Asahi Glass Tries to Steal Corning's Thunder

 
on January 20 2011 9:06 AM

Japan's largest glass maker Asahi Glass Co. has unveiled a super-tough, scratch-resistant glass cover Dragontrail for use in smartphones, tablet PCs, TVs, and similar devices, to compete with the biggest player in the market Corning Inc. (GLW) that makes Gorilla Glass.

Asahi said the launch of Dragontrail is in response to surging global demands for high-quality cover glass used for screens on electronic devices. Dragontrail is six times stronger than the conventional soda-lime glass it sells into traditional LCD TV designs, the company said.

Asahi said Dragontrail, developed from market-proven raw glass for chemical strengthening, is free of environmentally harmful materials such as arsenic, lead and antimony. Asahi expects Dragontrail to achieve global sales of over 30 billion yen (about $360 million) and about 30 percent market share by 2012.

Dragontrail is a a strategic product that will build new foundations for growth under Grow Beyond, our management policy, said Yoshiaki Tamura, Deputy President of Electronics Company unit. We will continue to explore new applications for this versatile product as we expand its global market.

Asahi said it uses a highly efficient float process to manufacture Dragontrail by utilizing the company’s extensive technical expertise in producing specialized glass for electronics acquired through manufacturing TFT glass substrates.

The superior production efficiency of this manufacturing process ensures stable supply of cover glass for the growing global mobile device market. Asahi will also proactively respond to growing demand for cover glass used in televisions.

The demand for cover material is growing in parallel with the rapid proliferation of smartphones, tablet PCs and other devices, many of which feature designs where touchscreen panels cover the majority of their surfaces. These mobile devices require protection against shocks and grazing resulting from touch operation, accidental drops and scraping inside a pocket or bag.

In 2012, Barclays Capital expects global shipments of smartphones to reach 500 million units, nearly double from 274 million last year. Barclays also projects tablet shipments to surge to 57 million units in 2012, more than triple from last year's 16 million.

Gorilla Glass versus Dragontrail

This announcement is a clear response to the success of Corning's Gorilla Glass product. Gorilla Glass, which was originally called Chemcor and developed in 1962, entered the market in 2008, a high-strength alkali-aluminosilicate thin sheet glass used as a protective cover glass offering scratch resistance and durability in handheld devices with touchscreens.

A few of the product models that feature Corning's Gorilla Glass product are: Dell Streak, Samsung Galaxy Tab, Sony Bravia, LG Optimus 7, Motorola Droid, Droid X, Motorola Milestone, Samsung Galaxy S and Samsung Epic 4G. 

We never assumed Corning's Gorilla Glass would have a long-standing monopoly in this space. We had heard that Asahi was developing a chemically-strengthened glass, but the nature of the glass and the timing of its release to the market were unclear, said George Notter, an analyst at Jefferies.

The press release doesn't give a specific date for when Asahi will begin shipping Dragontrail. Also, we don't have a good sense for how the product stacks up against Gorilla Glass from a technical perspective, Notter added.

George Notter doesn't expect Dragontrail to substantially slow the impressive trajectory of Gorilla Glass. Corning, of course, has a substantial head start on the competition -- as of its January 6 press release, Gorilla Glass was currently being used by 27 major brands, is designed into more than 280 product models, and is being used in more than 200 million devices.

We expect that first mover advantage to persist for some time despite Asahi's inevitable entrance into the market. Additionally, we still believe Corning will have no problem meeting its expectation to sell up to $1 billion in Gorilla Glass in 2011. We still believe there is considerable upside to this expectation -- depending on Corning's ability to ramp Gorilla Glass manufacturing, said Notter.

Asahi's sales for the latest third quarter was 318.8 billion yen, higher than 303.7 billion yen last year. Asahi's sales from glass segment was 140.7 billion yen, while electronics and display sales was 105.2 billion yen. Sales from chemicals was 65.8 billion yen, while sales from ceramics and others were 19.2 billion yen. Cash and cash equivalents at the end of September 30, 2010 were 130.7 billion yen.

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