How Important Is The Specialty Materials Segment To Corning?

by Trefis Team
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Corning (NASDAQ: GLW) has five key operating divisions – Display Technologies, Optical Communications, Specialty Materials, Environmental Technologies, and Life Sciences. Specialty Materials, which sells Gorilla Glass, is the third largest operating segment and accounts for nearly 14% of the company’s overall revenue. Further, Specialty Materials has been the fastest growing division of late, with revenues witnessing around 13% annual growth between 2015-2017. This was primarily due to strong adoption of its Gorilla Glass products, coupled with increased demand for its advanced optics products. But a lack of significant smartphone launches in the first half of 2018 dampened its growth slightly. However, Corning’s stock rose to an all time high of $36 as on September 20, as a result of Apple (NASDAQ: AAPL) launching three new iPhones. Additionally, we expect new smartphone launches, coupled with improved demand for its products from the wearables, telecommunications, and semiconductor markets, and its foray into the automotive interiors market, to drive decent near term growth. We have created an interactive dashboard analysis of Corning’s revenue growth that shows how much of the company’s future growth is likely to come from its Specialty Materials segment. You can adjust the revenue and margin drivers to see the impact on the overall revenues and earnings from operations.

New Smartphone Launches To Drive Specialty Materials Revenue

The Specialty Materials division was Corning’s fastest growing segment between 2015-2017, mostly due to increased adoption of smartphones, which in turn drove demand for its Gorilla Glass. The company also witnessed reasonable demand for its advanced optics products. Further, with the launch of three new iPhones, strategic partnership with smartphone manufacturer OPPO, and the anticipated launch of several new smartphones later this year should result in strong demand for Corning’s recently launched Gorilla Glass 6. Furthermore, Samsung’s decision to use Gorilla Glass DX+ for its smartwatch should provide decent near term growth opportunities. We expect this segment to grow driven by new smartphone launches, which should aid robust demand for its Gorilla Glass, thanks to increased adoption by smartphone OEMs. In addition, increased use of glass backs on phones should further drive the segment’s revenue in the near term.  Additionally, Corning’s introduction of Gorilla Glass DX and DX+ into the wearables market should further boost the sales from the segment. In addition, its foray into the automotive exteriors market, with multiple supercar partnerships – Porsche 911 GT3, McLaren 720s, and Ford GT should provide for decent near term growth opportunities. However, this market holds significant long term potential for Corning, provided it can break into mainstream vehicles.

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