Corning Inc at JPMorgan European Technology, Media & Telecoms CEO Conference (Virtual) Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : Great. Jeff, thanks for that. Before I start, I want to remind investors that they do have the option of sending in their questions, and I can ask it on their behalf. I'm seeing some on the Q&A portal here. So use your Q&A button on the website to ask a -- send in your question. If you are unsure whether that button is working or not, obviously you can email it directly to me as well so I can ask them for you. Jeff, with that, let me start with a broader question here. As we look back to early part of 2020, there were definitely challenges led by some of the COVID-19-led demand pauses that we saw across different consumer markets. As you evaluate some of the market access platforms on which you largely kind of treated those as the pillars of growth here for the company, how did the pandemic and kind of subsequent demand changes drive you to think about relevance of those platforms to customers?

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : Great. So as we return to a more normal environment post COVID, one of the things that we've seen is there's usually more visibility that you provide to investors about your market segments pre-COVID, and you've definitely been a bit more cordial about that during this pandemic. As we get back in terms of to a more normal environment, do you feel comfortable enough to start providing that same level of visibility to investors? Or are things still abnormal in certain pockets where the visibility is limited?

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : Yes. No, we'll definitely get into the segments in a bit, and I see some questions coming in about these individual segments as well from the audience. But let me hit one more topic before that, which is one of the sources of discussion on Corning in the past with investors has been the capital intensity or the high capital intensity that Corning has. As we think about the related growth between the market access platforms or the change in mix, for example most of the segments improving revenue or increasing revenue better than display in the long run, how does that influence the capital intensity of the company? Does that change overall how investors perceived Corning from the previous years?

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : Great. That's good. Let me move to the segments here because there's a lot to talk through. So firstly, the display segment. How transient is the price increase that you recently took in the PV glass business? Once some of these abnormal industry dynamics normalize, do we go back to kind of the mid-single-digit price declines maybe beyond 2021? What -- how temporary or permanent should we think these are?

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : Jeff, let me take a follow-up with that, which is a bit more near term in that aspect and a question that came in from the audience, which reads, "What is the opportunity you'll get further glass price increases from here? What is the perspective on supply/demand just for the second half of the year given that we see strong panel momentum but also downstream inventory build and software demand?" Last part of that is, "Is glass capacity coming back online at the competitors?"

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : I guess my follow-up to that and one of the questions that I had, you did touch on it with the demand in China, but if data points in the China market where TV has remained soft, if they continue to run soft for a period of time, is there a concern around some of the inventory being kind of pulled down from the panel makers? Is that, on a sustained basis, a weakness there or a source of concern?

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : Okay. That's great. No, that was helpful on display. So let me move over to Optical Communications and take one of the questions that has come in, which largely was similar to what I was going to ask you. "Can you elaborate on how AT&T's increased fiber focus and investment announcements benefit Corning in the optical segment?

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : Jeff, sounds like you're seeing very strong near-term drivers. And I don't know if you've quantified the amount of backlog of orders that you have, but, I mean, the first quarter was -- you had strong 19% year-over-year revenue growth, essentially within multiple near-term drivers you're seeing. Is that largely reflective of like being able to sustain that level of demand because you have strong near-term drivers and orders that you're seeing?

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : No, that's fair. Let me stay on that topic but essentially pivot to the infrastructure spending or the government spending plans related to infrastructure or broadband infrastructure of Biden's infrastructure plan being proposed. How should I think about the impact of those opportunities? Are there -- like are there quite high cost hurdles to driving adoption of fiber in the rural areas? Because we've seen some numbers and the cost of getting fiber out to some of these rural areas is really high. Does that effectively become one of the limiting drivers in getting fiber to leverage all of this spending coming through?

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : Staying on Optical Communications but largely the telco customers and them talking more recently about their 5G CapEx plans as well. Obviously, a lot of that focus has been on C-band deployment and wireless equipment being deployed. How should we think about correlation to demand for fiber? When does that start in terms of timing, rate of [boost], some of the timing around wireless equipment deployment? Any insights on that?

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : Okay. Got it. One of the other things that I wanted to touch on is fiber -- just supplying fiber to the customers is a lower-margin business, I believe, related to addressing some of the other 5G equipment needs. How do you think about the margin drivers for Optical Communications going forward if a lot of the demand is going to come through fiber? What's the likelihood that you get back to a mid-teens segment margin if mix is going to be more inclined towards fiber?

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : Before I move to the other segments, let me take a question that came in. And so the question reads, "What percent do you spend on R&D?" But maybe if I add a second leg to that because what you spend on R&D, I think, is more kind of current levels, just given the multiple revenue drivers or multiple new opportunities for revenue that you're ramping on, does your R&D need to kind of increase just to cater to those broader portfolio drivers or broader portfolio that you have in terms of growth? So maybe I'll make that a 2-part question for you.

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : That's helpful. Essentially, a lot of synergies in the R&D across the portfolio is [you said].

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : For investors, we're getting close to session time here. So if you have any final questions, please send them in. Jeff, one of the topics that I did want to get in, squeeze in here is Valor Glass. You indicated extra funding coming from the government. There's also a stronger volume ramp than you had guided to earlier. So just help us think through the revenue drivers here as part of the COVID-19 vaccine kind of ramp in capacity. And then what happens beyond that? What do we kind of think in terms of a sustainable growth phase beyond that?

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : Jeff, last-minute question coming in. "Any comments on the gross margin trajectory for the company here particularly given the -- again, the changing mix of the revenue drivers?"

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : I know we've gone a bit over time here, Jeff. Thanks for taking the time to host this. Thanks for attending the conference. And thank you to everyone who dialed in and sent questions as well. Thank you.