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