The company expects that its third quarter LCD glass shipments will be consistent with the improved second quarter forecast.
Corning Inc. Vice Chairman and Chief Financial Officer James B. Flaws recently updated the company’s guidance of sequential second quarter LCD glass volume growth, citing significant improvement in demand for LCD glass.
“Second quarter glass demand is much stronger than we anticipated even a few weeks ago,” said Flaws. “As a result, we now expect second quarter sequential volume to be up approximately 100% at our wholly owned business.” He pointed out that the company has met much of the improved demand by drawing down its existing inventory. In addition, the company has begun shipping glass from melting tanks that were restarted earlier in the quarter. Corning originally forecasted a second quarter volume increase of more than 50%, and at the end of May revised volume growth expectations to more than 75%.
Samsung Corning Precision Glass Co., Ltd.’s (SCP) second quarter sequential glass volume is expected to be up about 50%, an increase from both the more than 40% figure announced May 28 and the original expectation of more than 25% growth. Flaws pointed out that SCP’s volume did not decline as steeply as Corning’s wholly owned business did in the first quarter.
Regarding LCD glass pricing, Flaws said that second quarter prices were moderate and substantially below the first quarter price declines. “As we exit this quarter, our model indicates that the industry’s second quarter supply chain inventory is equivalent to inventory levels at the beginning of this year,” he said. “We see this as a positive sign. Industry growth required a supply chain expansion after the significant contractions we saw in the first quarter. As we go forward, we expect some further supply chain expansion as the industry prepares for the seasonally stronger fourth quarter.”
Flaws said that continued retail demand for LCD televisions is helping to prevent excessive buildup of inventory in the supply chain. He noted that various industry reports on retail data showed that April LCD TV unit sales increased 22% in Europe and 77% in China. In May, LCD TV sales were up 48% in Japan.
“While retail LCD TV sales growth in the United States had slowed somewhat in April after a very strong first quarter, reports that we have received indicate a significant upward spike in domestic LCD TV sales in late May and the first three weeks of June,” Flaws said.
Corning has not changed its expectation that the global LCD glass market will be between 2.1 billion and 2.2 billion square feet this year. “But given the continued strong demand for LCD TVs in recent months, especially in China, we believe there could be an upside to this forecast,” Flaws said. “We will continue to monitor retail trends and provide any updates in our second quarter conference call.”
Looking forward, Flaws said that Corning expects that its third quarter LCD glass shipments will be consistent with the improved second quarter forecast. “We significantly reduced our inventories in the second quarter to meet the increased needs of our customers. We also are strategically restarting capacity in response to some of the improved market demand. However, we expect to be capacity constrained in the third quarter as demand will remain higher than our ability to manufacture.” As a result, Flaws pointed out, Corning is prioritizing its glass allocation to its long-term supply agreement customers.
“It is important to point out that our initial forecast of third quarter glass shipments called for moderate sequential growth,” Flaws said. “This assumption was made off a much lower second quarter growth rate than what has occurred. We now believe that third quarter shipments will be on par with our significantly improved second quarter results.”
Third quarter LCD glass volume at SCP is also expected to be consistent with the stronger-than-expected second quarter results. The company anticipates third quarter glass pricing at its wholly owned business and SCP to be approximately flat vs. the second quarter.
“It is far too soon to forecast fourth quarter performance, but if retail demand for LCD TVs continues to be stronger than forecasted, we could see a more muted seasonal decline for LCD glass demand,” said Flaws.
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