The company, which once made glass light bulbs for Thomas Edison, has been losing money on fiber-optic cable for nearly 20 years.
Now, Corning cables are the connector of choice in the global race to build enough computing power for a future driven by artificial intelligence. The relatively unglamorous Cinderella story of high-tech components has been a boon for the 175-year-old company and a lesson in how working with new ideas over long periods of time at the expense of money can pay off.
Corning stock is hovering near all-time highs, boosted by the company’s recently announced $6 billion deal with Meta, which will supply fiber optic cables to the company’s fleet of AI data centers. Corning said it is in talks with other companies for additional such deals. We’re also working on what could be the next big thing: fiber that connects servers inside servers rather than just connecting them to each other.
clearer than crystal
Corning cables are suddenly in high demand due to physics. Light (made of photons) can be used to transmit data much faster and with less energy than electricity (made of electrons). The cable itself often contains dozens or hundreds of flexible, ultra-thin glass fibers to carry the signal.
Until recently, optical fiber was primarily used to connect nodes of the Internet. In some cases, they can extend thousands of miles underground and beneath the waves.
“Photons are three times more efficient at transmitting data than electrons, even over short distances,” said Wendell Weeks, chief executive officer of Corning’s fiber optics division since 2005. “For long distances, it’s 20 times more.”
About half of Corning’s manufacturing remains in the United States, a feat considering other companies have offshored high-tech manufacturing. A factory in North Carolina pulls strands of glass as thin as a human hair but more than 30 miles long. It is so transparent that when it fills the ocean, you can see straight to the bottom.
Corning’s success in this area was not guaranteed, said Mike O’Day, who heads the company’s fiber business. Until recently, the company continued to make products that had remained largely unchanged since their introduction in 1970.
In 2018, Weeks and O’Day traveled to Dallas to tour a data center owned by Meta, then known as Facebook. They were surprised by the demand for fiber optic cables to connect all the servers in their huge warehouse. Facebook had been using a combination of copper cables and existing fiber optics, but found that neither was suitable for the task.
This forced Corning engineers to not only make the cable thinner, but also stronger to withstand tight bends, said Claudio Mazzarri, Corning’s director of research.
Five years later, ChatGPT debuted and demand for fiber-powered data centers exploded.
“I’m grateful to have been able to travel and take the gamble in 2018,” O’Day says. At the time, they had no idea whether it would be a good or a bad investment, he added.
“Corning Way”
Corning’s reinvention of fiber has been made possible because the company does little outsourcing, Mazzarri said. We also design machines used in the production of optical fibers and cables.
Weeks said this is part of the “Corning Way.” This self-containment also applies to employees, the CEO says. When companies change direction, they redeploy engineers rather than fire them, so engineers accumulate expertise across a variety of projects over decades. “What our engineers do cannot be learned from a textbook,” Weeks says.
After the pandemic hit, Corning endured six consecutive quarters of declining revenue, the longest decline since the 2001 telecom crisis. Instead of laying off employees or downsizing factories, the company gave employees the option of receiving a portion of their compensation in stock.
“We probably employed 4,000 to 5,000 more people than our revenue could support,” Weeks said. Corning currently employs approximately 56,000 people worldwide.
Now, the company needs all these employees and capabilities, and more, as demand for fiber is surging.
supply and demand
Corning is by far the largest fiber optic manufacturer and holds the largest share of the North American market. Fiber for data centers is the fastest growing part of Corning’s revenue, O’Day said. Analysts say the company’s continued good fortune will depend on whether the tech giant can continue construction at the pace indicated.
“Everything is going well and nothing is wrong with Corning’s stock today,” said William Kerwin, senior equity analyst at Morningstar.
Like many data center providers, Corning already sells everything it can make. “I think demand for Corning fiber will outstrip supply for some time,” Kerwin said. “It’s no exaggeration to say that if we can produce more, we can ship more.” Another factor is that fiber optic installations are facing labor shortages.
Regardless of whether the AI industry achieves its growth goals, established companies and startups alike will continue to seek the quality of fiber offered by Corning and a handful of global competitors. And Corning is already planning its next growth business. Nvidia is considering servers that incorporate the glass maker’s “co-packaged” optics directly.
It took almost half a century for Corning to produce one billion miles of optical fiber. The 2 billionth one took eight years, and the milestone was reached last year. The next billion will arrive much sooner.
One reason for this, O’Day said, is that more fiber is reaching dense networks within data centers, quickly surpassing long-haul business in terms of transmission distance. And then there are the fibers used inside computers.
Weeks is optimistic about the relationship with Nvidia, but says he has not yet been invited to Nvidia CEO Jensen Huang’s famous fried chicken and beer summit. Like Corning’s past innovations, developing co-packaged optics requires patience and capital, Weeks says.
“I think once you actually deliver, that’s when people invite you for beer and chicken,” Weeks said.
Please email Christopher Mims. christopher.mims@wsj.com
