Corning Expects 2021 TV Sales to Fall Mid-Single Digits: CFO

TV retail sell-through data through June “largely” confirmed Corning forecasts entering the year that global TV unit sales will decline by mid-single digits in 2021, said Chief Financial Officer Tony Tripeny on a Q2 call Tuesday. Unit sales of TVs 65 inches and larger increased more than 20% year over year in 2021's first six months, while smaller sets were down by high-single digits, he said.

Since LCD TVs emerged as “mainstream technology” in 2004, annual unit sales have declined only three times, “and never two years in a row,” said Tripeny. “Annual glass demand has never declined” year to year, he said. Global TV sell-through unit sales since 2014 have averaged 225 million to 235 million sets a year, he said. Average screen sizes have grown about 1.5 inches a year, he said.

Global TV unit sales in 2020 increased about 4% “above the trend line” to about 242 million, said Tripeny. Screen-size growth was about 1.2 inches, “about 20% below trend,” he said. “A lot of smaller TVs sold, probably to accommodate more people living, working and studying from home.”

Halfway through 2021, Corning’s “expectations for TV units being down year over year” and average screen sizes growing about 1.5 inches from 2020 “are playing out,” said Tripeny. “Looking ahead to 2022, we think TV units and screen sizes will continue to follow historical trends,” he said. “It’s worth noting that TV units, which are declining this year, have never declined two years in a row. Next year is a World Cup year, and TV units have never declined in a World Cup year.”

Larger screen sizes are “the biggest driver of retail glass growth in most years,” said Tripeny. “We would expect the average screen size to once again grow one and a half inches next year.” Demand for large-screen TVs is expected to rise at a double-digit compound annual growth rate through 2024, said CEO Wendell Weeks.

Q2 sales in Corning’s display-glass business were $939 million, up 9% sequentially from Q1 and a 25% increase year over year. Net profit in the sector was up 63% from a year earlier, as Corning hiked glass substrate prices in Q2 and imposed another “moderate” price increase in Q3, said the company.

Corning is “energized by the momentum that is building” in its optical communications business, said Weeks. “Demand on the network has only been increasing,” he said. Broadband usage for June was up 33% from pre-pandemic levels, and was 10% higher than in June 2020, “a peak quarantine period,” he said.

Global 5G subscriptions have grown to nearly 300 million, “and they’re on track to double that by the end of 2021,” said Weeks. “We believe we’re in the early innings of a large capital deployment cycle across 5G, fiber to the home and hyperscale data centers,” he said. Q2 sales in Corning’s optical communications business were $1.08 billion, up 21% year over year.

Corning “continued to face supply chain disruptions and inflationary headwinds” during Q2, said Tripeny. Advanced planning “allowed us to reduce costly air freight,” compared with Q1, “but the sequential improvement was offset by increases in shipping rates and the cost of certain raw materials,” including resins, “a key component” in Corning’s optical communications business, he said.

The company experienced a margin “drag” in Q2 of about 150 basis points due to the higher supply chain costs, the same hit as in Q1, said Tripeny. Corning expects no “significant” supply chain cost improvements in the “short term,” but costs are expected to “normalize over time,” he said. “We’re taking mitigating actions, including raising prices in selected product lines.”