Corning is to reduce glass capacity at its wholly-owned business and the Korea-based joint-venture Samsung Corning Precision, which will include delaying the start up of new glass melting tanks, as well as postponing the relighting of tanks that are down for repair, as well as the shut down of several glass melting tanks.
During the Credit Suisse Annual Technology Conference, Corning senior vice president and corporate controller Tony Tripeny announced that Corning is taking action in the fourth quarter to reduce glass capacity at both its wholly-owned business and the Korea-based joint-venture Samsung Corning Precision (SCP). This decision has been made since Corning expects the LCD glass supply chain to exit 2011 at historically lean levels compared to past years.
Tripeny informed investors that Corning still expects worldwide glass demand to increase sequentially in the fourth quarter, but that there will be excess glass capacity.
These reductions in glass capacity will include delaying the start up of new glass melting tanks, as well as postponing the relighting of tanks that are down for repair, as well as the shut down of several glass melting tanks.
According to Tripeny, the combined actions at both Corning’s wholly owned business and SCP will reduce the company’s total worldwide capacity by about 25% by the end of the fourth quarter.
The company’s combined LCD glass volume, which includes both its wholly owned business and SCP, is now expected to be up slightly sequentially versus previous guidance of up more than 10%, he said. LCD glass price declines are expected to be more significant in the fourth quarter and as a result, consolidated equity earnings are expected to be down 30% compared to original guidance of down 5%.
During its third-quarter earnings call, Corning said that it expected to regain lost market share in South Korea in the fourth quarter and, in order to compress its pricing premium, in light of the current state of glass oversupply in the industry, it significantly reduced LCD glass pricing during the quarter.
However, a cut in orders by a major customer in Korea will now result in lower-than-expected shipments from SCP, Tripeny said, adding that Corning expects SCP’s LCD glass volume to increase 5% to 10% sequentially compared to original guidance of more than 20% volume growth.
The company will also decrease its Gorilla Glass sales forecast for the fourth quarter to a 25% sequential decline, compared to its original forecast of a 15% sequential decline. The revision is due to lower worldwide demand for cover glass for tablet computers, Tripeny said.