even though I think it's still kind of subscale, in terms of the revenue scale, but still, I think it's going to be profitable for the year. S peaking of the AI development, I think it's still in the, I mean, for the whole AI sector, is still in the very initial stage. T hen, in terms of our Industrial Automation business, I think even though that, in terms of China's economy, shows a slight improvement in exports, but it is not yet a meaningful recovery. Additionally, the depreciation of Asian currencies, driven by the Japanese yen, is relatively unfavorable for us.
We will continue to strengthen, our vertical specific solutions, hoping to make some breakthroughs.
My first question here is: Can you, share your view on the seasonality of this year? As we can see that you, experienced a relatively weaker Q1, so can we still expect, the traditional seasonality for this year?
I think in terms of the seasonality, we actually always have a pretty typical pattern for the seasonalities. In Q1, it's typically weaker because there are just fewer working days because of the Chinese New Year. F or this year, we still expect a typical seasonality pattern for the whole year.
My second question is related to your AI power supply. As you used to mention, your AI related power supply accounted for 2% of your revenues last year. C an you give me an update about your AI power supply?
I will have our IR, Rodney, to give you the update on this.
Last year, for the whole year, our AI related power accounted for 2% of overall revenues. I n Q1, because the AI related power continued to grow, and then also because of the seasonality for other businesses. T hat's the reason, our AI related power, as a percentage of our overall sales, almost doubled in Q1 compared to a year ago.
I would like to add on, a few points on the AI related powers. There are so many discussions around this AI, AI server powers. A ctually, at Delta, we are able to provide products, I mean, the power conversion products from grid to the chips. I think in terms of the AC to DC powers, there are actually, more companies or more players in the market. They are able to, produce or provide such products. F or Delta, we are not only able to provide the AC to DC, the front-end AC to DC power supplies. A lso we are able to provide the DC-DC converters.
In terms of your DC-DC converter, can you let me know where, where we can find a DC-DC converter in the system? Is it just onboard, on the motherboard?
Yes, it's actually, we have to in order to power up the chips, we have to put the DC-DC converters as close as possible to the GPUs or CPUs.
My next question is: can you share, like, how much in terms of the current and value increase between the AI-related power and traditional server powers?
We couldn't really provide the details in terms of the pricing. G enerally speaking, the AI-related power, in terms of the power output per unit, is actually much higher than the traditional server powers. Also, the requirements for the AI server powers is also much higher. I n terms of the value, I can be sure to say it's actually much higher. I n terms of how much higher, because of this is kind of the trade secret, so I couldn't really comment on the details.
So can you give us some updates on your cooling business?
Well, traditionally, when we were talking about the cooling business, we normally refer to our cooling fan business. Because our expertise, I mean, lies in the air cooling technology. Delta actually has been involved in data center cooling for a long time, but primarily in air cooling products related to the fans. In the future, with AI servers requiring extensive use of liquid cooling, we will also actively take part in this market. W e have already developed a range of related products, including 3D VC, cold plates, manifolds, coolant distribution units, and chillers. However, the application of liquid cooling is still limited at this stage. Its contribution to the company's revenue is not going to be significant this year.
My next question is, do you have any expansion, I mean, capacity expansion plan for the liquid cooling products?
Delta's advantages in liquid cooling span several areas. For example, Delta is one of the few companies with a complete solution. T hen secondly, we have a more diversified manufacturing footprints. In terms of the manufacturing capacity, I think we actually produce the cooling products both in our China production base and in our Thailand production site. It's actually subject to the client's requirements.
Do you have any capacity expansion plan for your liquid cooling or your cooling products?
Yes, we do.
For your cooling solutions business, would you normally just provide some components to your customers, or you provide you provide solutions to the customers?
I think it's actually also subject to the customer's requirements. I also have a few points to add on this, cooling system or our cooling solutions. E ven though people are, I mean, talking about the liquid cooling solutions, but actually, eventually, I mean, for the whole cooling system, eventually you still need to have a fan to dissipate the heat. I t's not just about the air cooling or liquid cooling, it's actually a system. It's you've got to have a complete system to dissipate the heat in the data centers.
My next question is: How do you see the future interests in the company's CapEx?
In terms of our investments, I mean, into our businesses, I think there are a few businesses. I mean, we will continue to invest. For example, our EV business is definitely one of them. As you can see from its history, after we have been investing into this business for over 13, 14 years, it actually finally became a profitable. It has become a profitable business after we have had been investing into it for more than 13 years. But going forward, we think there are still a lot to do and a lot to work on in terms of this EV, onboard EV business, so we will definitely continue to invest in it.
Then also, our Industrial Automation is another business we will continue to invest. We have been developing this business for almost 30 years. T he global market for Industrial Automation is around $25 billion, but we only own, like, maybe $1.5 billion of it. W hich means that, in terms of the market share, our market share for this business in this market is still relatively low. W e still need to. We still have a lot to work on. T hen we will also continue to invest in data center applications. Including the power management solutions for data centers, and also the cooling solution and cooling technology for the data centers. T hen we also see there is a great opportunity in terms of the microgrid market. W e think that is still in the very early stage in terms of the development of the microgrid.
