Corning Sees Smartphone Glass Sales Decline Seeping Into Current Quarter

Corning on Tuesday reported a drop in sales at its screen glass unit for the first time in at least four quarters, and said it expects the weakness to spill into the current quarter, adding to growing market jitters about demand for high-end smartphones.

Shares of the specialty glass maker, whose Gorilla glass became the screen of choice for many smartphones including Apple's iPhone and Samsung's Galaxy, were down about 3 percent in morning trade.

"Soft Apple and a broader slowdown in front of new smartphones launched in Asia caused the weakness in specialty material (the unit that makes Gorilla Glass)," Oppenheimer & Co analyst Andrew Uerkwitz said.

At least two other Apple suppliers - contract chipmaker Taiwan Semiconductor Manufacturing Co and chipmaker AMS - have pointed to soft demand from smartphone customers in the past week. Analysts have attributed the softness to weaker-than-anticipated demand for the California company's iPhone X.

Global sales of smartphones to end users was nearly 408 million units in the fourth quarter of 2017, a 5.6 percent year-over-year decline for the first time ever, Gartner Research said in February.

Corning said net sales in its specialty materials business fell 7 percent to $278 million (roughly Rs. 1,850 crores) in the first quarter, missing analysts' estimates of $293 million, according to Thomson Reuters.

The company expects a similar year-over-year decline in the unit in the second quarter, Chief Financial Officer R. Tony Tripeny said in a post-earnings conference call.

However, he said the company's long-term goal is to double sales in mobile consumer electronics despite a matured smartphone market.

Sales in its LCD business, which makes glasses used in televisions and PCs, also declined 5 percent to $745 million (roughly Rs. 4,960 crores), below Wall Street estimates of $747.5 million.

The only bright spot was demand for optical fiber cables as telecom companies invest in upgrading their networks ahead of the rollout of 5G.

The industry will spend $225 billion (roughly Rs. 15 lakh crores) on 5G between 2019 and 2025, according to a research note published by Morgan Stanley in October.

Net sales from Corning's optical communications business, which makes fiber optic cables and connectors and contributes nearly one-third to its total sales, rose 8 percent to $886 million.

On an adjusted basis, Corning earned 31 cents per share on revenue of $2.51 billion. Analysts on average had expected a profit of 30 cents and adjusted revenue of $2.49 billion.

© Thomson Reuters 2018