Display Week 2023とCorningの値上げについて思うこと～元同社所属アナリストの手記
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Thoughts on Display Week and Corning's Price Increase
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Display Week 2023 has come and gone, and as usual it was a very busy week for DSCC. For me the highlight of the week was Ross’ keynote address to the Display Week assembly on Tuesday morning. This was the first time any analyst was chosen to deliver a Display Week keynote, and Ross delivered in his customary rapid-fire style covering all the key business, market and technology issues facing the display industry.
This week’s issue of the DSCC Weekly Review is the first of many with content from Display Week, and we lead off our coverage with Guillaume’s perspective on AR/VR displays shown in the exhibition. The microdisplays in AR/VR are showing some of the greatest advancements in the industry, and huge investments by Meta, Microsoft, Apple and others are spurring development efforts by a wide range of companies.
For me, the Display Week presentations and exhibition were overshadowed by an announcement by my former employer Corning, who announced a 20 percent price increase on all display glass products. In an industry that is accustomed to prices declining over time, any price increase is a surprise, but the huge increase announced by Corning came as a shock. Now the question is – how will Corning’s competitors respond?
Like other display components, display glass has seen prices erode as the industry matured. Over the decade of the 2010s, I estimate that display glass prices declined 80% as expressed in US dollar terms. Display glass is priced in Japanese yen, and a part of the decrease in the 2010s was a decline in the value of the yen, which fell 20% during the decade. After several years hovering around JPY 110/$, the yen depreciated again in 2023 by another 20%, and the Corning increase approximately offsets this most recent devaluation.
For most of the 2010s, Corning was a price follower on display glass, accepting prices set by its two Japanese competitors, AGC and NEG. During that period, glass prices always declined but the rate of decline decelerated from teens % per year to low single digit %. Glassmakers were able to significantly offset price declines with cost reductions to maintain margins, but revenues and profits declined in most years.
As display demand surged during the pandemic, Corning shifted from being a price follower to a price leader, announcing a moderate price increase in Q2 2021 and following with a second increase one quarter later. Prices in yen have been close to flat since the end of 2021, but when translated into dollars glass prices are about 20% lower.
I think it is likely that the Japanese glass makers will follow Corning’s lead and raise prices to match the industry leader. Both of the Japanese companies reported operating losses in their display glass businesses in Q1 and both cited increased costs as reducing their profitability. Both companies have clearly indicated that display glass is no longer considered a strategic industry and their efforts for growth are directed elsewhere; AGC is focused on growing its chemicals business while NEG seeks to grow its fiberglass business.
Corning’s announcement came less than two weeks after AGC announced that it would close its display glass manufacturing site in Kansai, Japan, and I believe the timing was not coincidental. AGC has raised prices in its Architectural and Automotive glass businesses to improve profitability so following Corning in display glass will be a familiar track. We even heard rumors that AGC was seeking to sell its display glass fabs in China, and the company’s comments about restructuring do not rule out such a step.
NEG has a different case but is also likely to go along with a price increase as it has faced increased costs. NEG may opt for an increase of less than 20% in the hopes of gaining some share. NEG has been the biggest loser from LG Display’s capacity reductions and the company likely has idle capacity which it can start, but its cost structure is higher than Corning’s and it will require some increase in prices to assure profitability.
In the best-case scenario for the display industry, the Japanese glassmakers follow Corning’s price increase and flat panel makers leverage these increases to get price increases for LCDs, which can improve margins across the board. The current demand environment is relatively inelastic to prices, so a slight increase in prices is unlikely to reduce demand.
We will of course follow these developments closely in the coming weeks and months, as well as giving you comprehensive coverage of Display Week 2023.