Mauro Tibone, EBX Columnist

Bend It Like… Corning?

Mauro Tibone, EBX Columnist

The idea of making a type of flexible glass that does not break easily is centuries old and already in the Ancient Roman age the idea of creating such glass was mentioned in several accounts. According to historian Petronius, a glassmaker was granted an audience with Emperor Tiberius to showcase his invention. Unfortunately, the emperor had him beheaded for fear that such an amazing material could undermine the value of gold and silver.

We have no evidence that such material ever existed, of course, but the dream of creating a flexible glass is soon to become part of our life thanks to Corning Inc.

Last June, Corning presented his most recent creation called Willow, a type of glass that is as thin and as flexible as a sheet of paper. It can be drawn to form sheet with high quality surface area and bent enough to be spooled.

The capability to make very thin glass is not unique to Corning or new to the glass industry. What is new is that glass can be made to very thin levels, while preserving all the excellent chemical physical attributes required of the modern substrate.

Willow is made with Corning’s core manufacturing technology called fusion forming. This process involves heating glass in a trough at very high temperatures, in such a way that molten glass evenly pours over the sides and solidifies at the bottom. The difficulty for Corning was finding the rate at which to draw the glass after it fused, in order to achieve high-grade surface quality and getting it onto rollers.

What really sets Corning apart from competitors is that they figured how to make glass sheets in large quantities, so that customers will be enabled to use their own production lines (i.e. TV manufacturers).

This process shows the extent to which technological innovation in the glass industry will rely more and more on a close link between R&D and manufacturing at the OEM level.

Such close cooperation was already evident in the case of Apple, when in 2006 Steve Jobs asked Corning to develop a new type of high performance glass (later named Gorilla glass) that could meet the requirements (durability, thinness, clarity and resistance to scratches) needed for a new generation of mobile devices like the iPhone.

Flexible thin glass roll-to-roll processing meets the growing need toward managing the mass production of high performance displays, such as those used in electronic mobile devices.

High performance displays are employed where there has been a significant change to the backplane technology. The backplane is the part of the device that actually drives the pixels, turning them on and off.

With high-resolution displays consumer electronics manufacturers are trying to create more vivid colours, smaller pixels to achieve superior image resolution by packing more of them and at the same time to have a faster device for more compelling video performance.

To enable high performance displays it is required that a substrate glass has intrinsic thermostabilty to benefit of smaller and faster transistors.
Plastic is not the right answer for the challenges posed by the manufacturing process of such devices as it cannot provide the same clarity or withstand high temperatures.

Mobile devices require the layering of several panels performing functions such as TFT substrate, colour filters cover, touch-sensor feature and mobile cover. All these functions could in the future be performed by Willow, bringing the overall thickness of a display down by about a third, with great advantages in terms of weight, flexibility and production cost.

It is widely believed that the adoption of Willow, tentatively scheduled in the next three years, as recently announced by Corning, should accelerate the pace of product innovation in many industries.

In consumer electronics the trend towards thinner, lighter and larger screens is gathering pace as people become accustomed to rapidly evolving personal devices as thin and light as possible. Now customers expect the same in devices such as notebooks and tablets, with the consequence that glass becomes even more important than ever before, while moving up the value chain.

Television could experience a renaissance after the introduction of OLED and 3D viewing, pushing the envelope on features like image clarity and size, while integrating touch-screen functionality.

With this process in place, it is possible to imagine a whole new range of applications, including all those who benefit from touch-screen features (not only in consumer electronics mobile devices, but also digital wallpaper or windows) as designers get accustomed to think about glass not in terms of one limiting factor, but as a vital component of the entire product design.

Flexible glass will go a long way to help creating products such as wearable electronic devices, such as the often talked Apple iWatch, smart eye-glasses, bendable mobile phones and tablets for the mass market or even new interactive game consolles.

Other fields like architecture or the photovoltaic industry, where photosensitive materials needing protection from oxygen and moisture to avoid calcium degradation, will benefit greatly from such type of glass. OLED lighting (organic light emitting diodes) could be printed on flexible glass and used in a curved shape (think about lamp shades that generates lights instead of a bulb). How quickly the transition to roll-to-roll processing will happen could also significantly make a difference in terms of an investment in Corning shares.

Corning is in my opinion not only a remarkable company from the point of view of constant innovation and forward thinking; it is also an interesting investment proposition for investors who wish to diversify their portfolio into equities with a long term perspective.

Few companies in the USA have managed to stand the test of time by staying in business for more than 150 years like Corning Inc. Founded in 1851 by Amory Houghton, Corning established almost from the onset its glass making operations in the small town that carries its name.

Over the course of its last 100 years, Corning has diversified its operations achieving great success in numerous areas, such as consumer products (Pyrex), telecommunications (fibre optics), clinical lab services and diagnostics (Quest and Covance were spun off in the 1990s), specialty materials, solar panels and environmental technologies.

Corning survived a disruptive crisis in the aftermath of the tech bubble, when its core high tech fibre optic business collapsed and the share price fell from a peak of $60 down to a little over $1. The company managed to stay in business thanks to a solid balance sheet and to its long-standing commitment to innovation and R&D. In fact, even nowadays the company keeps its expenditure in R&D close to about 10% of total revenues, in good or bad times.

Investors have been shunning Corning for quite some time during the recent market rally, underperforming this year the main indexes at some point by almost 15%.

Nonetheless, a week ago when the company announced its quarterly results above expectations, the market promptly started to re-evaluate Corning’s prospects. Corning announced not only better profits, but gave clear indications that several business lines are having good traction with customers, with sales of Gorilla glass on a strong growth trajectory.

Management is convinced that the share price has been so undervalued that the board has committed to a $2bn share buyback (roughly 9% of its total market capitalisation).

Corning currently still trades below its book value, sporting a 2,8% quarterly dividend yield which the company just upped to 10c/share. It is my opinion that on the current valuation metrics, Corning is a very compelling investment proposition for those seeking exposure to the next up-cycle in glass, specialty materials and environmental technologies.

Contact the Editor Responsible for this Story:

Brian Maguire – brian.maguire@europeanbusinessexpress.com

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