In the movie The Graduate, a pompous friend of the family, trying to give Dustin Hoffman’s character some direction for his future, famously said, "I want to say one word to you. Just one word. PLASTICS." That was actually pretty good advice in 1967, although to Hoffman’s character it seemed like a recipe for a souless - dare we say "plastic" - existence.

Ken Werner
Senior Analyst and Editor

Still, 40 years after The Graduate, the display substrate of choice is not plastic; it’s still glass. And making display glass is one of the better ways of making money in the display industry, a long-standing truth that’s becoming more widely appreciated.

On Monday, the Chinese-language Commercial Times, citing a report from an unnamed foreign invetment firm, said demand for glass substrates will exceed supply by 7 to 10% this year, up from 3% last year, with price reductions for substrates to be only 5 to 10% in 2007, less than 2006. Contributing to the tight supply will be a reduced rate of expansion in the growth of manufacturing capacity at the substrate makers.

Two days later, Ryuichi Tsuruta, Matsushita’s General Manager of Investor Relations, told the attendees at a Merrill Lynch investors’ conference in Taipei that his company will not invest in LG.Philips LCD, nor will it buy the display operations of LG Electronics. Why? In part because the company would rather use its cash reserves to acquire display material businesses.

Last November, as we have previously reported in Display Daily, Corning announced it would aggressively protect its margins on sales of display glass, even, it was implied, at the risk of losing some market share.

And this past Tuesday, Displaybank reported that Number 3 LCD glass-maker Nippon Electric Glass (NEG) will increase its production capacity of glass substrates for LCD panels by 20% beginning in October 2007. NEG plans to invest 11B yen (~ $94M) in its plant in Shiga prefecture for capacity expansion and productivity enhancements. Why? To respond to the worldwide increase in demand, the company said. NEG is also beginning operations at a joint venture in China this autumn, Displaybank said.

NEG’s goal is not modest. Through aggressive investments, the company intends to narrow the gap between its own third-ranking market share and those of Corning (Number 1) and Asahi Glass (Number 2). Currently Corning has about 50% of the total world market for LCD glass, Asahi Glass has 25% share, and NEG has about 20%, Nikkei reported. Of course, Corning and Asahi are increasing capacity, too, so it’s not clear that NEG’s efforts will give it a larger market share or simply give it the same percentage of a growing pie - which is not exactly a bad thing. But if the capacity is there and NEG is willing to accept a somewhat smaller margin than Corning is, NEG might actually be able to nibble a percentage point or two away from the American giant.

But however those percentages are apportioned, I have just one word for how to make money consistently in displays: GLASS. Well, there may be a few other words, too. Words like polarizers, color filters, backlights and enhancement films come to mind. The bottom line is that the key materials and components for LCDs is where the consistent profits are. Depositing amorphous silicon onto glass and assembling components into modules has become a high-volume, painfully low-margin game.