Demand for Corning Glass Getting Stronger… Really?

April 8, 2008

Mark Sue, a RBC ana­lyst, upgraded Corning’s stock from “Neutral” to “Buy”. He based this deci­sion on the assump­tion that “demand for Corning glass is get­ting stronger due to the pop­u­lar­ity, and grow­ing size, of LCD TV screens around the world.”

I am not sure if Mr. Sue has been read­ing the news lately, but I must dis­agree. For instance, Sharp announced that Q1 results were well below expec­ta­tions and that the com­pany will be focus­ing on smaller LCD TVs. Sharp began man­u­fac­tur­ing <a href="http://www.displayblog.com/?tag=32"">32″ LCD TV pan­els on its G8 line, which is more suited for 42″ and larger sizes. Other LCD TV man­u­fac­tur­ers will likely fol­low the trend toward man­u­fac­tur­ing smaller and more afford­able units. Best Buy has reported that although LCD TVs are grow­ing, growth is slow­ing down. There are reports that sug­gest LCD TV sell-through in the US has shifted toward smaller-sized units in March.

Mr. Sue might know some­thing that Sharp and Best Buy do not, but I am cer­tain demand for Corning glass is not get­ting stronger. The phrase “get­ting stronger” would imply that growth is accel­er­at­ing. Growth for Corning’s LCD glass sub­strates are def­i­nitely not accel­er­at­ing. In fact with every year LCD TV pen­e­tra­tion of the over­all TV mar­ket is grow­ing and that means year-over-year growth in gen­eral will slow and it has been for the last cou­ple of years.

Corning has a dom­i­nant share of the LCD glass sub­strate mar­ket at roughly 60% when its joint ven­ture Samsung Corning Precision (SCP) is included in the cal­cu­la­tion. The com­pany has main­tained this dom­i­nance for many years and will con­tinue to do so for many more. However, Asahi Glass Co. (AGC) is build­ing out its capac­ity quickly and will erode Corning’s share some­what. AGC’s share of LCD glass capac­ity should be around 20% at the time of this writing.

Source: Forbes

[tags]Corning, LCD Glass, LCD Glass Substrate, LCD TV, Samsung Corning Precision, SCP, Asahi Glass, AGC, Sharp[/tags]