康寧 (GLW) 2017 Q2 法說會逐字稿

Welcome to the Corning Incorporated Quarter 2 2017 Earnings Results.

歡迎收聽康寧公司（Corning Incorporated）2017 年第二季財報結果說明。

It is my pleasure to turn the call over to Ann Nicholson, Division Vice President of Investor Relations.

我很高興把電話會議交給投資人關係部門副總裁 Ann Nicholson。

Thank you, Cynthia, and good morning, everyone. Welcome to our second quarter conference call.

謝謝你，Cynthia，各位早安。歡迎參加我們第二季的電話會議。

With me today is Wendell Weeks, Chairman and Chief Executive Officer; Tony Tripeny, Senior Vice President and Chief Financial Officer; and Jeff Evenson, Senior Vice President and Chief Strategy Officer.

今天與我一同出席的有董事長兼執行長 Wendell Weeks；資深副總裁兼財務長 Tony Tripeny；以及資深副總裁兼策略長 Jeff Evenson。

Before we begin our formal comments, I'd like to remind you that today's remarks contain forward-looking statements that fall within the meaning of the Private Securities Litigation Reform Act of 1995. These remarks involve a number of risks, uncertainties and other factors that could cause actual results to differ materially. These factors are detailed in the company's financial reports.

在我們開始正式發言之前，我想提醒各位，今天的談話包含前瞻性陳述，屬於 1995 年《私人證券訴訟改革法》（Private Securities Litigation Reform Act of 1995）所界定的範圍。這些陳述涉及多項風險、不確定性及其他因素，可能導致實際結果出現重大差異。相關因素已在本公司的財務報告中詳述。

You should also note that we will be discussing our results using core performance measures, unless we specifically indicate our comments relate to GAAP data. Our core performance measures are non-GAAP measures used by management to analyze the business. A reconciliation of core results to the comparable GAAP value can be found in the Investor Relations section of our website at corning.com. Slides are being shown live on our webcast to accompany our formal comments, and we encourage you to follow along. They'll also be available on our website for downloading.

另請注意，除非我們特別說明評論與 GAAP 數據相關，否則我們將以核心績效衡量指標（core performance measures）來討論結果。我們的核心績效衡量指標為非 GAAP 指標，管理階層用以分析業務表現。核心結果與可比 GAAP 數值之調節表，可於 corning.com 網站的投資人關係（Investor Relations）專區查閱。為配合我們的正式發言，網路直播將同步播放投影片，建議各位一併觀看。投影片也將提供於我們網站供下載。

And now I'll turn the call over to Wendell.

現在我把電話會議交給 Wendell。

Thank you, Ann. Good morning, everyone. This morning, we reported second quarter results that exceeded our expectations. Sales were up 6%, and EPS was up 14% over last year with strong sales growth continuing in Optical Communications and Specialty Materials. Our Display business performed in line with our expectations, including price declines that continued to moderate.

謝謝你，Ann。各位早安。今天早上，我們公布的第二季業績超出我們的預期。銷售額較去年成長 6%，每股盈餘（EPS）較去年成長 14%，其中光纖通訊（Optical Communications）與特殊材料（Specialty Materials）持續展現強勁的銷售成長。我們的顯示（Display）業務表現符合預期，包括價格下滑幅度持續趨緩。

We remain on track to deliver our strategy and capital allocation framework goals due to strong operating results and solid progress on innovation. We believe that the strategic and financial benefits of our framework are becoming even more apparent during its second year. The framework outlines our leadership priorities and is designed to create significant value for shareholders by focusing our portfolio and leveraging our financial strength. As we have discussed, we target generating $26 billion to $30 billion in cash through 2019. We plan to return more than $12.5 billion to our shareholders through repurchases and dividends, and we will invest $10 billion to sustain our leadership and deliver growth.

憑藉強勁的營運成果與創新方面的扎實進展，我們仍按計畫推進策略與資本配置架構的目標。我們相信，在架構推行的第二年，其策略與財務效益正變得更加明顯。該架構闡明我們的領導優先事項，並透過聚焦投資組合與運用財務實力，為股東創造顯著價值。如同我們先前所討論，我們的目標是在 2019 年前創造 260 億至 300 億美元的現金。我們計畫透過庫藏股回購與股利，向股東回饋超過 125 億美元，並投資 100 億美元以維持領導地位並帶動成長。

We have made great progress against those goals. Since October of 2015, our cash generation is on target, and we have returned $7.4 billion in share repurchases and dividends. Through our repurchases, we have reduced our outstanding shares by approximately 26%. We increased the dividend 14.8% in February and 12.5% last year for a combined increase of 29%. We expect to increase the dividend by at least 10% in 2018 and in 2019.

我們在這些目標上已取得重大進展。自 2015 年 10 月以來，我們的現金創造符合目標，且已透過股票回購與股利回饋股東 74 億美元。透過回購，我們已將流通在外股數減少約 26%。我們在 2 月將股利提高 14.8%，去年提高 12.5%，合計提高 29%。我們預期在 2018 年與 2019 年，股利至少各提高 10%。

In addition to articulating our capital allocation goals, our framework outlines how we have and will continue to utilize our focused and cohesive portfolio to generate value for our shareholders and to delight our customers. We are best-in-the-world in 3 core technologies, 4 manufacturing and engineering platforms and 5 market-access platforms. We focus 80% of our resources on opportunities that use capabilities in at least 2 of these 3 categories. We are investing in research and development, capital expansion and acquisitions to advance our innovation initiatives, strengthen our product leadership and low-cost positions, and ultimately, outperform our competitors. By pursuing our focused strategy, we believe our likelihood of success increases, our cost of innovation decreases, and we create higher and more sustainable competitive barriers.

除了闡述資本配置目標外，我們的架構也說明我們如何以及將如何持續運用聚焦且一致的投資組合，為股東創造價值並讓客戶滿意。我們在 3 項核心技術、4 個製造與工程平台，以及 5 個市場進入平台方面皆屬世界一流。我們將 80% 的資源聚焦於至少同時運用上述 3 大類別中其中 2 類能力的機會。我們正投資於研發、資本擴張與併購，以推進創新計畫、強化產品領導地位與低成本優勢，並最終超越競爭對手。透過推動聚焦策略，我們相信成功機率將提高、創新成本將降低，並建立更高且更可持續的競爭壁壘。

Our focus and leadership also attract some of the world's leading companies to collaborate with Corning, because they know how our expertise and unique combination of capabilities can help address some of their toughest challenges. During the first quarter earnings call in April, I discussed how our joint announcement with Verizon illustrates the power of our Optical Communications market-access platform. Verizon's commitment to our optical solutions is one outcome of the deep dialogue we are having with major telecom players across the globe. They are anticipating transformations in communications, education, health care, transportation and eventually, the way we all live, and they are turning to Corning for our unique co- innovation approach. Since then, Apple joined us to announce its $200 million investment in our advanced glass manufacturing capabilities in Harrodsburg, Kentucky. Apple's commitment for future innovations illustrates the leadership of our mobile consumer electronics platform.

