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Morningstar | Corning Progresses Along Strategic Roadmap

Corning is a leading producer of optical fibers, glass substrates for liquid-crystal display panels, and specialty glass and ceramic materials used in a variety of applications. We think the firm’s commitment to innovation through continual research and development and its solid capital-allocation targets optimally position the company for sustained growth from the secular trends toward efficiency and connectivity. In our view, Corning has established strong intangible assets through ongoing research, a manufacturing cost advantage, and product switching costs, giving it a narrow economic moat.Corning’s superior manufacturing processes and dominance in latest-generation glass technologies have allowed it to control a plurality of the glass panel market. These capabilities have allowed the firm to maintain some of the highest margins in the industry despite ongoing price declines. Corning invests in research and development at double the rate of its average competitor. The firm’s commitment to research has allowed it to be nimble, moving into new markets quickly (such as smartphones) and to improve already strong products (such as optical fiber). Corning’s ability to continually innovate has enabled it to achieve the lowest-cost manufacturing position and earn a higher share of the industry’s profits. We also believe the structure of Corning’s investment projects, requiring significant co-investment from customers, has introduced switching costs into a number of the firm’s products.We forecast significant growth within Corning’s optical fiber business, as carriers and data center operators seek to improve network capacity, latency, and accuracy. We are also optimistic of the growth in Corning’s specialty materials segment as the company expands its leadership position in smartphones with dual-sided glass and continues to grow within the wearables market. We also believe thin, light, and durable glass will be attractive in the automotive market. Finally, we think Corning’s environmental ceramics business will benefit from increasingly stringent emissions regulations in the European and Chinese markets, resulting in continued demand for its filter products.