For a product that Corning (NYSE:GLW) dug out of the back of its closet, Gorilla Glass has been quite profitable. But the ultra-strong protective glass that’s become a favorite of mobile-device makers is not immune from the market forces hitting the company’s other high-tech display products. Although sales for Gorilla Glass were strong in 2011, they topped out at $710 million, significantly less than the $1 billion Corning had predicted earlier in the year.
Corning’s plans for Gorilla Glass involve not only mobile devices and portable electronics but also flat-screen televisions. While the first category was on fire last year, the second was a disappointment that doesn’t hold much promise for 2012, either.
Corning has done extremely well in the mobile space thanks to the performance of companies such as Apple (NASDAQ:AAPL) and Samsung (PINK:SSNLF), which have used Gorilla Glass in their smartphones and tablets. However, the failure in this Apple-dominated space of many other tablets that also use Corning’s high-tech product — including Motorola‘s Xoom (NYSE:MMI) and the Dell Streak (NASDAQ:DELL) — likely held back Gorilla Glass from doing even better.
While Corning was hoping to make inroads in the flat-screen TV market with its premium protective glass (a market it already dominates with its flat glass panels), it has had limited success. Sony (NYSE:SNE) adopted Gorilla Glass in some of its Bravia HDTVs, but industrywide adoption similar to the smartphone market hasn’t materialized.
Making things worse in that area, HDTV sales were sluggish through 2011 and are expected to remain so in 2012, leading Corning to announce it is taking 25% of its LCD glass production capacity offline. With the number of panels being produced down, HDTV sales disappointing and TV manufacturers looking for ways to cut costs, the prospects for a premium product like Gorilla Glass in TVs weren’t good in 2011 and don’t look much better in 2012.
Gorilla Glass 2, unveiled at the Consumer Electronics Show, promises to deliver the same durability and scratch resistance as its predecessor while being 20% thinner. For smartphone and tablet displays, a thinner, lighter protective glass layer means more responsive touchscreens and improved display quality — while any component that can be made more svelte is always a winner to size- and weight-conscious mobile device makers.
Tempering the improved-product unveiling, Corning Senior VP Tony Tripeny noted in a Forbes interview that while Gorilla Glass sales tripled in 2011 (thanks to smartphones and tablets), factors such as pressure from device makers for lower component prices are expected to slow growth in that segment in 2012.
Apple is secretive about many of its suppliers, and though it’s an open secret that Gorilla Glass is used in its iPhones and iPads, Apple hasn’t officially confirmed it, and the company doesn’t appear in Corning’s published list of Gorilla Glass customers. Will the 2011 success of Gorilla Glass be repeated in 2012? It’s likely to come down to three factors: whether Apple uses the product in the upcoming iPhone 5 and iPad 3, whether inroads can be made with flat-panel TV makers and whether Corning can sell Gorilla Glass for other applications, such as protecting appliance or automotive displays.