A number of megatrends in the telecommunications market have propelled Corning to the top of the times. Firstly, the US Infrastructure Investment and Jobs Act passed last year will result in $42 billion of investment in broadband network construction across the US, of which Corning believes at least 10% will be spent on fibre deployment. In addition to government investment, there is a significant influx of investment from both the public and private sectors into this area. In a video released by Corning last December, Mike Bell, head of Corning's optical communications business, said the fiber optic industry is entering an overall massive multi-year double-digit growth cycle.
A number of megatrends in the telecommunications market are driving Corning to be a hot spot for the times. For starters, the U.S. Infrastructure Investment and Jobs Act passed last year will result in $42 billion in broadband network construction investment across the U.S., of which Corning believes at least 10 percent will go to fiber deployment. In addition to government investment, there is a significant influx of investment from both the public and private sectors into this area. Analysts at market research firm Cowen are calling the current fibre market historic.
The analyst wrote: "It took the US about 20 years to complete the first 40 million homes with fibre coverage, and the next 40 million are expected to take just five years. Enthusiasm for fibre broadband among US operators is currently at an all-time high."
For Corning, there is another big positive for the current fibre market. The slogan of the Infrastructure Investment and Jobs Act, passed last year, is "Buy American, Build in America". Corning is the only truly US-based fibre OEM.
Mike Bell noted that with the gradual implementation of the U.S. infrastructure plan, there is at least a billion dollars a year of fiber demand, and Corning's leadership position, as well as Corning's American-made attributes, will allow Corning to maximize this opportunity. In Corning's recently released earnings report, the company's optical communications business grew 22 percent year-over-year to $4.3 billion.
Corning's goal is also to make better fiber optic products, and Bell notes that Corning is staying ahead of the curve in cutting-edge technologies such as field connectivity, miniaturized fiber optic cables and field application terminals.
But Corning's dominant position in the North American fiber market also raises some concerns, with analysts at Cowen noting that many small operators are having trouble buying what they need. In a situation where one company is dominant, there is no doubt that those larger companies have more of an advantage. At Corning's recent earnings presentation, it was also brought up that some customers are currently claiming to have to wait at least two years for high-cell-count cables from Corning.
In response, Corning has announced that it will expand its production capacity. Corning CEO Wendell Weeks said the expansion is their commitment to the US market. What's really missing now is not raw materials, not labour, but the ability to meet demand at the right place at the right time. Regardless, Corning will work hard to meet customer demand and seize this historic opportunity.