我們的聚焦與領導地位也吸引全球一些領先企業與康寧合作，因為他們知道我們的專業與獨特的能力組合，能協助解決其最棘手的挑戰。在 4 月第一季財報電話會議中，我談到我們與 Verizon 的聯合公告如何展現我們光纖通訊市場進入平台的力量。Verizon 對我們光學解決方案的承諾，是我們與全球主要電信業者深入對話的成果之一。他們預期通訊、教育、醫療照護、運輸，乃至最終我們所有人的生活方式都將發生轉型，因此轉向康寧，採用我們獨特的共同創新（co-innovation）模式。此後，Apple 與我們共同宣布，將在肯塔基州哈羅茲堡（Harrodsburg, Kentucky）對我們先進玻璃製造能力投資 2 億美元。Apple 對未來創新的承諾，展現了我們行動消費性電子平台的領導地位。

Today, I would like to focus on how our cohesive set of capabilities is attracting leading pharmaceutical and biotech companies to seek our help to transform pharmaceutical packaging. We work closely with our development partners who are also long-standing customers of our life science vessels platform. As a senior scientist and one of these partners remarked, "Corning took a macroscopic set of problems, followed them to the root cause, dissected each cause to its science and rebuilt a solution at the molecular level on up to create a totally redesigned pharmaceutical package." This remarkable product, Corning Valor Glass packaging, dramatically reduces particle contamination, breaks and cracks while significantly increasing throughput. As a result, Valor helps protect patients and improve pharmaceutical manufacturing. In March of 2011, the FDA issued an advisory on glass lamella or the tiny flakes of glass that can be shed from the inside of the container contaminating the product. This is just one of the many issues Valor addresses.

今天，我想聚焦說明我們一致的能力組合如何吸引領先的製藥與生技公司，尋求我們協助改造藥品包裝。我們與開發合作夥伴密切合作，而他們同時也是我們生命科學容器（life science vessels）平台的長期客戶。正如其中一位資深科學家暨合作夥伴所言：「康寧把一整套宏觀問題一路追溯到根本原因，將每個原因拆解到其科學本質，並自分子層級向上重建解決方案，打造出全新設計的藥品包裝。」這項卓越產品——康寧 Valor 玻璃包裝（Corning Valor Glass packaging）——可大幅降低微粒污染、破裂與裂紋，同時顯著提升產能。因此，Valor 有助於保護病患並改善藥品製造流程。2011 年 3 月，美國 FDA 就玻璃薄片（glass lamella），亦即可能自容器內壁剝落並污染產品的微小玻璃片，發布了警示。這只是 Valor 所能解決的眾多問題之一。

Consequently, there is significant excitement in the industry. Now our customers' endorsements are far more powerful than my words. When announcing Valor at the White House last week, Merck's CEO, Ken Frazier said, "Biologic medicines and vaccines remain on the leading edge of scientific innovation, and Valor Glass represents a similar advancement in material science. A glass that is purpose built for medicines and vaccines. Merck plans to convert several injectable products to this exceptional new glass packaging solution pending appropriate regulatory approvals." And Pfizer's CEO, Ian Read stated, "We believe that our collaboration with Corning is a game changer. The glass industry represents about $4 billion in expenditures for the pharmaceutical industry, but subsequent issues, potential shards or breakages require strong quality control to ensure that it doesn't get through to patients." The subsequent costs are multiples of the glass cost to ensure that we deliver a high-quality product to patients. So Valor is a major innovation, a major way that we can be more competitive.

因此，業界對此充滿高度期待。現在，客戶的背書遠比我的話更有說服力。上週在白宮宣布 Valor 時，默克（Merck）執行長 Ken Frazier 表示：「生物製劑與疫苗仍站在科學創新的最前沿，而 Valor 玻璃代表材料科學的同等進步。這是一種專為藥品與疫苗量身打造的玻璃。在取得適當的法規核准後，默克計畫將多項注射產品轉換為這項卓越的新型玻璃包裝解決方案。」而輝瑞（Pfizer）執行長 Ian Read 則表示：「我們相信與康寧的合作將改變遊戲規則。對製藥產業而言，玻璃產業支出約 40 億美元，但後續問題、潛在碎片或破損，要求嚴格的品質控管，以確保不會流向病患。」為了向病患交付高品質產品，後續成本往往是玻璃成本的數倍。因此，Valor 是一項重大創新，也是我們提升競爭力的重要途徑。

This strong pull from our customers led us to announce an initial investment of $0.5 billion. Total investments over time could reach $4 billion, in sync with global demand and customer commitments for additional sales. Planned investments are included in our strategy and capital allocation framework. We ultimately expect about $1 of annual sales for every dollar of investment and profitability that exceeds our corporate average.

客戶端強勁的需求拉力促使我們宣布初期投資 5 億美元。隨著全球需求以及客戶對額外銷售的承諾同步推進，長期總投資可能達到 40 億美元。規劃中的投資已納入我們的策略與資本配置架構。我們最終預期每投入 1 美元，約可帶來每年 1 美元的銷售額，且獲利能力將高於公司平均水準。

Now you heard me say before that the timing and revenues of disruptive innovation are difficult to predict. This is especially true in highly-regulated industries such as drug packaging. The good news is that the regulatory environment derisks our investment by providing clear advance notice of demand and by creating stable sales that recur over a many, many years. In sum, we are extremely excited about this opportunity. You can watch for a customer in regulatory announcements as proof points to mark our progress.

各位之前也聽我說過，顛覆式創新的時點與營收很難預測。在藥品包裝等高度受監管的產業中尤其如此。好消息是，監管環境透過提前清楚告知需求，並創造可在多年、很多很多年內反覆出現的穩定銷售，從而降低我們投資的風險。總而言之，我們對這個機會感到非常振奮。各位可留意法規公告中出現的客戶資訊，作為驗證進展的佐證。

Valor also provides a powerful example of what happens when our focused and cohesive portfolio meets a customer opportunity. We started out with major customers from our life science vessels platform. We reapplied our expertise in glass science, optical physics, vapor deposition, precision forming and extrusion to develop a breakthrough product that we believe has the potential to power Corning's growth for the next decade and beyond.

Valor 也提供了一個強而有力的例子，說明當我們專注且高度協同的產品組合遇上客戶商機時會發生什麼。我們起初的主要客戶來自我們的生命科學容器平台。我們重新運用在玻璃科學、光學物理、蒸鍍、精密成形與擠出方面的專業，開發出一項突破性產品；我們相信它有潛力驅動康寧未來十年乃至更長時間的成長。

Stepping back, the announcements with Verizon, Apple, Merck and Pfizer show how global leaders are attracted to participate deeply in our ecosystem and inviting us to participate in theirs. We think this indicates that we're on the right track and bodes well for our future growth.

退一步來看，與 Verizon、Apple、Merck 及 Pfizer 的公告顯示，全球領導者被吸引而深度參與我們的生態系，同時也邀請我們參與他們的生態系。我們認為這表示我們走在正確的道路上，並對未來成長帶來正面訊號。

Now let me turn the call over to Tony for a review of our results and details on our outlook for 2017.

現在我把電話會議交給 Tony，請他回顧我們的業績並說明 2017 年展望的細節。

Thank you, Wendell, and good morning. As we noted in today's release, our second quarter core results reflect strong year-over-year improvement that exceeded what we expected, and we are very pleased with our operating performance. We remain on track to deliver both the full year business objectives that we laid out in January and our overall framework goals. Before I get into the details of our performance and results, I want to address GAAP and its impact on our hedge contract accounting.

