Fox in the Henhouse
The display glass business is an unusual one, with a small number of suppliers providing the bulk of the substrate material for major panel producers. Corning (GLW) is the leading supplier, competing with Asahi (5201.JP) and NEG (5214.JP), while a number of smaller suppliers such as Schott (pvt), IRICO (600707.CH), Avanstrate (pvt), and Dongxu (000413.CH), fill in more specialized products. Panel suppliers have established long=term relationships with primary display glass providers, with a number of glass production sites co-located with display panel fabs. Corning has well-known relationships with Samsung Display, BOE (200725.CH) and a number of other producers, but the primary display glass supplier to LG Display (LPL), has been Paju Electric Glass (pvt), a joint venture between LG Display and NEG.
While we expect Corning has always supplied some glass product to LG Display, the NEG relationship has been a long one and gives LG Display a mechanism for matching new product production timelines to glass substrate production. But as the display industry becomes more segmented and specialized, alternative suppliers have a chance at entering the display supply chain for major producers, and while they rarely are able to meet the volumes that top panel producers need for more generic products, they are certainly able to provide product for those more specialized display products.
In LG Display’s case, they have been using two smaller display glass suppliers for their automotive displays, China’s Tunghsu Optoelectronics aka DongXu, and local firm, Tovis (051360.KS) and while we expect the automotive display business is a relatively small one compared to the TV, IT, and mobile display businesses, it carries high margins and is therefore a focus for panel producers who are always working against declining panel prices and tight margins. According to Korean press, it seems that Corning has been able to insert itself into the LG Display automotive display supply chain and capture ~10% of the automotive display substrate business from the existing suppliers by offering pricing below that of the two smaller competitors.
This is significant in that it gives Corning another possible entry point toward establishing a larger relationship with LG Display, and while it is a small step, if LG Display grows its automotive display business, Corning has a backdoor to gaining some ground at LGD. We don’t think this ‘incursion’ will lead to a change in LGD’s primary relationship with NEG, but it seems that Corning’s impact is being felt by Dongxu and Tovis, with the later already seeing a drop in sales to LGD’s parent LG Electronics (066570.KS) as they have recently shuttered their mobile phone division. With Corning’s array of glass products it is hard to imagine that once the door is opened, they won’t push further in.
While we expect Corning has always supplied some glass product to LG Display, the NEG relationship has been a long one and gives LG Display a mechanism for matching new product production timelines to glass substrate production. But as the display industry becomes more segmented and specialized, alternative suppliers have a chance at entering the display supply chain for major producers, and while they rarely are able to meet the volumes that top panel producers need for more generic products, they are certainly able to provide product for those more specialized display products.
In LG Display’s case, they have been using two smaller display glass suppliers for their automotive displays, China’s Tunghsu Optoelectronics aka DongXu, and local firm, Tovis (051360.KS) and while we expect the automotive display business is a relatively small one compared to the TV, IT, and mobile display businesses, it carries high margins and is therefore a focus for panel producers who are always working against declining panel prices and tight margins. According to Korean press, it seems that Corning has been able to insert itself into the LG Display automotive display supply chain and capture ~10% of the automotive display substrate business from the existing suppliers by offering pricing below that of the two smaller competitors.
This is significant in that it gives Corning another possible entry point toward establishing a larger relationship with LG Display, and while it is a small step, if LG Display grows its automotive display business, Corning has a backdoor to gaining some ground at LGD. We don’t think this ‘incursion’ will lead to a change in LGD’s primary relationship with NEG, but it seems that Corning’s impact is being felt by Dongxu and Tovis, with the later already seeing a drop in sales to LGD’s parent LG Electronics (066570.KS) as they have recently shuttered their mobile phone division. With Corning’s array of glass products it is hard to imagine that once the door is opened, they won’t push further in.
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