Corning’s near-$5 billion optical communications business is primed to grow rapidly over the next four years, as networks adopt significantly more optical fiber to support the move to 5G connectivity.
That was one of the key messages from the glass company’s recent “investor day”, hosted in its home city of New York. Alongside 5G, the build-out of hyperscale data centers with high-speed optical links is expected to be a key driver as Corning targets compound annual sales growth of 6-8 per cent thorough 2023 - twice the rate of the wider passive optical market - alongside up to $12 billion of investments, plus increased shareholder dividends.
Claudio Mazzali, senior VP of technology for the firm’s optical communications division, told shareholders and analysts at the event that “massive network densification” would be critical for true 5G.
Further explaining what that meant in terms of fiber demand, Mazzali added that for New York City, the amount of fiber required to connect all expected 5G cells would be nearly 100 times that for a 4G network.
“Wireless will be transformed from a fiber-poor network to a really fiber-rich network, and Corning will be a key part of making this transformation happen,” he said.
More optics in data centers
Turning to data centers, Mazzali explained how the recent evolution in their architecture would be a boon for optics and photonics technologies.
“Legacy data centers were built based on large clusters of servers,” he said. “As needs evolve, big cluster switches create latency issues, make it slow and expensive to scale, and perhaps more importantly, reduce overall network robustness by creating a single point of failure.
“To solve these bottleneck issues, network architects are breaking the large clusters into smaller parts that can be repeated more effectively.”
“The transition to scalable, non-blocking architectures increases the connectivity needs from hundreds to several thousand links per megawatt installed, and all links between switches are optical.”
Mazzali detailed a specific example of that impact, pointing out that a recent deployment for a single data center campus required the same amount of optical fiber that would be needed to support fiber-to-the-home connectivity to every home in the suburbs of Dallas.
“There is another trend coming, which is the upcoming transition of fiber directly to the servers,” he continued. “This will once again move into optical signal deeper into the network, replacing more copper links.”
Future developments may even demand fiber-to-the-chip connectivity, potentially requiring precision flat glass for high-density waveguides – something else that Corning produces. “If optical connectivity and fusion glass converge on the same platform, Corning will be certainly well positioned,” Mazzali stated. “And our research investments are on track to capture the value of this potential new space.”
LCDs to see off OLED threat
Though not quite as large as its optical communications business, which posted sales exceeding $1 billion in the opening quarter of 2019 (up 20 per cent year-on-year), Corning’s displays unit is also huge – it accounted for $818 million sales in the same period.
James Clappin, Corning’s executive VP for this part of the business, predicted that LCDs would remain the dominant technology in the television displays sector – despite the long-heralded threat from OLED screens.
“As the TV industry moves toward 8K resolution, the higher pixel density decreases aperture ratio and therefore light transmission,” he told the investor day crowd. “We believe this trend favors LCD, which can more easily increase set brightness because its LED light source is inherently brighter, lower cost, and more reliable than OLED. We think most consumers who don’t want their TVs in dark rooms will prefer the brighter LCD sets.”
Coupled with the significant price premium still evident for OLED, Klappin predicted that the technology would continue to represent only a small fraction of TV unit sales.
Resilience
Wrapping up the session, Corning’s CEO Wendell Weeks referenced current market worries including trade disputes and political unrest, but said he remained confident that Corning’s business would continue to grow at a solid pace.
“You may be wondering why we are so confident that we will grow,” he told investors. “And it’s fundamentally because we’re not just counting on everybody buying more stuff. Instead, we’re putting more Corning into the products that people already buy.”
Examples of that include TVs, where although unit sales are flat, the average size of screens continues to grow. “We’re not counting on more TVs,” Weeks said. “We’re putting more Corning in those TVs.”
Turning to communications, he added: “We’re not talking about more networks. We’re talking network densification, which means glassification, which means more Corning.”
Summing things up, Weeks concluded: “Now I’m not saying that we’re immune to economic downturns or trade disputes or other geopolitical upsets. But I am saying that we are more resilient than in any other time in our history.”
