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Corning to expand production

Corning Inc, the world's largest liquid-crystal-display (LCD) glass maker, said yesterday that it was aggressively boosting capacity to satisfy voracious demand from Taiwan's flat-panel makers, which are increasing output to challenge their South Korean rivals.

"We hope to supply Taiwan customers with glass substrates from the manufacturing facilities here," James Clappin, general manager of Corning Display Technologies Taiwan, said yesterday in Tainan. The company supplies its Taiwanese customers mostly with glass substrates made in its US plants, he said.

Clappin made the remarks during a press conference to open the New York-based company's new plant in the Southern Taiwan Science Park (南部科學園區).

The new facilities, part of a US$180 million expansion plan announced last year, will produce glass substrates for larger fifth-generation (5G) LCDs, the company said.

Each LCD panel requires two glass substrates with a layer of liquid crystals in between. Each generation of of displays is larger than the previous generation and sells for a lot more.

"We're feeling a shortage at all generations ... but we have no plan to raise prices at this point," Clappin said.

He said it was difficult to say when supply would improve.

Taiwan's thin-film transistor LCD sector is expected to increase output to 57.8 million units this year after investments worth US$9.42 billion in new equipment, according to DisplaySearch.

To meet increased demand for LCD glass, Corning last month announced it was investing a further US$600 million in Taiwan. More than 75 percent of the combined US$780 million investment will be spent on capacity expansion, according to Clappin. The company plans to expand its capacity in Taiwan by 30 percent to 50 percent over the next few years.

Despite the increase in LCD glass supply, Taiwan's major flat-panel players did not expect the supply crunch to improve any time soon.

"The shortfall will be controlled at a manageable level. But the supply constraints could remain in place through the whole of 2004," said Chen Hsuen-bin (陳炫彬), president of AU Optronics Corp (友達光電), the nation's biggest flat-panel maker.

A big portion of AU's glass substrates come from Corning, according to the company.

Smaller rival Chi Mei Optoelectronics Corp (奇美電子) also felt the pinch of tight glass supplies, especially those for 5G glass substrates, Chao Lin-yu (趙令瑜), director of Chi Mei's procurement division, said on the sidelines of yesterday's ceremony. "LCD glass makers' expansion has lagged far behind that of flat-panel makers."

Alex Wu (吳興國), an analyst with KGI Securities (中信證券), however, estimated that the shortfall could be below 5 percent in the current quarter, a result of local companies' panic overbooking.

"They will be under pressure, of course. But the shortage will not be as severe as it appears to be," Wu said.

The supply constraints are expected to ease quarter by quarter this year after Corning and Asahi Glass Co start to operate their new plants in the second half, he said. Corning and Asahi are the two biggest LCD glass suppliers in Taiwan.

But Roger Yu (游智超), an analyst at Polaris Securities Group (寶來證券), said: "Supply constraints will become a regular problem, but it will not be so severe that it will hurt panel shipments. The volatile flat-panel industry has taught LCD glass makers to be cautious about capacity expansion."
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