Corning: During the Maxim Group Growth Conference on October 7, 2008 in New York City, Corning’s CFO James Flaws updated the company’s display glass market outlook for 2009. Flaws also announced Q3’08 glass volume shipments for the company’s wholly owned business and Samsung Corning Precision Glass (SCP). Q3’08 glass volume shipments grew 2% Q/Q, which was lower than expected. SCP’s volume, however, grew 12% Q/Q on the strengths of its ties with Samsung, S-LCD and Sony. What brought growth down was its wholly-owned businesses located primarily in Japan and Taiwan with a 10% Q/Q drop in volume shipments in Q3’08.
Glass pricing was as expected in Q3’08 according to Flaws and Corning will continue to pursue its pricing strategy in Q4’08. Flaws also noted that the inventory situation in the supply chain is improving. He then moved toward LCD TV demand citing that US LCD TV unit sales were up 29% in August citing NPD Group’s retail tracking service. Unfortunately, NPD does not track club store sales. Club stores such as Sam’s Club and Costco is where many cost-concious LCD TV consumers are increasingly shopping. Sam’s Club recently announced that its electronics category posted soft sales in September but also noted that LCD TVs and small electronics (MP3 players, GPS devices) were strong. Also that 29% growth figure is in units. If those units are generally on the small side, then Corning is in trouble. Corning’s Display Technologies segment relies on growth in display size. Not only must LCD TV unit sales grow, the trend needs to be toward larger sizes for Corning to maintain healthy growth.
Flaws cautioned that many Taiwan-based LCD manufacturers might continue to run their TFT LCD fabs at lower utilization rates in Q4’08. A Q/Q decline in volume shipments in Q4’08 is not out of the question according to Flaws. He was also cautiously optimistic about SCP that Q4’08 volume shipments could come in higher than in Q3’08. LG Display, based in South Korea, just announced that it has resumed normal production rates starting October. Corning supplies roughly 50% to LG Display’s larger generation LCD fabs.
In 2009, Corning is looking at a 15% to 25% Y/Y growth. Previously the company forecasted a 20% to 25% Y/Y growth for 2009. In 2008, Corning estimates that 2.25 billion square feet will be shipped and the new forecast would mean volume shipments of 2.65 billion to 2.9 billion square feet in 2009, an increase of 400 million square feet at a minimum. Corning has decided to delay construction and ramp in capacity with the fourth phase of its Taichung facility until late 2010. The company may also delay maintenance at some of its glass production facilities. CAPEX in 2008 and 2009 will be reduced by US$400 million to US$600 million. In 2008, Corning’s CAPEX for its Display Technologies segment will be between US$1.8 billion and US$1.9 billion, down US$300 million to US$400 million. CAPEX in 2009 will be between US$1.6 billion and US$1.7 billion, down US$100 million to US$200 million from previous forecasts. Corning also announced that it has stopped outside hiring, preparing for capacity shift toward other businesses, limit R&D spending and reflects prudence not a lack of confidence according to Flaws.