Tablet failures hamper Corning's Gorilla Glass growth

Crumbling demand for key Corning tablet customers is hurting growth for Gorilla Glass.

Corning said it will cut capacity as demand for its display glass is lower than expected. Part of Corning's problem is LCD TV demand, but tablets that have bombed are another hit for the company.

The company said it is facing a glut of glass for displays, but the Gorilla Glass problems are most notable. Corning was betting that Gorilla Glass on TVs would be a hit, but demand never materialized. Toss in tablet demand and Corning has a few Gorilla Glass sales forecast issues.

Specifically, Corning cut its Gorilla Glass fourth quarter sales forecast to a sequential decline of 25 percent compared to its initial guidance of a 15 percent sales decline. The problem is "lower worldwide demand for cover glass for tablet computers."

Speaking at the Credit Suisse technology conference on Tuesday, Tony Tripeny, corporate controller for Corning, laid it out:

Lower Gorilla Glass demand is "just an indication that, as we stand today, we're expecting to get lower orders in this quarter. It's lower tablet demand. In some cases, people introduce tablets, think they're going to be successful. They're not as successful in the end market."

According to Corning, Acer, Asus, Dell, Lenovo, Motorola and Samsung use Gorilla Glass for their tablets. Apple is also believed to be a customer, but that's unconfirmed. A few analysts indicated that Gorilla Glass is used for the Amazon Kindle Fire, which may help demand.

Amir Rozwadowski, an analyst at Barclays Capital, said:

The company indicated that Gorilla Glass sales are now expected to decline 25% Q/Q in 4Q vs. prior expectations for a 15% decline, driven by weaker tablet demand. With preliminary sell-through data points for Amazon Fire appearing to be strong, this guidance reduction may reflect some overly optimistic cover glass purchasing for other tablets such as Samsung's Galaxy and potentially the iPad. Note that our colleague, Ben Reitzes, currently estimates 4Q iPad shipments of ~14M (+25% Q/Q), suggesting that the reduced Gorilla Glass forecasts are likely a reflection of supply chain rationalization rather than product end demand.

Bottom line: Corning's Gorilla Glass outlook indicates that tablet demand overall is spotty.