It seems rather ironic that billions of dollars are about to be unleashed on states through the Broadband Equity Access & Deployment (BEAD) program, but Corning, a provider of optical fiber and cables for fiber deployments has been seeing a down-tick in demand this year.
On its Q1 2023 earnings call Corning CEO Wendell Weeks said there’s a “disconnect” between stated fiber deployment goals and actual rollouts.
Perhaps it’s just a matter of timing. States have not yet begun to receive BEAD funds to allocate to service providers. There’s also the fact that some companies may have stocked up on their optical fiber inventory due to all the supply chain issues during and after Covid.
Speaking at the J.P. Morgan investor conference today, Edward Schlesinger, Corning’s CFO, said, “I think the biggest indicator for us of what's happening in this space is our orders. Normally, we would see a seasonal increase in orders as we go from Q1 to Q2, and we're not really seeing that seasonal increase.”
He said in the past the seasonal increase from Q1 to Q2 could be as high as 15%.
“But that said, I think the drivers that are going to drive growth over the longer term are still intact,” said Schlesinger. “The need for broadband to build out 5G, the build-out of cloud computing. I think those things are all intact. There's a lot of private commitment for that build-out, and there's also a lot of public funding for that build-out as well. You have the BEAD program here in the United States.”
In terms of the reason for the slowdown in its fiber optical business for telecom, he noted the inventory build-up, saying “that's definitely a factor.” But he also said there’s been a slowdown in the deployment of capital by some of the large telcos and even in the data center space.
But he added, “We haven't really heard anybody talk about reducing their long-term goals in terms of whether it's homes passed or data center capacity. So, we think those commitments still exist, and we think the short term is cash conservation and some inventory digestion.”
Corning is currently building a new factory in Gilbert, Arizona, to manufacture optical cable, largely to support AT&T’s needs.
Meanwhile, the National Telecommunications & Information Administration (NTIA) is working on finalizing its rules for the Buy America requirements of BEAD funding. Perhaps Corning, headquartered in New York, will benefit from those rules later this year.