謝謝你，Wendell，大家早安。如同我們在今日新聞稿中所提到的，我們第二季核心業績反映出強勁的年增改善，且優於我們的預期；我們對營運表現感到非常滿意。我們仍按計畫推進，以達成我們在一月提出的全年業務目標以及整體架構目標。在我進入績效與結果的細節之前，我想先說明 GAAP 及其對我們避險合約會計處理的影響。

GAAP accounting requires our earnings translation hedge contract settling in the future periods to be mark-to-market and recorded at their current value at the end of each quarter, even though those contracts will not be settled in the current quarter. During the second quarter, the yen weakened increasing the value of our hedge contracts. This resulted in an after-tax GAAP gain of $94 million when we marked the contracts to market as required by GAAP. To be clear, this mark-to-market accounting has no impact on our cash flow.

依 GAAP 會計規定，我們將於未來期間結算的盈餘換算避險合約，必須按市價評價（mark-to-market），並在每季季末以當期價值入帳，即使這些合約不會在本季結算。第二季期間，日圓走弱，使我們避險合約的價值上升。因此，依 GAAP 規定將合約按市價評價後，產生稅後 GAAP 利得 9,400 萬美元。需要明確指出的是，這種按市價評價的會計處理對我們的現金流沒有任何影響。

We remain very pleased with the results of our hedging program and the economic certainty it delivers. Since its inception, we have received cash totaling $1.5 billion under our hedge contracts. These proceeds offset much of the yen-related fluctuations in Display's earnings. Hedging our earnings and cash flows through 2022 substantially mitigates risk from a weakening yen. For investors who have additional questions on the mechanics of these contracts, please refer to the tutorial on FX hedge accounting on the Digital Media Disclosure section of our Investor Relations website. And as always, Ann and her team are available after the call.

我們對避險計畫的成果以及其帶來的經濟確定性仍感到非常滿意。自計畫啟動以來，我們已透過避險合約累計收到 15 億美元現金。這些款項抵銷了顯示事業盈餘中與日圓相關的多數波動。將盈餘與現金流避險至 2022 年，可大幅降低日圓走弱帶來的風險。若投資人對這些合約的運作機制有進一步問題，請參考我們投資人關係網站「數位媒體揭露」區的外匯避險會計教學。一如往常，Ann 與她的團隊會在會後提供協助。

Also, as a reminder, last year's GAAP net income included a $2.7 billion nontaxable gain on the strategic realignment of our ownership interest in Dow Corning.

另外提醒一下，去年 GAAP 淨利包含一筆 27 億美元的免稅利得，係來自我們對 Dow Corning 持股權益進行策略性調整。

Now let's turn to core results. Second quarter sales rose 6% year-over-year. Core earnings were $431 million, consistent year-over-year. On an apples-to-apples comparison that excludes silicones equity earnings from the second quarter of 2016, core earnings grew 12% year-over-year. Second quarter EPS was $0.42, up 14%.

現在我們來看核心業績。第二季銷售額年增 6%。核心盈餘為 4.31 億美元，與去年同期一致。在排除 2016 年第二季矽利康（silicones）權益法收益、以可比基礎（apples-to-apples）比較下，核心盈餘年增 12%。第二季每股盈餘（EPS）為 0.42 美元，成長 14%。

Second quarter sales reflected strong growth in Optical Communications on healthy demand in the fiber-to-the-home markets. Strong growth in Specialty Materials, with continued strength in Gorilla Glass volume, an LCD glass volume growth with continued moderate pricing declines. Gross margin of 42.4% was in line with our expectations and consistent with Q1.

第二季銷售額反映出光學通訊在光纖到府（FTTH）市場需求健康帶動下的強勁成長。特種材料亦強勁成長，Gorilla Glass 出貨量持續強勢；LCD 玻璃出貨量成長，但價格仍呈持續的溫和下滑。毛利率 42.4% 符合我們的預期，且與第一季一致。

SG&A was 14% of sales at $358 million, and our RD&E was 8% of sales at $207 million. Total gross equity earnings were $38 million, largely from Hemlock Semiconductors, which exceeded expectations predominantly because of the timing of Hemlock sales between the second and third quarter. We are changing our view that full year gross equity earnings should be about $150 million. Our effective tax rate for the quarter was 18%.

銷售、一般及管理費用（SG&A）為 3.58 億美元，占銷售額 14%；研發與工程（RD&E）為 2.07 億美元，占銷售額 8%。權益法總收益為 3,800 萬美元，主要來自 Hemlock Semiconductors；其表現優於預期，主要是因 Hemlock 的銷售在第二季與第三季之間的時點差異所致。我們調整對全年權益法總收益的看法，預期約為 1.5 億美元。本季有效稅率為 18%。

Turning briefly to the balance sheet. We ended the quarter with $4.2 billion in cash, approximately 25% of which is in the U.S. Adjusted operating cash flow for the quarter was $479 million and keeps us on track to meet the goals of our 4-year capital allocation plan.

簡要談一下資產負債表。本季期末現金為 42 億美元，其中約 25% 位於美國。經調整的本季營運現金流為 4.79 億美元，使我們持續按計畫達成四年期資本配置計畫的目標。

Now let's look at the detailed segment results and outlook beginning with Display Technologies. The second quarter Display market and our results met expectations. Sales were $841 million and core earnings were $240 million. Volume and pricing were in line with expectations. The glass market and our volume were up low-single digits sequentially. Sequential LCD glass price declined moderately. And as we expected, the decline in this quarter was substantially less than the first quarter.

接著我們從顯示科技（Display Technologies）開始，檢視各事業部的詳細業績與展望。第二季顯示市場與我們的表現符合預期。銷售額為 8.41 億美元，核心盈餘為 2.40 億美元。出貨量與價格符合預期。玻璃市場與我們的出貨量較前一季增加低個位數百分比。LCD 玻璃價格較前一季溫和下滑。且如我們所預期，本季的降幅明顯小於第一季。

We continue to expect that the full year 2017 retail market, as measured in square feet of glass, will be up mid-single digits, driven by demand for larger screen size TVs. For the year, we expect our glass demand will be up mid-single digits, in line with the overall market. We continue to see progress towards a more moderate pricing environment. Our price declines in 2015 were smaller than in 2014. And in 2016, they were smaller still. We expect this pattern to continue with our glass prices declining 10% or less this year.

我們仍預期 2017 年全年零售市場（以玻璃平方英尺衡量）將成長中個位數百分比，主要由更大尺寸電視的需求所帶動。就全年而言，我們預期自身玻璃需求將成長中個位數百分比，與整體市場一致。我們持續看到價格環境朝更溫和的方向改善。我們在 2015 年的降價幅度小於 2014 年。而在 2016 年，降幅又更小。我們預期此趨勢將延續，今年玻璃價格降幅將為 10% 或更低。

Now 3 factors drive our view of the more favorable pricing. First, global glass supply and demand remain balanced. We are successfully aligning our capacity to our demand. Publicly available information indicates competitors are doing the same. Second, our competitors continue to face profitability challenges at current pricing levels. Therefore, we expect their price declines will slow further as they try to remain profitable. And third, LCD glass manufacturing requires ongoing investments in current and new capacity. To generate acceptable returns on new investments, glass pricing will need to moderate even further.

