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​Corning’s Display and Specialty Materials Growth Report Another Strong Quarter
May 13, 2019
 
Corning’s  Display & Specialty Materials had display sales 4.4% above analyst expectations, most likely due to a slightly faster ramp at BOE and display margins were 25.4%. Comments about the display and specialty products and markets: 
 

• New Products – Screen Protectors -- A very competitive market, but GLW has partnered with Otterbox, which gives them an edge as to shelf space, but product sales will be at lower than typical margins for specialty materials
• Auto-grade glass-- When the Hefei plant goes into production later this year, the cost structure and profitability of this new product category should be understood.
• China -- As long as agreements are made in 2Q there will be no trade impact.  With no agreement, slower economic growth worldwide could impact the CE space 
• Display –Not too long ago Corning’s display business was the company’s growth engine, but the industry has matured, and Corning’s pure display business is based on capturing category growth as opposed to industry growth.  There is still significant growth in the display space as TV panels and smartphones area continue to grow. But there are other Gen 10.5 fabs being built in China by CSoT and Foxconn for which Corning’s competitors have announced agreements.  
  • 1Q 
    • Sales ↑10% - Net up 12% (Y/Y)      
    • Price declines – Lowest in a decade
    • Glass Market grew 4% 
    • GLW glass volume grew 4.4% due to BOE Gen 10 ramp
  • 2Q          
    • Expect glass market up 4% - 6% (Y/Y)            
    • GLW glass up 4%-6% but could exceed depending on BOE Gen 10 ramp 
    • Price declines – similar to Q1 

 

• Specialty Materials (Gorilla)
  • 1Q          
    • Sales up 11% (Y/Y)
    • Net income up 7%
  • 2Q -- Sales up 7% - 8%
  • Yr. -- No Guidance provided

 
Corning’s response to a reduction of smaller LCD substrate capacity is that they would ‘repurpose’ these facilities toward Gorilla Glass or automotive specialty products, which is what Corning did when it bought back Samsung’s share of their joint venture a few years ago.  At that time not all of the JV capacity was being fully utilized, and the company converted some of that capacity to Gorilla Glass and other specialty product production.  Panel producers push for bigger price reductions every quarter, but operating personnel know that paying a bit more to guarantee quality supply is far less expensive than a missed customer production deadline, which gives Corning the leverage to maintain their margins.