Corning Incorporated (NYSE:GLW) announced today that its board of directors has approved a capital expenditure plan to expand the company's LCD glass and Gorilla glass manufacturing in response to strong market demand.
The company will invest approximately $800 million to construct a new LCD glass substrate facility in the People's Republic of China. With the support of the Beijing municipal government, Corning will locate the new facility in the Beijing Digital TV Industry Park within the Beijing Economic Technological Development Area. The manufacturing plant will have up to Generation 8.5 glass-melting and finishing capabilities. Groundbreaking is planned for September of this year, with production slated to begin in the first half of 2012.
Corning's investments will also include construction projects in other regions to expand capacity for two of its flagship products: EAGLE XG LCD glass substrates and Gorilla glass. As previously announced, the company has restarted an expansion project at its Taichung (Taiwan) LCD glass facility and is ramping up idled capacity at its facility in Shizuoka, Japan to produce Gorilla glass for various applications. The company now intends to expand further in Taichung under the new capital expenditure plan, with additional capacity projected to come on line in the first half of 2012.
"These investments will position Corning to capture significant new sales opportunities from rapidly increasing demand for our Gorilla glass, while continuing to meet the demand for our EAGLE XG products," Wendell P. Weeks, chairman and chief executive officer, said. Corning expects Gorilla glass sales to exceed $200 million this year in its Specialty Materials segment, and estimates that sales could reach approximately $1 billion annually by 2011. Gorilla glass is a protective cover glass that provides superior damage and scratch resistance on hundreds of models of handheld devices and smart phones.
"The need for additional Gorilla glass capacity is based in part on the product's new application as a TV cover glass," Weeks explained. "Gorilla glass has already been embraced by information technology and handheld device makers, and the addition of the TV cover glass application creates a tremendous opportunity for further growth."
LCD substrate growth
"We continue to forecast strong growth for LCD glass for the next several years. This growth will be driven primarily by continued market penetration of LCD televisions, with significant gains in Asia and South America, and an accelerated technology replacement cycle in more mature global markets. Therefore, we are making the appropriate capacity investments to take advantage of this projected demand," said James P. Clappin, president, Corning Display Technologies, Asia.
"China is not only one of the world's leading consumers of LCD televisions; it is also poised to become a major producer of LCD panels for TV applications within the next several years. We are excited to be a part of this emerging market," Clappin added.
"China is quickly becoming a leader in LCD panel development, and Corning will be well positioned to grow with the China market through these capacity expansions," noted Eric S. Musser, chief executive officer of Corning Greater China. "These investments, combined with our earlier announcement to expand production of auto emissions-control products and establish a life science presence in China, underscore Corning's long-term commitment to the China market."
The company noted that continued higher-than-expected retail demand for LCD televisions, laptops, and desktop computers has resulted in an improved outlook for these consumer electronic products throughout the remainder of the year. Therefore, Corning now believes that annual LCD glass demand could be at the higher end of its forecasted range of 2.9 billion square feet to 3.1 billion square feet this year.
As a result of these investments, Corning has increased its forecast of capital expenditures to approximately $1.2 billion this year, up from its previous estimate of $1 billion. The company also expects that capital expenditures in 2011 will be higher than this year's current forecast.