我們對較有利的定價看法主要由三項因素驅動。第一，全球玻璃供需仍維持平衡。我們正成功地將產能與需求對齊。公開資訊顯示競爭對手也在做同樣的事。第二，在目前的價格水準下，我們的競爭對手仍面臨獲利能力的挑戰。因此，我們預期他們為了維持獲利，降價幅度將進一步放緩。第三，LCD 玻璃製造需要持續投資於既有與新增產能。為了讓新投資產生可接受的報酬，玻璃定價需要進一步趨於溫和。

For the third quarter, we expect the LCD glass market and Corning volume to be up low-single digits. Sequential price declines should be moderate and similar to the second quarter sequential declines.

就第三季而言，我們預期 LCD 玻璃市場與康寧出貨量將較前一季增加低個位數百分比。價格較前一季的降幅應屬溫和，並與第二季的季對季降幅相近。

Looking into the supply chain. Panel Makers and total supply chain inventories expanded slightly at the end of Q2, as we expected. Total supply chain inventories should continue to expand in Q3 in preparation for a seasonally strong fourth quarter retail demand, which we anticipate will then draw inventory down. Year-end inventory will depend on Q4 sell-through, and we continue to expect total supply chain inventory at the end of 2017 will be in a healthy range. In summary, we remain very pleased with the current dynamics in our Display business and our progress in stabilizing returns.

再來看供應鏈狀況。如我們所預期，第二季末面板廠與整體供應鏈庫存小幅增加。為了準備季節性強勁的第四季零售需求，我們預期第三季整體供應鏈庫存將持續增加，之後在第四季需求帶動下庫存將被消化下降。年底庫存水位將取決於第四季的終端銷售（sell-through），我們仍預期 2017 年底整體供應鏈庫存將維持在健康區間。總結而言，我們對目前顯示事業的動態以及我們在穩定報酬方面的進展仍感到非常滿意。

Let's move to Optical Communications where the second quarter results were strong with sales up 13% and core earnings up 26%. The growth was primarily driven by the North America fiber-to-the-home market. Throughout this year, we have been saying we expect low teens sales growth for 2017. In line with this, we expect third quarter sales to be up more than 10%. Now given the strong momentum in the first half, optical sales have the potential to be at mid-teens for the full year like many sell-side analysts are modeling. That said, we are always cautious about our guidance to you, because sales are driven by large civil works projects that are subject to delays that can lead to quarterly volatility. This introduces a measure of conservatism and leads to our guidance. The good news is we continue to see major carriers shifting more spending towards optical solutions. This is a long-term positive for Corning and transcends fluctuations in individual quarters. This is an exciting time for our Optical business. Overall, we expect to grow significantly faster than the optical markets we serve, and we enable next -- as we enable next-generation networks and our customers benefit from our unique set of capability. We are on track to achieve our goal for Optical Communications at $5 billion in annual sales by 2020.

接下來談光學通訊業務，第二季表現強勁，銷售額成長13%，核心盈餘成長26%。成長主要由北美光纖到府（FTTH）市場帶動。今年以來我們一直表示，預期2017年銷售額將呈現低十位數百分比的成長。與此一致，我們預期第三季銷售額將成長超過10%。鑑於上半年動能強勁，光學銷售額全年有機會達到中十位數百分比的成長，正如許多賣方分析師所建模的那樣。不過，我們對提供給各位的指引一向保持審慎，因為銷售額受大型土木工程專案驅動，而這些專案可能延宕，進而導致季度間波動。這使我們在指引上加入一定程度的保守性。好消息是，我們持續看到主要電信營運商將更多支出轉向光學解決方案。這對康寧而言是長期利多，並超越單一季度的波動。對我們的光學業務而言，這是一個令人振奮的時刻。整體而言，我們預期成長速度將顯著快於我們所服務的光學市場；同時，當我們協助建置下一代網路、且客戶受益於我們獨特的能力組合時，我們也在促成下一步的發展。我們正按計畫在2020年前達成光學通訊年銷售額50億美元的目標。

Now while the vast majority of this growth is expected to come from organic initiatives, we also plan to acquire or gain strategic advantages by strengthening our portfolio or increasing our market access. We are excited about last week's announcements that we acquired SpiderCloud, which will help us accelerate the deployment of fiber inside buildings.

雖然這些成長的絕大部分預期將來自有機性措施，我們也計畫透過收購或取得策略優勢，藉由強化產品組合或提升市場進入能力。我們對上週宣布收購SpiderCloud感到振奮，這將協助我們加速在建築物內部部署光纖。

Turning to our Environmental business. Second quarter sales were $263 million, up slightly year-over-year. Core earnings were $32 million, down year-over-year due to investments for the development and introduction of our new gas particulate filter. Second quarter year-over-year automotive sales rose on worldwide growth in the automotive market and additional business wins that allow us to grow faster than the market. In addition, the North America heavy-duty diesel market appears to be stabilizing. Our total diesel sales were flat sequentially.

接著談環境事業。第二季銷售額為2.63億美元，年增小幅上升。核心盈餘為3,200萬美元，因投資於新款汽油顆粒過濾器的開發與導入而較去年同期下滑。第二季汽車相關銷售年增，受惠於全球汽車市場成長，以及新增得標業務使我們得以快於市場成長。此外，北美重型柴油市場似乎正在趨於穩定。我們的柴油總銷售額較前一季持平。

As we've previously noted, we're leveraging our position in mobile emissions controls by building a significant new business for gas particulate filters or GPFs. Evidence strongly suggests that adding a GPF is the most effective way for automakers to meet new environmental regulations in Europe and China. We continue to win the majority of platforms and have agreements for more than 15 models from 20 automakers with new wins in the past month and more to come.

如同我們先前提到的，我們正運用在行動排放控制領域的既有地位，打造一項重要的新業務：汽油顆粒過濾器（GPF）。多項證據強烈顯示，為了符合歐洲與中國的新環保法規，對車廠而言加裝GPF是最有效的方式。我們持續拿下大多數平台，並已與20家車廠就超過15個車型達成協議；過去一個月也新增得標，後續還會有更多。

Our GPF platform wins require a select capacity and engineering investments. In the near term, you will see both cost on the P&L and capital expenditures. We will see our first commercial sales in the third quarter. We're excited because our sales per vehicle increased by a factor of 3 to 4x with profitability similar to our current Environmental business. Once regulations are fully implemented in Europe and China in the early 2020s, we estimate this opportunity will exceed $0.5 billion for Corning. In total, for the third quarter, we expect low-single digit sales growth. For 2017 overall, we expect sales to be consistent to up slightly from 2016.

我們在GPF平台的得標需要特定產能與工程投資。短期內，您將在損益表上看到相關成本，同時也會看到資本支出。我們將在第三季看到首批商業化銷售。我們感到振奮，因為每輛車的銷售額提升了3到4倍，而獲利能力與我們現有的環境事業相近。一旦歐洲與中國在2020年代初期全面落實法規，我們估計此機會對康寧的貢獻將超過5億美元。整體而言，第三季我們預期銷售額將呈現低個位數百分比成長。就2017年全年而言，我們預期銷售額將與2016年大致持平或小幅成長。

Let's move to Specialty Materials where our goal is to double sales for mobile consumer electronics despite maturing smartphone unit growth. Second quarter sales rose 27% over last year and core earnings were up 21% year-over-year, both ahead of our expectations, driven by stronger Gorilla Glass shipments to support new product launches. We had record shipments of Gorilla Glass and expect strong demand to be continued for the remainder of the year.

