Corning (GLW +0.61%) is set to unveil Gorilla Glass 3 at the Consumer Electronics Show in Las Vegas next week. This will be Corning's third generation of its highly popular scratch-resistant glass, giving it a high probability of success. To date, previous generations have been featured in more than 1 billion devices from over 33 brands. The newest ape-inspired glass will utilize what Corning is referring to as Native Damage Resistance, which reduces the appearance of scratches. Corning claims that 40% of scratches will not be visible to the naked eye. Also noteworthy: the glass will be 50% stronger than Gorilla Glass 2.
It's believed that Apple (AAPL 0.04%) utilizes Gorilla Glass in its devices, but when Corning's CEO was questioned about it on the third quarter conference call, he responded, "We're going to follow our general rule of never talking about anybody who lives in Cupertino."
Aggressive push
Corning has been pushing Gorilla Glass to make further inroads into high-growth areas like smartphones and tablets. Last quarter, its specialty materials segment (including Gorilla Glass) reported a 23% sequential rise in revenue. Looking at the big picture, this division makes up 18% of Corning's total revenue, which still declined 2% on a year-over-year basis. At this time, Gorilla Glass is not a large enough business to be the tail that wags the dog. That's because Corning has deep interest in the stagnating HDTV market, making up 82% of its net income last quarter.
Average selling price on the rise?
While specialty materials may not drive overall top-line growth today, it's still an area where profit margins can grow. Given its technological advances, Gorilla Glass 3 could easily command a higher premium for smartphone manufacturers like Nokia (NOK 6.37%), where the glass is featured on its flagship Lumia 920 smartphone. At this time, it remains unclear if Corning will discontinue previous generations of Gorilla Glass, and if OEMs will ultimately get stuck with a potentially higher bill.
Look out for Willow Glass
Gorilla Glass is not the only place Corning innovates. Its upcoming Willow Glass will be 100 microns thin, equivalent to a sheet of paper, and has the ability to be flexible. At first, this will translate into thinner and less constrained form factors for consumer devices. Going forward, this technology could become part of Google's (GOOG 0.04%) Project Glass, or part of a wearable "smart" bracelet-gadget-thing. It could also just mean consumers benefit from even thinner and lighter smartphone designs. Whatever the outcome, it's clear that Corning is taking the role of being the world's gadget glass provider very seriously as it continues to find new ways to drive future profitability.
