BOE Signs G10.5 Supply Agreement with Corning

Corning is to establish a production base adjacent to BOE’s under-construction G10.5 fab in Hefei, China, from where it will supply glass substrates to the new plant. Glass production is expected to support BOE’s plan to begin mass production of large LCD TV panels in Q3’18.

The total investment for Corning’s new facility is around $1.3 billion. Corning’s investment will be composed mostly of equipment and precious metals. The company’s net outlay of $460 million, excluding government and commercial incentives, is expected to be approximately $290 million in cash and $170 million in currently-owned precious metals.

As part of the investment, Corning and BOE have entered into a long-term supply agreement. This agreement commits BOE to purchasing G10.5 glass substrates from the Corning faciility. In addition, BOE has extended its long-term supply agreement with the company, to purchase G8.5 and smaller substrates.

Analyst Comment

Some years ago, Corning said at an event that I went to, that it would never go above this kind of size of substrate simply because it is impossible to transport larger glass sheets by road in a standard container. As a result, any factory would not have any outlet for the glass if it was in dispute with the client, or if the client failed. Of course, it could make smaller sizes in such a factory, but the risk would be in the extra cost to make the larger substrates. That could explain why Corning’s share of the cost of invesment is less than half of the total. (BR)