接下來談特殊材料事業；我們的目標是在智慧型手機出貨量成長趨緩的情況下，仍將行動消費電子的銷售額翻倍。第二季銷售額較去年成長27%，核心盈餘年增21%，兩者皆優於我們預期，主要由更強勁的Gorilla Glass出貨支撐新產品上市所帶動。我們的Gorilla Glass出貨量創下紀錄，並預期今年剩餘期間需求將持續強勁。

Now we made progress in all 3 of our branches to grow sales. In particular, we again saw the benefit of Gorilla Glass 5, which leads the market for drop performance and is now on 22 devices. Also, we continue to see strong adoption of Gorilla Glass on devices being introduced in developing markets with brands such as Micromax of India. We also had growth on other major programs to increase sales per device. Overall, our growth prospects remain strong in mobile consumer electronics. Our innovative products provide added value for consumers, particularly in terms of durability and create new opportunities for us to increase sales. We expect sales growth in the third quarter to be up in the low to mid-teens year-over-year. Exactly how much growth we will see for the full year continues to be dependent on the timing and extent of customers deploying Gorilla Glass 5 and other Corning innovations. Through the first half, sales are up 29%, so we are clearly pleased with the adoption so far this year.

我們在三大業務分支皆取得進展以推動銷售成長。尤其是，我們再次看到Gorilla Glass 5帶來的效益；其抗摔表現領先市場，目前已導入22款裝置。此外，我們持續看到Gorilla Glass在新興市場推出的裝置上被廣泛採用，例如印度的Micromax等品牌。我們在其他主要專案上也有所成長，以提升每台裝置的銷售額。整體而言，我們在行動消費電子領域的成長前景依然強勁。我們的創新產品為消費者帶來附加價值，特別是在耐用性方面，並為我們創造提升銷售的新機會。我們預期第三季銷售額年增將落在低至中十位數百分比。全年最終能達到多少成長，仍取決於客戶導入Gorilla Glass 5及其他康寧創新的時點與規模。截至上半年，銷售額已成長29%，因此我們對今年迄今的採用情況顯然感到滿意。

In Life Sciences, second quarter sales were $221 million and core earnings were $19 million. For the full year 2017 and the third quarter, we continue to expect low-single-digit sales growth year-over-year. Also, we've had a number of investors ask, if our new pharmaceutical packaging business will be included with the Life Sciences business in our financial results or remain in our other reporting segment. For now, it will remain in other, along with other new product line and development projects. We group our emerging opportunities in other to better manage their goals and objectives independent from a fully commercialized business.

在生命科學事業方面，第二季銷售額為2.21億美元，核心盈餘為1,900萬美元。對於2017年全年與第三季，我們仍預期銷售額年增為低個位數百分比。另外，也有不少投資人詢問，我們新的藥品包裝業務在財務結果中會納入生命科學事業，或是維持在其他報導部門。目前它將維持在「其他」之中，並與其他新產品線及開發專案一併列示。我們將新興機會歸類於「其他」，以便在尚未完全商業化之前，能更好地獨立管理其目標與任務。

Shifting to the full company P&L. For the third quarter, we expect our gross margin as a percent of sales to remain in line with the first half of this year at about 42.5%. SG&A and RD&E spending should be approximately 14% and 8% of sales, respectively. We expect other income, other expense to be a net of expense of approximately $25 million to $35 million. Third quarter total gross equity earnings are expected to be approximately $10 million to $20 million due to the timing of Hemlock's Q2 earnings that I mentioned earlier. We continue to believe full year gross equity earnings will be approximately $150 million predominantly from Hemlock, and we expect our effective tax rate for the third quarter and full year 2017 to be approximately 18%, and CapEx for the year to be approximately $1.5 billion.

接著看全公司損益表。第三季我們預期毛利率（占銷售額比重）將與今年上半年大致一致，約為42.5%。SG&A與RD&E支出預計分別約占銷售額的14%與8%。我們預期其他收入、其他費用合計將為淨費用約2,500萬至3,500萬美元。由於我先前提到Hemlock第二季盈餘認列時點的影響，第三季權益法投資總毛利預期約為1,000萬至2,000萬美元。我們仍認為全年權益法投資毛利約為1.5億美元，主要來自Hemlock；並預期第三季及2017年全年的有效稅率約為18%，全年資本支出（CapEx）約為15億美元。

Finally, let me update you on our plan to return at least $12.5 billion to shareholders under our framework. Through the end of the second quarter, we have returned $7.4 billion. In the second quarter, we returned $780 million, bringing the year-to-date total to $1.3 billion. As you may recall, in February, the board increased the cash dividends per share by 14.8%. Let me close by saying that we are very pleased with our continued positive momentum. We remain on track to deliver our 2017 objectives and the overall goals of our strategy in capital allocation framework. We feel very good about the rich set of opportunities ahead of us.

最後，向各位更新我們依資本配置架構，至少回饋股東125億美元的計畫進度。截至第二季末，我們已回饋74億美元。第二季我們回饋7.8億美元，使年初至今合計達13億美元。各位或許記得，董事會在2月將每股現金股利提高14.8%。最後我想說，我們對持續的正向動能感到非常滿意。我們仍按計畫達成2017年的目標，以及資本配置架構策略的整體目標。我們對未來一系列豐富的機會感到非常有信心。

With that, let's move to Q&A.

那麼，接下來我們進入問答環節。

Thanks, Tony. Cynthia, you can start the line for questions.

謝謝你，Tony。Cynthia，你可以開始開放提問線路。

(Operator Instructions) Our first question will come from the line of Joseph Wolf with Barclays.

(接線員指示) 我們的第一個問題來自 Barclays 的 Joseph Wolf。

Question on the partnerships that you were describing. With the Apple one, it seems like there was an investment from the company of $200 million. It wasn't clear to me from the Life Sciences, whether Merck and Pfizer contributed for this initial work or that was all Corning dollars. And I'm just wondering how that progresses? And then you also mentioned we should be watching with that $1 in sales per $1 of investment milestones announcements. But I expect that those are not going to come for a couple of years. Is there anything else we should be looking at in terms of a decision-making process in terms of milestones for the incremental opportunity? And then finally, just to add on to this long question, is this opportunity even bigger than the Gorilla Glass for auto, internal and external?

我想問你剛才描述的合作夥伴關係。就 Apple 那個案子來看，似乎公司投入了 2 億美元。但在生命科學那邊，我不太清楚 Merck 和 Pfizer 是否為這項初期工作出資，或是全部都是 Corning 的資金。我想了解這會如何推進？另外你也提到，我們應該關注每投入 1 美元、帶來 1 美元銷售的里程碑公告。但我預期這些可能要過幾年才會出現。就增量機會而言，在決策流程與里程碑方面，還有沒有其他我們應該觀察的指標？最後，再補充這個很長的問題：這個機會是否甚至比汽車內外裝用的 Gorilla Glass 還要更大？

Thank you, Joseph. Let's try to take them in order. The development partners did contribute to some of the development expense that is related to creation of this product. This is a significant development effort for us and a significant development effort for them, so they were a critical part of getting us to the announcement the other day. That being said, their major contribution is to adopt our product over time across their product lines. As you noted, when something as significant as new pharmaceutical packaging of what the pharmaceutical companies need to do is because it's existing marketed product already is take and show that new product and the new package to the FDA. And when they do that, it's going to be already based on them having done stability testing, machinability and a number of tests. This means, it will take a while for the revenue of this business to ramp. That being said, there are actually a number of other milestones you'll be able to see, you will be able to see some of the FDA submissions as they go in. You will hear from other customers as they take our product for different ones of their products. So I think we're going to be able to really clearly set out a map for you. And as we start to build out this business, it'll become pretty clear sort of how large a breakout it will become. I think your last question, which was dealing with how large is this opportunity and used as an example comparing to our Gorilla Glass for automotive. I think there is no question that the size of this opportunity is larger. The key here is how much of a breakout does it become? If truly this product picks up very strong regulatory support, and we also -- if our data that we've gathered so far with our development partners holds true on its tremendous benefits for patients as well as increased throughput for pharmaceutical companies, this is going to be a very, very large business. It is going to grow for decades. And that's why we've been pursuing it so strongly. But that being said, last week was our breakthrough moment. We had a lot of work ahead of us for it to turn into the size of breakout that I just described.

