Worldwide Demand for Optical Fiber and Photonics Showed Significant Growth in 1999; Corning Expects Continued Growth in 2000 - Industry Trend or Event

Cambridge Telcom Report, March 13, 2000

Corning Incorporated (NYSE:GLW), a world leading optical layer company, Monday presented its overview of the optical fiber and photonics industries as well as its near-term expectations for those markets.

Presenting before a group of media representatives and industry analysts, Corning stated that worldwide demand for optical fiber grew by more than 35% and worldwide demand for photonics grew by more than 60% over the previous year. The data was part of the company's annual business briefing that coincides with the start of the annual Optical Fiber Communications Conference (OFC 2000) being held in Baltimore, Maryland.

Corning's annual presentation of its market overview has become an anticipated event by industry watchers, particularly this year in light of the tremendous growth occurring in the optical networking marketplace. This is also true for Corning, as demand for its optical fiber and photonics products is increasing as the worldwide appetite for bandwidth, the information carrying capability for high-data-rate applications like the Internet, continues to grow exponentially.

Soaring Worldwide Fiber Demand In presenting the optical fiber market update, Alan Eusden, vice president and general manager of Corning's Telecommunications Products Division, stated that worldwide demand for optical fiber in 1999 totaled more than 70 million fiber kilometers, representing an overall growth rate of more than 35% over 1998.

For North America, which accounted for nearly half of the total worldwide demand during this time period, the various market segments collectively grew by approximately 45%. When broken out individually, long-haul increased by 80%, Cable TV grew by 50%, Local Exchange by 15%, CLECs (Competitive Local Exchange Carriers) by 60%, and 50% in the remaining market segments, which included premises applications.

Eusden reported that global demand for fiber also continued at a rapid pace. Western Europe, which represented 25% of the 1999 worldwide demand, was up 40% from 1998. Japan, representing 10% of the world fiber demand, was up 40%, and "Other Asia," which represented 15% of worldwide demand, was also up 20%. Rounding out the global review, Latin America and the rest of the world, which comprises less than 1%, was up 35%.

Looking to the upcoming year, Eusden added that worldwide fiber demand should stay very strong throughout 2000, with an expected growth rate of approximately 30%, led by North America and Western Europe.

The Growth of Photonics Gerald Fine, vice president and general manager of Corning's Photonic Technologies Division, presented an overview of the rapidly growing market for photonic modules and components used in building high-data-rate telecommunications networks. The year-to-year growth of this market approached 60% in 1999, and is expected to accelerate in 2000, with a growth rate of more than 70%.

The continued growth of the photonics market should be paced by the emerging metropolitan networks segment of the market, with growth rates anticipated to be in excess of 100% over the course of the next five years.

A New Perspective Due to the increasingly convergent global communications marketplace, Corning also presented growth rates for the fiber and photonics industries in a way that reflects the reality of this convergence through broader application segments. These segments were identified as Submarine, Long-Haul, Metro/Access and Premises.

In looking at worldwide fiber growth rates in these new categories, Eusden noted the following: Submarine fiber applications, comprising about 2% of 1999's total worldwide fiber demand, grew by 55%. Long-haul fiber applications, which comprised about 23% of last year's total, grew by approximately 45%. Metro/access fiber applications, with about 70% of the total, showed about 40% growth. And premises applications, with about 5% of the total, grew approximately 15% in 1999.

For photonics, Gerald J. Fine highlighted the composition of the total 1999 demand in the photonics market broken out along the same categories:

Submarine applications for photonics comprised about 40%, Long-haul applications comprised about 57%, and Metro/Access applications comprised approximately 3%.

Drivers for fiber and photonics growth, by application segment, included the following highlights:

-- Submarine. Global Internet traffic is driving demand for long-haul submarine capacity. A major market event in 1999 and 2000 is the rapid adoption of 10 Gb/s 980 nm pump systems. Dramatic increase is expected in complexity of wet repeaters resulting in a multiplier effect for component demand.

-- Long-Haul. Primarily a market segment growing in North America, significant growth shifts are expected in European markets, due to the emergence of new pan-European long-haul carriers. The demand for greater bandwidth and the major deregulation of utilities have established a favorable economic environment for healthy growth potential for 2000 and beyond.