Corning sees LCD panel surplus falling in 3Q 2006

Corning Inc. sees high inventory levels of LCD panels going down in the 3Q 2006 as some customers have indicated they have begun reducing their factory utilization rates.
Corning thinks the inventory…

Corning Inc. sees high inventory levels of LCD panels going down in the 3Q 2006 as some customers have indicated they have begun reducing their factory utilization rates. Corning thinks the inventory problem is in the supply chain and not the end market, and although it is difficult to tell exactly when the problem will end, the firm predicts the 3Q 2006, Corning CFO Jim Flaws said in an interview. Corning shares fell 6.2% on 12 June 2006 after flat panel display maker LG.Philips LCD Co. lowered its outlook for the 2Q due to high inventories. LG.Philips LCD is the second LCD maker in June 2006 to issue a profit warning; Taiwan“s AU Optronics Corp. also cut its 2Q 2006 forecasts, saying overall shipments would come in lower than previous expectations, while average selling prices would fall by more than 10%. Despite the profit warnings by the LCD makers for the quarter, Mr. Flaws reiterated Corning“s 22 May 2006 guidance for glass volume to be flat to down 5% in the 2Q from the 1Q 2006. Without going into specifics, Mr. Flaws also said Corning“s display technologies segment is expected to be profitable in the 2Q and throughout 2006. Corning continues to expect sales of USD 1.29 billion to USD 1.33 billion and earnings per share of USD 0.24 to USD 0.26 a share before items in the 2Q 2006, with strength coming from the telecom business, he said. Corning expects demand for glass substrates to grow at a compound annual growth rate of 37% from 2005 through 2007. For 2006, the company expects glass demand to rise 40% to 50% from 2005. Mr. Weeks said that in 2006 LCDs made up 19% of the total TV market, expected to rise to 30% by 2007. In that light, supply chain problems in a given quarter or two were not strategically important, he said. Corning announced plans in April 2006 to set up a new LCD glass finishing facility in Beijing, which will be the firm“s sixth glass substrate facility. The company already has plants in Taiwan, Japan, Korea and the USA. Weeks said that the investment in the Beijing plant would be “small”. Mr. Flaws said that the new Beijing plant is expected to be running by 2008, although the schedule could vary depending on demand from LCD makers in China. “As the industry grows, we want to have something close to China”, he said. To secure its place in the supply chain, Corning has built plants close to its Asian customers such as Samsung Electronics, AU Optronics and Sharp Corp. enabling the company to build to specification, deliver in time and cement relationships with these customers. In May 2006, Corning said that it would invest USD 174 million to further expand its eighth generation LCD glass substrate manufacturing capacity at its Shizuoka, Japan plant. The company has already shipped some eighth generation size LCD glass from this facility in the 2Q 2006 and Corning plans to begin commercial shipments in the 3Q. Weeks said that demand for measuring 50-inches and above should materialize. “We feel comfortable that there is a market for very large sized TVs and we will build to that market”, he said. “The amount of panel makers who make that next leap in size up to Gen 8 will be less than those who made the leap in Gen 5. The scale of investment is quite high and purely aimed at very large-sized TV”.