Corning Renews Agreement with Samsung Despite Overcapacity Hangover

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Corning

Corning (NYSE:GLW) has extended its agreement with Samsung Corning Precision (SCP) and the AMLCD division of Samsung Electronics for the next five years. This partnership is essential for Corning as the Samsung Corning JV accounts for nearly ~50% of its stock value by our estimates. The agreement extends the technology licensing agreement between SCP and Corning and the supplier agreement between SCP and Samsung Electronics (SEC). The supplier agreement stipulates that the company will provide glass for LED backlit and OLED displays to Samsung for the next five years, while the technology licensing agreement specifies that SCP will have access to Corning’s propriety technology for the same period. Corning competes with companies like PPG Industries (NYSE:PPG) and 3M (NYSE: MMM).

We have a price estimate of $16.53 for Corning’s stock, which is around 22% above the current market price.

See our full analysis of the Corning stock here

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Exploring Samsung-Corning Synergies

Samsung Corning Precision (SCP) is an equity company formed by Corning and Samsung in 1995. It uses the propriety Corning technology to create glass which is supplied to LCD manufacturers across the world. The venture has been highly successful since its inception and has become the preferred choice for high quality glass by most LCD manufacturers. It has provided LCD makers with the award winning EAGLE XG glass, which was the industry’s first LCD glass to contain no added arsenic, antimony, barium, or halides.

SCP also supplies Lotus Glass which is used for curved screens along with market leading Gorilla Glass that is used in a wide variety of smartphones, tablets, and some new notebooks. SCP had acquired Samsung Corning, a company  making cathode ray tube (CRT) glass and other display parts and materials in late 2007 and then exploited its synergies to offer a broad product portfolio for flat panel display industry.

SCP Continues to Grapple with Oversupply

In spite of these developments, the joint venture continues to struggle with industry overcapacity. Because of this, glass prices have dipped and are expected to continue their downward trend until mid-2012.

Samsung Corning Precision (SCP) lost market share in Korea last year due to oversupply and was looking to correct it by reducing the glass prices. This move, however, did not work out as the competitors also reduced glass prices, resulting in SCP missing its volume targets for Korea.

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