Corning returns to its glass roots - article in Sundays local paper: here's the url - but it may vanish:http://www.stargazettenews.com/local/Sulocal4.html - below is the text:
Corning returns to its glass roots
By LARRY WILSON
Star-Gazette Corning Bureau
lwilson@stargazette.com
CORNING -- As Corning Inc. seeks a way out of its worst downturn in
decades, it may find salvation in a product relegated to the back burner by
enthusiasm for optical networking devices -- a product called glass.
While the company was reinventing itself in the 1990s as a
telecommunications powerhouse, it was also quietly building a position as the
world's dominant producer of glass for flat-panel computer displays.
"This is the old Corning," said Peter L. Bocko, the technology director for the
business.
Founded in 1851 as a glass manufacturer and known until 1989 as Corning
Glass Works, Corning Inc. was making most of its money in the late 1990s
from optical fiber and telecom devices for communications networks.
But 15 years of research and hundreds of millions of dollars of investment
have brought glass back to the center of the company's operations and have
again made it a key revenue producer. In 2001, when the telecom business
lost $81 million, Corning's information display business -- which includes
flat-panel glass -- turned a profit of $149 million.
Much of the invisibility of the business in the United States results from the
location of its markets. All the major customers -- the companies that make
liquid crystal displays for laptop and desktop computers -- are in Japan, Korea
and Taiwan.
"There is no market in the U.S. for LCD panels," said Donald McNaughton,
general manager of Corning Display Technologies, which operates from a
headquarters in Tokyo.
When a market for flat-panel computer screen glass began to emerge in the
1980s, Corning Inc. revived a production technique -- known as the fusion
draw process -- that it invented in the 1960s to make auto windshields. The
windshield project was a flop, but the technique produced nearly flawless glass
surfaces that proved to be perfect for computer screens.
On a worldwide scale, Corning Inc. is the 800-pound gorilla of the flat-panel
glass business. Its executives aren't shy about touting that fact.
"We provide over half the glass used today in this industry," said Peter
Volanakis, president of Corning Technologies.
McNaughton estimates that Corning's flat-panel business is three times the
size of its nearest competitor's. The competitors -- Japanese companies Asahi
Glass, Nippon Electric Glass, or NEG, and NH Techno Glass -- are struggling,
Volanakis said.
"We believe two of the three are losing money and one is breaking even,"
Volanakis said.
Corning's business recently improved when the Japanese government closed
NH Techno Glass temporarily for releasing arsenic into the atmosphere.
Corning's prospects for big profits from the flat-panel glass business are tied,
in the near term, to the computer industry. McNaughton said a dip in computer
sales last year, the first since 1984, won't have much of an effect on glass
sales.
What will have an effect is the rate at which flat-panel displays replace bulky
CRTs -- cathode ray tube monitors -- sold with most computers. From 2000 to
2001, the sales of flat-panel desktop monitors doubled from 7 million to 15.5
million, McNaughton said.
Helping push flat-panel monitors onto desktops is a steep price decline,
narrowing the cost advantage of CRTs. The average price of a flat-panel
display dropped 45 percent from late 2000 to 2001.
McNaughton thinks flat-panel monitors could account for 50 percent of the
desktop computer market sometime after 2005, up from 14 percent in 2001.
About 100 million personal computers are sold each year.
Apple Computer's recent introduction of a flat-panel version of its popular
iMac is not expected to have a major effect on sales because Apple's market
share is in the low single digits, McNaughton said.
"It shows the power of what one can do when you think about integrating
flat-panel monitors with your computer," he said.
If the market grows as expected, Corning could need new glass melting and
production facilities next year. Already operating at capacity, the company
would probably expand in Asia, McNaughton said. The only American plant
that produces the specialty glass is in Harrodsburg, Ky.
The demand for flat-panel glass grew 23 percent in 2001, despite the decline
in computer sales, and is expected to continue to grow by 25 to 40 percent a
year in the next five years, McNaughton said. Those glowing predictions
resemble those made a few years earlier about the telecommunications
market, which abruptly collapsed last year.
Could the same thing happen to the flat-panel glass business? McNaughton
doesn't think so.
