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Forget Apple, Corning Has the Real News

Your grandmother's glass-lidded casserole dish isn't the most likely place to look for cutting-edge technology. However, this week’s announcement that Samsung's display unit is acquiring the largest share of famous crockery outfit Corning is quietly the news of the week.

Samsung will own nearly 8 percent of the New York-based glassmaker, and will strike a decade-long supply deal. Even in a week when Apple announced more of its sleek new products, Samsung's grab for a key supplier of the base technology in your mobile or tablet screen is an enormously important move.

Why? Well, as long as four years ago, the big issue in the then-new tablet market was whether Apple, not Samsung, was going to corner the market for touchscreen glass supply. The new deal suggests Samsung is closer to dictating the terms of this important tablet component. That affects Apple in part because Samsung actually supplies a lot of Apple's glass. The two behemoths are rivals in the showroom, but cooperate on component supply.

Enter Corning. Its scratch-proof Gorilla Glass is the industry standard for smartphone and tablet screens, including tech used in the iPhone. Samsung also supplies finished screens for giants like Lenovo and Sony, whose ultrabook lines are rivals for Apple's MacBook laptops, and their much-ballyhooed “Retina” screen technology.

So Apple, which has bet its immediate future on touch screen products like the iPhone and the new Retina iPad models, could be more beholden to Samsung today than it was a day before the Corning deal. The 10-year agreement, and the possibility of a glass supply Samsung owns down to the base technology — Corning's technology — gives Samsung significant supply chain leverage over a component that's the lifeline of Apple's key products. That's a tenuous position for the Cupertino outfit to face.

Pricing also comes into focus under the deal. Corning's calculation of price and demand for its glass tech will almost certainly become a calculation made by primary shareholder Samsung. Earlier this month, rumors were already flying that Apple's new iPad mini, which features the Retina technology, could be delayed or slowed by supply issues. If that proves true for future devices — and Apple only announced the new products Tuesday, so we'll see how fast these ship — Samsung could theoretically sit in the middle, brokering Apple's access to Corning's technology. Not a bad deal for Samsung.

Corning, better known for casseroles than computing, has seen its stock price sour nearly 30 percent on the news, according to Reuters. For its part, Samsung looks to be gaining access to Corning's research and development of new glass tech, including future steps into flexible glass, the Reuters report said. Samsung has also made investments in German and Japanese firms likely to supply glass tech in the near future, adding more evidence to suggest that the Korean company is looking to have a big role in the glass supply chain for awhile, and that Apple is going to have to play ball with them, or compete.

If the US firm decides to compete, it's doing so from a step behind now — a fact no one happened to mention at Apple's dramatic stage presentation this week.

14 comments on “Forget Apple, Corning Has the Real News

  1. t.alex
    October 25, 2013

    Will this company also poducing flex display which is supposed to be the up and coming trend for smart phones?

  2. SP
    October 25, 2013

    This will definitely put Samsung at a better position. Corning gorilla glasses are well known. Wonder if Apple also tried to win them over.

  3. Hailey Lynne McKeefry
    October 25, 2013

    @SP, you are right…I would have loved to been a fly in the wall at Apple or in the negotiations. I bet there was a lot of fascinating conversation.

  4. Hailey Lynne McKeefry
    October 25, 2013

    It really is suprising what eight percent will get Samsung. It seems like a small corner of the company really. Ten years on the ohter hand feels like a lifetime in technology land.  The ongoing relatoinship between Samsung, Apple and Corning will be very interesting to track, I suspect. Anybody have predictions?

  5. _hm
    October 25, 2013

    Looks as if Samsung is on worng path. The logic is that, Samasung should put efforts on its core strength. This is a way to success.

    If they try to Corner Apple or Google or everyone else, they may loose focus of thier own strength and get driven to wrong path. Decision to get Corning, to give hurdle to Apple is irrational decision.

     

     

  6. Taimoor Zubar
    October 26, 2013

    “If they try to Corner Apple or Google or everyone else, they may loose focus of thier own strength and get driven to wrong path. Decision to get Corning, to give hurdle to Apple is irrational decision.”

    @_hm: I wouldn't agree with this. I don't think Samsung is heading for the wrong path. Yes, it's important to focus on the strengths but it shouldn't limit your growth and expansion. You cannot continue to rely on your key strenghts and not look to innovate given the dynamic nature of the market. Samsung is already a well-established company and it can afford to make these moves without compromising on the strengths.

  7. prabhakar_deosthali
    October 26, 2013

    This move by Samsung is somewhat surprising, as the cutting edge technology is now moving away from the hard surfaces to flexible surfaces for the display units of smart phones, tablets, phablets and may be also the notebooks and all those new wearable devices in offing

  8. Taimoor Zubar
    October 26, 2013

    “The ongoing relatoinship between Samsung, Apple and Corning will be very interesting to track, I suspect. Anybody have predictions?”

    @Hailey: I think this is attempt towards backward vertical integration is a very strategic move by Samsung. Corning supplies the glass not only to Samsung but also to other major cellphone manufacturers. If Samsung can control Corning, they can monopolize on the glass and ensure the latest models are only available to Samsung and not to any other company. This can give them a major edge in the market.

  9. Hailey Lynne McKeefry
    October 27, 2013

    @_hm, i have to disagree with how you are framing this. I doubt that Samsung made the decision based on a hope to throw a hurdle up for Apple. I'm willing to bet that it is a long-term strategic sourcing decision… and the glass is going to be a key component in smart phones and tablets for the foreseeable future. Having  a strong source of supply on the leading technology seems like good business to me.

  10. Hailey Lynne McKeefry
    October 27, 2013

    @Taimoor, on the other hand, it could backfire on them. I wonder if limited supplies could translate into a situation that pushes the other players into innovating in new directions. That may be a pipe dream but it is intersting to consider. It would be quite a turnaround!

  11. SunitaT
    October 27, 2013

    We all have encountered the term “corning gorilla glass display” when we were browsing through specifications of many mobile phone models. There are two things Apple could have done: acquired Corning themselves, or buying their business policies which would at least have shortened the decade long supply chain to Samsung significantly.

  12. Taimoor Zubar
    October 29, 2013

    “..on the other hand, it could backfire on them. I wonder if limited supplies could translate into a situation that pushes the other players into innovating in new directions”

    @Hailey: What's stopping the other companies to innovate now and come up with their own glass products for displays? Surely, they can vertically integrate on their own and develop a product that's better in technology and lower in cost.

  13. Hailey Lynne McKeefry
    October 31, 2013

    @TaimoorZ, i don't know that anything is stopping them other than a lack of innovation. Innovating in the way you describe takes the dedication of people who are willing to tackle the problem. I suspect many organizations lack the R&D expertise to do it.

  14. allanhm
    November 5, 2013

    Paranoia aside, 8% ownership does not give access to detailed other customer forecasts, deliveries unless someone wants to go to jail.

    8% ownership is a vote of confidence in Corning.

    Strategic long term supply agreements are good ways to guarantee supply and sometimes have 'most favored customer pricing' terms built in but those are tough to enforce.

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