Corning Inc. (GLW) recently announced that slower-than-expected demand from panel makers would lower glass volume in the third quarter, fueling speculation about leading glass providers beginning to feel the heat of excess inventory.
Corning, which had earlier said it expected glass demand to remain flat in the third quarter, said it now sees glass volumes to decline 5% from the second quarter. The specialty glass maker said it expects glass demand in its wholly owned business to drop about 25% sequentially as manufacturers, mainly from Taiwan and Japan, make downward adjustments to panel utilization rates.
Market research firm iSuppli had said last week that shipments of large-sized LCDs had far outstripped end-market sales of televisions, monitors and notebook computers in the first half, resulting in inventories of LCDs and finished products to spike. Corning said it was of the view that the LCD market was in the midst of an inventory correction. In the current quarter, makers of LCD TVs are trimming production targets and inventory levels, putting increasing pressure on panel suppliers to further reduce prices.
The sharp rise in glass inventories is now forcing panel makers to cut back on production, and specialty glass makers such as Corning which supplies glass to these manufacturers are finding themselves on shaky ground as rising inventories threaten to drive down prices.
However, Corning said it was not seeing a letup in retail sales of LCDs and still expects global LCD television sales to rise 37% this year to 185 million units. Corning said continued strength in the Japanese yen-to-U.S. dollar exchange rate would boost its third-quarter sales and net income. Strong production levels at Korean panel makers would help the Samsung Corning Precision unit to rise 5% in the third quarter, Corning said.
We currently have a Zacks #3 Rank (Short-term Hold recommendation) on Corning shares.