謝謝你，Joseph。我們盡量按順序回答。開發合作夥伴確實分擔了部分與此產品開發相關的費用。這對我們而言是重大的開發投入，對他們而言也是重大的開發投入，因此他們是促成我們前幾天發布公告的關鍵一環。話雖如此，他們最大的貢獻是在未來逐步於其產品線中採用我們的產品。如你所指出，像這樣重大的新型藥品包裝，製藥公司之所以需要這麼做，是因為它通常是既有已上市產品；他們必須把新產品與新包裝提交給 FDA。而當他們提交時，通常已經完成了安定性測試、可機械加工性（machinability）以及多項測試。這表示這項業務的營收爬坡需要一段時間。不過，實際上你還能看到其他一些里程碑，例如隨著提交進行，你會看到部分 FDA 送件。當其他客戶把我們的產品用於其不同產品時，你也會聽到相關訊息。因此我認為我們能為你非常清楚地勾勒出一張路線圖。而隨著我們開始擴展這項業務，它最終會成為多大規模的突破也會變得相當清楚。至於你最後一個問題，是在問這個機會有多大，並以我們汽車用 Gorilla Glass 作為比較。我認為毫無疑問，這個機會的規模更大。關鍵在於它會成為多大程度的突破。如果這項產品確實獲得非常強的監管支持，而且我們目前與開發合作夥伴所蒐集的數據也持續證實其對病患的巨大效益，以及對製藥公司提升產能（throughput）的效果，那麼這將會是一門非常、非常龐大的業務。它將成長數十年。這也是我們如此積極投入追求的原因。但話說回來，上週是我們的突破時刻。要讓它成為我剛才描述的那種規模突破，我們前面仍有大量工作要做。

Just one quick follow-on. And Tony you talked about this a little bit. But if we look at the strong performance in Gorilla Glass and you look at the guidance for the rest of the year and even at 2018, can you give us any more color on what this key was in terms of that growth? Whether it's the unit, which seem kind of -- to be kind of flat? Is it just pricing being stronger on the Gorilla Glass 5? Or is it the take -- or is it the more glass per phone option in that...

我再快速追問一點。Tony，你也稍微提到過。但如果我們看 Gorilla Glass 的強勁表現，再看你們對今年剩餘期間甚至 2018 年的指引，你能否再多提供一些關於這波成長關鍵驅動因素的說明？是出貨量（unit）嗎？看起來似乎有點——大致持平？還是只是 Gorilla Glass 5 的定價更強？或是採用率——或者是每支手機使用更多玻璃的選項在其中……

Certainly, the more glass per phone is pretty significant. And as you know, we've had -- we talked about it in the last quarter several devices that have put glass on the back of the phone, including the Samsung Galaxy x8 (sic) [Samsung Galaxy S8] and so that is a significant part of the growth that we have year-over-year. Now the adoption of Gorilla Glass 5 is also significant part, because as we've talked in the past, that creates real value for our customers and we are able to charge a higher price for that. So it's a combination of all of these items. The overall underlying market, as we've said, is relatively flat and consistent, and our ability to grow really has to do with our innovations.

當然，每支手機使用更多玻璃的影響相當顯著。而如你所知，我們在上一季也談到過，有幾款裝置在手機背面也採用了玻璃，包括 Samsung Galaxy x8（原文如此）[Samsung Galaxy S8]，因此這是我們年對年成長的重要部分。此外，Gorilla Glass 5 的採用也是重要因素，因為如我們過去所談，這能為客戶創造實質價值，我們也因此能收取更高的價格。所以這些因素是綜合起來的結果。整體底層市場如我們所說，相對平坦且一致，而我們能夠成長主要取決於我們的創新。

Our next question comes from the line of Steven Fox with Cross Research.

下一個問題來自 Cross Research 的 Steven Fox。

First question for me. Recently, there's been sort of a blip down in LCD panel prices for large sizes. And I know, Tony, you just mentioned that you're pretty comfortable with where inventories are right now. I was wondering if you could just sort of react to that near-term trend and what you make of it and what do you think the risks are relative to the outlook you provided just for LCD glass, and then I had a follow-up.

我這邊第一個問題。最近大尺寸 LCD 面板價格似乎出現了一個小幅下滑。我知道 Tony 你剛才提到，你對目前的庫存水位相當有信心。我想請你就這個短期趨勢談談看法：你如何解讀？以及相對於你對 LCD 玻璃所提供的展望，你認為風險在哪裡？然後我還有一個追問。

Sure. It's true that panel prices have started to decline on a sequential basis in the last quarter. They're still really close to record highs. I think it's important to remember they've risen significantly every quarter since Q2 '16. And this has resulted in both record panel maker profitability. And we believe that prices have room to move down to more sustainable levels. So this should enable lower set prices to stimulate some second half demand. I think it's important from a supply chain standpoint to remember that in '17, panel maker capacity does not grow significantly. So our Panel Makers have to run at high utilizations to build the inventory for Q4 selling season, and we saw that happen in Q2 just as we expected. And in Q3, set maker demand is strong and set makers will be building inventory for that seasonally strong Q4 demand, and we anticipate that's going to drive down the inventory. So when we look at this from an overall standpoint, we think the 2017 is going to end in a healthy range.

好的。確實，面板價格在上一季開始出現環比下滑。但它們仍非常接近歷史高點。我認為重要的是要記得，自 2016 年第二季以來，它們每一季都大幅上升。這也帶來了面板廠創紀錄的獲利能力。我們認為價格仍有空間下調至更可持續的水準。因此，這應能讓整機（set）價格下降，進而刺激下半年部分需求。從供應鏈角度來看，重要的是要記得在 2017 年，面板廠產能並未顯著成長。因此我們的面板客戶必須以高稼動率運轉，以建立第四季銷售旺季所需的庫存，而我們在第二季如預期看到這種情況。到了第三季，整機廠需求強勁，整機廠也會為季節性強勁的第四季需求建立庫存，我們預期這將帶動庫存下降。因此從整體來看，我們認為 2017 年將在健康的區間內結束。

Great, that's helpful. And then just as a follow-up, Wendell, I was wondering you mentioned the AT&T agreement is probably not going to be unique within the industry. I'm sure you can't talk about specific timing, but I'm wondering if there's any other near-term drivers that maybe could lead to other announcements, say, before the end of the year? Or are we thinking this is as more -- something to watch out for as you get into next year or year after?