"We have a rather large market share," he said. "Every major LCD producer
is a customer of ours, except one or two. The PC industry is a fundamentally
mature and sound marketplace."
But McNaughton isn't ignoring the lessons of the telecom collapse.
"That has given us all a heightened awareness of what could happen," he said.
"You have to deal with the fact that there's less money all the way around.
You have to justify the money you spend, in your own mind and in
management's mind."
Corning's leadership position in the LCD glass business is a result of 15 years
of technical innovation, McNaughton said.
Bocko, who has led much of the innovation process, said close collaboration
with customers has been critical.
"We went to our customers to find out what glass would give them increased
value," he said. "When we were ready to move this glass into the marketplace,
our customers already had a lot of skin in the game."
What those customers are looking for is glass that is thinner, stronger, lighter
and more stable through a range of temperatures, Bocko said.
"If the glass expands too much, it causes errors and the circuits don't work
anymore," he said.
Corning's newest flat-panel glass, the third generation of a product called
Eagle 2000, achieved a 5 percent weight reduction and a 20 percent cut in
thermal expansion, Bocko said. That's important because lighter glass allows
manufacturers to trim weight from their products.
"They are like mad Huns in getting every gram out," Bocko said. "It allows
customers to go thinner and makes a better-looking display for monitors."
Continuing to squeeze out weight and imperfections from the glass requires
increasing sophistication in testing and measurement at Sullivan Park,
Corning's research facility in the town of Erwin. Devices dubbed "GEORGE"
and "GRACIE" measure the thermal stability of glass compositions, checking
72 points on a 10-inch square sheet of glass.
In Sullivan Park's Micro Surface Lab, new technologies are identifying defects
as small as a nanometer -- one billionth of a meter -- in size.
"This is like the National Bureau of Standards for nano-surfaces," Bocko said.
In addition to advantages such as increased brightness and conservation of
desktop space, flat-panel displays use only a fraction of the glass and the
energy required by CRTs, Bocko said.
"They are a lot more ecologically friendly than conventional computer
screens," he said. "A 20-inch liquid crystal display uses less than a half
kilogram of glass. A 19-inch CRT uses 11 kilograms of glass."
Even customers sometimes don't appreciate the complexity of the glass that
serves as a depository for the millions of transistors and the liquid crystal in a
flat-panel display, Bocko said.
"The glass is not a passive part of the display, it's a living, breathing thing," he
said.
Creating a product for an essentially Asian market has required Corning Inc.
to adapt to business systems and cultural practices that vary sharply from
those in the States, said Koya Iwai, Corning's Pacific Rim manager of
business development.
Iwai said flat-panel TV monitors will create a new market for Corning's LCD
glass in the next few years.
"There's no doubt about the growth of this market on LCD TVs," he said in an
interview from Tokyo by videoconference. "Samsung has developed a 40-inch
LCD TV and Sharp has released an LCD TV up to 28 inches. Prices are very
high, but I expect they will go down."
A Samsung 24-inch LCD TV lists for $9,995 and retails for $6,199.
Volanakis said Corning expects flat-panel monitors to account for 4 to 5
percent of television sales in the next few years.
"We're very encouraged by this, but we're not betting the farm on it," he said.
"In the next two years our growth will be in the laptop and desktop markets."
The glass that Corning produces -- analogous to the silicon on which computer
chips are manufactured -- accounts for about 4 percent or less of the cost of a
completed computer display.
The displays consist of two pieces of the specialty glass, one coated with a
thin film of more than 10 million transistors and the other coated with liquid
crystal. As electrical current flows through the display, each transistor controls
one pixel, determining which color it displays.
The earnings potential of the flat-panel glass business is significant, even for a
$6 billion global company. Sales totaled $333 million in 2000 and $323 million
last year.
A 40 percent annual growth rate would push sales to $1.2 billion by 2005. That
would make flat-panel glass Corning's second-best-selling product, behind
optical fiber and cable.
McNaughton hopes the growing flat-panel glass business will help return
Corning Inc. to profitability.
"It pains us all to see the company going through a tough spot like this," he
said. "It hurts you in your heart and soul and gut more than anything else. We
hope we can help in a bigger way than originally expected." |