We actually have a few businesses related to this microgrid market, including our EV charger business, our energy storage system business, and so on. A s we are actually transforming ourselves into more branded business. In that case, we not only need to have the engineers and technical staff in the headquarters, but also we will have to have more engineers in different regions in order to service the local markets. Because in terms of, I mean, in order to do the solution business, you will have to be closer to the clients. T hat's the reason why we would need to have a more diversified footprint, not only on the manufacturing capacities side, but also on the R&D capabilities side.
Then also our new investments into the hydrogen energy, which we just licensed the technology from a U.K.-listed company last year, which is also part of this microgrid system. W e actually continue to invest into many business opportunities. We do understand and realize that we will have to be responsible for our existing shareholders. I n terms of the long-term business development, we can't just, I mean, cut back the investments for the new opportunities, just because of the, I mean, just because of the soft, the softer economy circumstances or some, or maybe be due to the sluggish demand for one or two years. T hat's the reason why we will continue to invest into the new opportunities.
My next question is related to the rising electricity costs in Taiwan. Do you think there is going to, I mean, have any impact on the business?
I think given the current circumstances, increasing the electricity cost in Taiwan is necessary. F or example, if I ask you, like, do you have any idea about, like, I mean, typically, how much your electricity bill is? I think very few people can answer me this question. W hy is that? It is actually because we actually have a very, very low—we actually enjoy very, very low electricity costs in Taiwan. I think it's always, I mean, we have always coming back to this user pays principle. W e think rising the electricity price is actually going to be helpful in terms of helping the users to be more energy conscious. I think compared to increase the power supply in Taiwan, more important is we have to save as much as possible. We have to save the electricity, I mean, consumption.
Reduce our electricity consumption as much as possible. We believe that is actually the more critical thing to do. T his idea has always been part of the DNA of Delta. As we always believe that saving the electricity, or I mean, taking actions in these approaches, is actually not going to increase the overall cost of a company, but reduce the cost of a company and help to improve the profitability of a company instead. For example, in terms of the efficiency of the buildings, there is actually plenty room to improve in terms of the efficiency of a building. T hat is also precisely the reason why we are involved into this Building Automation business. T hat's actually also the reason why starting from 2006, we determined that all of the new buildings of Delta, that we have to make them a green building.
Because it's actually not a really difficult thing to do in terms of just making some minor changes, in terms of the designs of buildings, can actually help to improve the efficiency, especially the electricity, I mean, the energy efficiency within a building. B y doing so, we actually saved a lot of electricity just by improving the intelligence of a building. I f we are able to duplicate this system or this mechanism into other buildings in Taiwan, I think we are able to save tremendous energy consumption, to reduce tremendous energy consumption for the country. J umping back to your question, I think when the cost, the electricity cost was low, nobody really cared about the, the cost, the overall cost.
When the government is trying to increase the electricity price, it can actually help to increase the awareness of electricity consumption among the users. T hat is my view on this.
My next question is related to the liquid cooling products. When do you expect the revenue contribution of this liquid cooling products to account for, like, 1% of your total revenue?
I think it's, w ell, for your question, I think that as we said, we are not actually, we don't expect to see a very meaningful revenue contribution for the liquid cooling products for this year.
Can you comment on the average selling price for your liquid cooling solution?
I think it really depends, because in terms of the size of the solutions, it's highly complicated, and then they are all customized. Although, I mean, it is, I mean, in terms of the concept, it's quite similar from one supplier to another. I n terms of the design, can be very different, s o in terms of your EV, onboard EV business, as we can see from the report, your onboard EV business only had like around 18% year-on-year growth in Q1.
Your guidance for this business is like still like 20%-30% for the whole year. Does that mean that you are actually expecting you expect an acceleration for the business for the rest of the year?
Currently, because we actually still see a healthy order flow for our EV, onboard EV business, so we think that 20%-30% is still achievable. T he next question is about the competitive landscape for the liquid cooling market, as there are so many players in the market claiming themselves are able to provide liquid cooling products to the clients. I think in terms of the competition in the liquid cooling, as I said, we have, I mean, our advantage is we have a relatively complete product offerings in terms of this liquid cooling solution. I do believe that we are in the leading position, but eventually, it's still, it's still subject to, I mean, it still depends on whether you're able to solve the problems for the clients.
Can you share your view on the competition landscape for your DC-DC converter product?
I think, as you must know, that there are actually a few players in the market. They are pretty aggressive in this market, but I think that we are actually. I think ours, well, in terms of the specialty of the, I mean, other competitors in the market, especially for those, especially for those power module makers. I think because for this kind of DC-DC converter product, as you know, that they are the onboard products, so you actually have to have, I mean, pretty profound packaging know-how, in terms of how you package the products on board. I don't believe that those competitors, they actually possess this know-how.
My last question is regarding how you see Tesla?
Tesla, I mean, laid off their Supercharging division. I think it was actually a surprise to everyone, even to the employee of Tesla. Actually, I got a friend, I mean, his kid just got hired by this department, but he didn't actually made it on board, and then he got laid off because of this. I think it's definitely going to be a turbulence. I mean-