Corning sees an opportunity to take advantage of Tier 1 telcos moves to enhance their respective fiber-to-the-home (FTTH) and 5G wireless footprints—two network builds that will require large amounts of fiber.
Wendell Weeks, CEO and Chairman of Corning, told investors during its second quarter earnings call that the rise in broadband consumption and customer interest in its fiber and related products gives it confidence it can gain further share in the optical communications space.
“Broadband usage for June was up 33 percent versus pre-pandemic levels, and up 10 percent versus June 2020, which was a peak quarantine period,” he said. “Global 5G subscriptions have grown to almost $300 million, and they’re on track to double that by the end of 2021 according to industry projections. The second confirmation is customer commitments. And many of our customers are being quite public about their plans.”
Weeks added that the “third confirmation is our order book where we’re seeing year-over-year growth in double-digit percentages in both carrier and enterprise networks.”
Indeed, AT&T and Deutsche Telekom have publicly talked about their aggressive FTTH and 5G wireless plans.
AT&T, which added an additional 246,000 new fiber subscribers in the second quarter, said that they expect to expand their FTTH footprint by 3 million additional locations. Likewise, Deutsche Telekom’s CEO Tim Hoettges told investors during its capital markets day in May that it plans to equip 2.5 million homes in fiber by 2024.
Meanwhile, Microsoft’s CEO cited how accelerating digital adoption curves will require an expansion of data center capacity.
“We believe we’re in the early innings of a large capital deployment cycle across 5G, fiber to the home, and hyperscale data centers,” Weeks said.
Driven by 5G, fiber-to-the-home, and cloud computing opportunities, Corning reported second-quarter Optical Communications sales were $1.08 billion, up 21 percent year over year.
Corning saw revenues rise in the enterprise and carrier networks segments of the Optical Communications division. Carrier Network sales were $773, up 16 percent, while Enterprise Networks rose 11 percent to $302 million.
“Higher volume and better operational performance drove the improvement,” said Tony Tripeny, CFO and EVP of Corning. “The environment is extremely favorable. Demand on networks is at an all-time high. In response, operators are expanding network capacity, capabilities, and access.”
Reducing Installation Times
To address growing optical deployments, Corning introduced two new products that are designed to enhance network deployment times.
The company introduced Corning SMF-28 Contour fiber, which offers greater bendability, designed to reduce the impact of errors during installation while optimizing reach in densely cabled environments where 5G networks are being deployed.
Corning said that the associated increase in microbend resilience enables dense, high-fiber-count cables needed to meet the demands of future high-capacity networks. Additionally, SMF-28 Contour fiber also offers exceptional compatibility with legacy networks, while providing bend protection, which can mean up to 50 percent faster installation by minimizing corrective splice-loss work.
Data center connectivity was also a key focus. Corning also launched EDGE Rapid Connect solutions that it claims can increase fiber density and reduce customer installation time by up to 70 percent. Designed to facilitate data center interconnect (DCI) deployments and connections between data halls, EDGE Rapid Connect utilizes trunk cables with the Fast-Track MTP Connector.
“During the quarter, we extended our technology and market leadership in optical communications by introducing new solutions that speed network deployment,” Weeks said.
Mitigating Supply Chain Issues
Although Corning is seeing ripe opportunities for the Optical Communications business, the vendor is facing the same supply chain issues that have rippled throughout the telecom vendor industry segment.
Tripeny said that while Corning is facing a lot of supply chain disruptions and inflationary pressure, it put in a strategy to lower the impact.
“What we saw in the first quarter was of course a lot of that you know relative to freight and logistics,” he said. “We had plans to mitigate that. We did those mitigations but then there were other things that occurred, particularly around an increase in cost.”
Corning expects the same inflationary and supply chain logistics costs would continue into the third quarter and beyond, but it will take similar steps as it did in the second quarter.
“We’ve got lots of things to mitigate those in including in some cases raising prices on certain product lines but at least we think for at least for the next couple of quarters we’ll continue to see that drag,” Tripeny said. “We do believe it will mitigate over time but exactly how long it takes to mitigate that, we just need to let it play out.”
