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Profiting From 150 Years of Failure



February 11, 2013 – Comments (0) | RELATED TICKERS: GLW

Board: Corning, Inc.

Author: Vetiver

Prior to the dropping of the A-bomb on Japan, one of the scientists working on the Manhattan Project pleaded with the US War Department not to do it. He noted that the government had someone following him around lest he reveal the tiniest secret about how to build an A-bomb,… But the biggest nuclear secret there was was not how to build an A-bomb but that one can be built. Once you know that, figuring out the details becomes straight forward.

When I graduated with a Materials Science degree from MIT, the sole discussion of glass that was had in 4 years at MIT was a mention by the crystallography professor that, to him, “an uncrystallized material was like an uncooked piece of meat”. All of what I learned about glass was OJT. Dr. Bocko says that some schools are starting to produce graduates that do know a thing or two about glass but for most of Corning’s history, everyone had to learn about glass on the job. A large part of learning about glass is learning what it can or can’t do and the basics of how to do it.

Corning was one of the first corporations to have its own research lab and those inventions have been keeping the company in business, though not always in the way expected. Some decades ago, the lab developed a process for making windshields for cars. It turns out that the process was way too expensive for that and the company completely shut down one of the two facilities it had built. It turns out that the process made glass that was extremely flat, optically flat. This flatness made it ideal for microscope slides. Microscope slides was not the high volume automotive windshield business but it did have a much better price per pound so the one facility was able to keep in business selling glass for microscope slides. Years later, after an ever increasing stream of orders for uncut sheets of microscope slide glass, the company discovered it was in the LCD substrate business. What was a rather substantial business failure turned into one of the companies greatest success. Similarly, the ion stuffing technique used in gorilla glass was developed long ago with a different objective in mind. When Steve Jobs ( ) asked for the product for the upcoming iPhone, the company had not made that glass in a while but it was a simple matter to recreate the process.

In the CRT business, when the technology was well past its prime, sets sales were still growing but prices were decidedly on the decline, Corning was able to increase CRT glass prices. In part, this was due to the improvements in the glass-making process, finer dimensional control that enabled increased automation and lower costs in the CRT tube making process. Another thing that also helped was that the last big innovation in CRT was the introduction of 36% transmission, black glass. This was the first dramatic improvement in CRT visual quality in a while and continued a trend of increasing value added in this display technology embodied in the glass.

In Corning’s current display business, they have a large piece of the LCD substrate business because they already had what the customer needed. They have a large piece of the cover glass business because they already had what the customer needed. There continues to be a lot of development regarding display technology to improve its durability, to improve its viewing characteristics, to lower costs. Some of these efforts may be amenable to things that Corning already has sitting on its shelf: the ability to grow lenses and other structures within the glass, unique surface and printing on glass technology, who knows.

With the passing of RCA’s Sarnoff Labs, industrial research has largely abandoned the model of undirected research, research into interesting properties without a specific product in mind. And, of course, RCA is gone and Sarnoff is no longer intact. Corning is not engaging in undirected research either, but the fact that the lab remains intact means that there is a back shelf of 150 years of inventions ready to go if the right customer just asks the right question.


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