Corning (NYSE:GLW) is a global leader in producing specialty glass and ceramics that are used in various technology-based applications. The company’s operations are split among five diversified business segments: Display Technologies, Telecommunications, Environmental Technologies, Specialty Materials and Life Sciences. Corning’s glass manufacturing operations date back to its founding in 1851, and today its Display Technologies segment as well as its joint venture, Samsung Corning, manufacture glass substrates for active matrix liquid crystal displays (LCDs) that are used primarily in notebook computers, flat panel desktop monitors, and LCD televisions. In the LCD market, Corning mainly competes with Asahi Glass (TYO:5201), Nippon Electric Glass (TYO:5214), and Avan Strate, Inc. Its competitors across other segments include Schott, Shin-Etsu Quartz Products (TYO:7970), Carl Zeiss, Nikon (TYO:7731), Denso (TYO:6902), 3M Company (NYSE:MMM) and Tyco Electronics (NYSE:TYC) among others.
We currently have a $18.25 Trefis price estimate for Corning. Our price estimate is about 30% ahead of the market price.
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Corning at a Glance
Samsung Corning mentioned above accounts for nearly half of our estimated stock value. Corning also has another major joint venture, Dow Corning, that manufactures silicone products worldwide and contributes another 25% to our estimated value for the total company. It is a leader in silicon-based technology and innovation, offering more than 7,000 products and services.
Corning also produces optical fiber and cable and hardware and equipment products for the telecommunications industry globally; ceramic substrates and filter products for emissions control in mobile and stationary applications; special materials for glass, glass ceramics and fluoride crystals to meet demand for unique customer needs; and scientific laboratory products.
Recently Corning introduced a protective cover glass, known as Corning Gorilla glass for display devices such as notebook PCs, televisions and mobile phones and is being used in Apple’s (NASDAQ:AAPL) iPhone 4.
Corning’s Major Revenue Drivers
We have broken down Corning into 7 different divisions which drive Corning’s revenues.
- Samsung Corning Precision
- Dow Corning & Other Affiliates
- Display Technologies and Development Projects
- Life Sciences
- Telecommunication (Optical Fiber and Cable & Telecom Hardware and Equipment)
- Environmental Technologies (Diesel Technologies & Automotive Technologies)
- Specialty Materials
Booming LCD Demand Will Drive Revenues
LCD demand is expected to increase substantially over our forecast horizon due to higher penetration in emerging markets and high replacement rate in developed economies.
Currently, notebook, tablet PC and LCD television penetration levels remain low in most emerging markets and developing nations. We expect that the penetration levels will increase consistently in these growth markets. Moreover, even though a deteriorating economic environment will adversely affect many developed economies, we expect that replacement rate of notebooks, tablet PCs and LCD televisions will remain high over the long-term in these countries. As such, increasing LCD demand will offer significant growth opportunities for Corning.
Increasing Competition in Korea Will Impact Samsung Corning’s Market Share
Samsung Corning accounts for almost half of our estimated stock value for Corning and its sales are highly concentrated to two LCD panel makers located in South Korea that account for approximately 93% of its total sales. Thus demand for Samsung Corning’s products is highly dependent upon these major customers.
The current pace of innovation in both the electronics industry as well as the glass industry will adversely affect Samsung Corning’s market share if it is unable to diversify its customer base and these customers choose other suppliers.