很好，這很有幫助。接著追問一下，Wendell，我想請教你提到 AT&T 的協議在產業內可能不會是特例。我知道你可能不能談具體時點，但我想了解是否還有其他短期驅動因素，可能促成其他公告，例如在年底之前？還是我們應該把它視為——更像是要等到明年或後年再觀察的事情？

So I believe when you say AT&T, you mean Verizon?

所以我想你說的 AT&T，是指 Verizon 嗎？

I'm sorry, Verizon..

抱歉，是 Verizon。

That's no problem. So the Verizon agreement is not unique among the deep conversations we are having around the globe with telecom players. Whether or not we will announce those or not, deals more with our customers' preference. In Verizon's case, they felt it was so strategic to their densification plans. They wanted to do it for their own purposes. And for us, we put our customers' needs first. Some will probably want to be public, some will probably not want to be public, and that's how we'll make a decision around announcements.

沒問題。因此，Verizon 的協議並非我們在全球與電信業者進行的深入洽談中獨一無二的案例。至於我們是否會對外宣布，更多取決於客戶的偏好。以 Verizon 為例，他們認為這對其網路加密（densification）計畫具有高度策略性。他們希望基於自身目的來推動。而對我們而言，我們會把客戶需求放在第一位。有些客戶可能希望公開，有些客戶可能不希望公開，我們就會依此來決定是否發布公告。

Okay, that's helpful. And then just very quickly. The Optical profits are growing faster than the sales in the most recent quarter. I was wondering if you just explain why that dynamic happened most recently?

好的，這很有幫助。接著很快問一下。最近一季光學業務的利潤成長快於銷售成長。我想請你解釋一下，為什麼最近會出現這樣的動態？

Sure. I mean, I think that from a leverage standpoint, an awful lot of fixed costs that are in the Optical business, actually in all of our businesses. So generally speaking, you'll expect over time for our profits to grow faster than sales in any of our business segments. The exception being in the Display business where we're looking for stability, and we certainly saw that in the second quarter in Optical Communications. And it's important to realize that while that's happening, we are also investing a lot. We are investing, in particular, in some of the expansions that we've talked about the keep up with demand. So -- but from an overall standpoint, I think it's safe to assume that in the Optical business, in most quarters, we'll see profits grow faster than sales.

當然。我的意思是，從槓桿效應的角度來看，光學業務中有非常多的固定成本，事實上我們所有業務都是如此。因此一般而言，隨著時間推移，你會預期我們在任何業務分部的利潤成長都會快於銷售成長。例外是顯示業務，我們追求的是穩定；而在第二季的光學通訊業務中，我們確實看到了這一點。而且要注意的是，在這種情況發生的同時，我們也在大量投資。我們特別是在投資一些我們談到過的擴產，以跟上需求。所以——但從整體來看，我認為可以合理假設，在光學業務中，多數季度我們會看到利潤成長快於銷售成長。

Our next question will come from the line of Rod Hall with JPMorgan.

下一個問題來自摩根大通（JPMorgan）的 Rod Hall。

I guess I wanted to open up with just a tax question, I mean, in light of the Valor announcement and the administration is backing for that? I wonder, Wendell, could you just maybe give us an update on your thinking on tax reform, generally, just kind of how that's moving along in timing? And are there going to be disproportionate advantages for people that build manufacturing onshore here? And then I have a follow-up.

我想先從稅務問題開始，也就是考量到 Valor 的公告以及政府對此的支持？我想問一下，Wendell，你能否更新一下你對整體稅改的看法，尤其是目前進展與時間點大概如何？另外，對於把製造業回流到美國本土設廠的人，是否會有不成比例的優勢？然後我還有一個追問。

As to tax reform, I think it's easy to be confident long term that the current tax policy of the United States is not stable over time, that it leads to things that are not good for our economy or jobs and then ultimately that's going to get fixed. And I think that's -- that I feel quite confident about. What I am much less confident about is, how the political math works in any given year. So I think calling timing on that one is above my pay grade. I do believe that there are significant advantages to be gained by manufacturing where your customers are, and that is the core of our investment philosophy. We believe we can serve our customers better, we believe that serves the communities better, and we believe it's part of being a good citizen and a spectacular competitor. And so that tends to guide our philosophy and that's what all these various announcements you've been seeing recently really deal with about us. Valor Glass is aimed at the pharmaceutical industry. The U.S. is the powerhouse of biotech and pharmaceutical manufacturing, and we believe this is the right place to put it.

關於稅改，我認為從長期來看，很容易有信心的是：美國目前的稅制政策不可能長期維持不變，它會導致一些不利於經濟或就業的結果，最終一定會被修正。而這一點——我相當有信心。但我比較沒有把握的是，在任何特定年度，政治上的盤算會如何運作。所以要預測時間點，坦白說超出我的職級範圍。我確實相信，在客戶所在地進行製造能帶來顯著優勢，而這也是我們投資理念的核心。我們相信能更好地服務客戶，也相信這對社區更有利，並且我們認為這是成為良好企業公民與卓越競爭者的一部分。因此，這也就引導了我們的理念，而你最近看到的各種公告，基本上都是在談我們這件事。Valor Glass 是針對製藥產業。美國是生技與製藥製造的重鎮，我們相信把它設在這裡是正確的。

Okay. And then I wanted to -- my follow-up, I just wanted to come back to Tony on Display. Samsung has recently cut their expectations for demand later in the year. I know your commentary suggest that things are relatively on track, but I wonder if you could just talk about what you think is happening with end-market demand right now? Are we just seeing some temporal weakness? And as we move into the back end of the year, you feel that demand will be relatively normal? Or any other color you can give us on what you guys are seeing on end-market demand would be helpful.

好的。接著我的追問，我想回到 Tony 談顯示業務。三星最近下調了對今年稍晚需求的預期。我知道你們的評論顯示整體仍相對在軌道上，但我想請你談談你認為目前終端市場需求正在發生什麼？我們只是看到一些短期的疲弱嗎？隨著進入今年下半年後段，你是否覺得需求會相對正常？或是你們對終端市場需求的觀察還有任何其他補充，都會很有幫助。

Yes, sure. I mean, I think that if you look at the data from January to May, it does show the TV viewing area, some weakness in China and Western Europe, while all the other regions are up on a year-over-year basis. But I think what's important to remember about this is retail demand is clearly back-end loaded. And we're just now entering the significant selling season, so it's hard to draw a conclusion based on the first 5 months' worth of data. Second thing I'd remind you is, is that what really drives the growth of our business is the size of TVs, and we said that TVs would grow more than a 1.5 inches and all the data in the first 5 months confirms that we feel very confident about that.

是的，當然。我的意思是，如果你看 1 月到 5 月的數據，確實顯示電視觀看面積在中國與西歐有些疲弱，而其他所有地區以年增率來看都是成長的。但我認為重要的是要記住，零售端需求很明顯是偏向下半年後段（back-end loaded）。而我們現在才正要進入重要的銷售旺季，所以僅根據前 5 個月的數據很難下結論。第二點我要提醒的是，真正驅動我們業務成長的是電視尺寸，我們說過電視尺寸會增加超過 1.5 吋，而前 5 個月的所有數據都證實了這一點，因此我們對此非常有信心。

Our next question comes from the line of Jess Lubert with Wells Fargo.

下一個問題來自富國銀行（Wells Fargo）的 Jess Lubert。

I have 2 questions. First for Wendell, I was hoping you could comment on the breadth of strength you're seeing in the U.S. optical market? How much is coming from the Tier 1 telcos like Verizon? How much is coming from cable or other verticals? And then perhaps you can help us understand what you're seeing internationally. And are you seeing any improvement there that could become an optical tailwind later this year or next? And then for Tony, I was hoping you could comment on that gross and operating margin trajectory, both were down sequentially relative to Q1. It seems like you're expecting similar trends during Q3. So I guess I was hoping you can help us understand if you believe these are the margin levels we should be thinking about over time? Or do you still see the potential to drive some margin improvement?

我有兩個問題。第一個給 Wendell，我希望你能評論一下你在美國光學市場看到的強勁動能的廣度？其中有多少來自像 Verizon 這樣的一級電信商（Tier 1 telcos）？有多少來自有線電視業者或其他垂直領域？另外也請你幫我們理解一下你們在國際市場看到的情況。你們是否看到那邊有任何改善，可能在今年稍晚或明年成為光學業務的順風？第二個給 Tony，我希望你能評論一下毛利率與營業利益率的走勢，兩者相較於第一季都呈現季減。看起來你們預期第三季也會有類似趨勢。所以我想請你幫我們理解，你是否認為這些就是我們長期應該預期的利潤率水準？或者你仍然看到推動利潤率改善的可能性？

So in Optical, I think that's a really excellent question. First, note that our growth is really strongly driven by our organic innovation. And second is that exact timing of when those are being pulled into these major network builds can be quite challenging to call accurately. That being said, you are right to note that you're seeing the major telecom players are driving a hunk of our growth at this point in time. That being said, we are seeing the same type of momentum being built in our dialogues really across the spectrum of our Communications business. And this, together with the growth that we are also seeing in the cloud-based optical systems and around the world, is what is leading us to believe that though any given quarter could come out different ways. There is the potential here for a building wave of demand in our Optical Communications business largely because as fiber pushes closer and closer and deeper and deeper in the network, right? What happens is the amount of demand for our particular type product goes up significantly. And so that's what we are feeling around the world. But like I say, these are major programs and calling exact timing can be quite challenging, but I think we're seeing at least the basis of a long-term secular momentum building for our tech.

關於光學，我認為這是一個非常好的問題。首先要注意的是，我們的成長確實是由我們的內生創新（organic innovation）強力驅動。第二點是，這些創新何時會被納入這些大型網路建設計畫中，其精確時點其實很難準確判斷。話雖如此，你指出目前主要電信業者正在推動我們相當一部分的成長，這是正確的。同時，我們也看到在通訊業務的各個面向，我們的對話正在累積同樣類型的動能。再加上我們在雲端式光學系統以及全球各地也看到的成長，這讓我們相信，雖然任何單一季度的結果可能會有所不同，但在光學通訊業務上，需求有可能形成一波逐步堆疊的浪潮，主要原因是當光纖在網路中越來越靠近用戶端、越來越深入時，對吧？接下來會發生的是，對我們這類產品的需求量會顯著上升。因此，這就是我們在全球感受到的趨勢。但如我所說，這些都是大型計畫，要精準判斷時間點相當具挑戰性；不過我認為我們至少看到了長期結構性（secular）的動能正在為我們的技術累積。

And from a margin standpoint, I mean, we were happy with our margin performance in the second quarter. Gross margin was, I think, 42.4%, very consistent with where we were in Q1, which I think was 42.3%, and we expect the rest of the year to be in the 42.5% range. But I think it's important to remember, and I mentioned it a little bit when I was answering Optical question, is that we are beginning to invest in a number of growth areas that we've talked about and that increases spending slightly, it increases the -- and the cost of goods sold, it increases the S&A (sic) [SG&A] and RD&E, not above any of the percentages. Normal ranges we've given you. 14% in SG&A, 8% in RD&E, gross margins in the 42% to 43% range. But you do see some of that that's occurring in our businesses. So we don't see anything unusual about that, and we're actually quite pleased with where we are.

從毛利率的角度來看，我的意思是，我們對第二季的毛利率表現感到滿意。毛利率我記得是 42.4%，與我們在第一季的水準非常一致，我記得第一季是 42.3%，而我們預期今年其餘時間會落在 42.5% 左右。但我認為重要的是要記住——我在回答光學相關問題時也稍微提到——我們正開始在我們談過的多個成長領域進行投資，這會使支出略微增加，也會增加——銷貨成本會增加，SG&A（原文誤寫為 S&A）[SG&A] 與 RD&E 也會增加，但不會高於我們提供給各位的任何百分比。也就是我們給出的正常區間。SG&A 14%，RD&E 8%，毛利率在 42% 到 43% 的區間。但你確實會看到我們的業務中正在發生一些這樣的情況。所以我們不認為這有任何異常，事實上我們對目前的狀況相當滿意。

Our next question comes from the line of Patrick Newton with Stifel.

我們的下一個問題來自 Stifel 的 Patrick Newton。

I guess my first question is on your other sales, this seems to have broken out sequentially and year-over-year. Curious if you could help us understand what is driving this, perhaps, commenting on auto trends? Whether Valor Glass trials are driving some incremental revenue? And could you also remind us what businesses or products are embedded in other sales?

我想我的第一個問題是關於你們的「其他銷售」，看起來無論是季比或年比都明顯拆分並成長。想請你們協助我們理解是什麼在驅動這個變化，或許也能評論一下汽車相關趨勢？是否 Valor Glass 的試驗正在帶來一些增量營收？另外也請提醒我們，「其他銷售」中包含了哪些業務或產品？

Sure. We have a lot of our development programs in our other sales. It includes the business that we acquired a couple of years ago from Gerresheimer that's part of our pharmaceutical packaging technology business and it includes a variety of other programs that we have in there. And I wouldn't say that those specific trends are a reflection of anything specifically that's going on. The proof points you ought to look at are the ones we've talked about in each of these programs.

當然。我們有很多開發計畫都歸在「其他銷售」裡。其中包含我們幾年前從 Gerresheimer 收購的、屬於我們藥品包裝技術業務的一部分，也包含我們放在那裡的各種其他計畫。我不會說那些特定趨勢反映了任何特別正在發生的事情。你們應該關注的驗證點，是我們在這些計畫中各自談到的那些。

And auto is in this bucket as well, correct?

而汽車也在這個分類裡，對嗎？

Yes, auto is in this bucket as well.

是的，汽車也在這個分類裡。

Okay. And then Wendell, you talked about Valor Glass having an uphill climb for regulatory purposes and making timing of adoption difficult to predict. And I guess, just given that backdrop, is there any long-term time frame that you could provide to us to help us understand the potential timing of when Valor Glass could become an impact to -- a meaningful impact to your P&L? And then on the profitability side of Valor, I think with your purchase of Gerresheimer's glass tubing operations, you did form an equity venture that's about 75% owned by Corning. So does this mean that Gerresheimer is going to receive 25% of future Valor business profit?

好的。接著 Wendell，你提到 Valor Glass 在法規層面有一段艱難的路要走，使得採用時點難以預測。那在這樣的背景下，你們是否能提供任何長期的時間框架，幫助我們理解 Valor Glass 何時可能對——對你們的損益表（P&L）產生有意義的影響？另外在 Valor 的獲利面，我想你們收購 Gerresheimer 的玻璃管（glass tubing）業務時，也成立了一家股權合資企業，約 75% 由 Corning 持有。那這是否意味著 Gerresheimer 將取得未來 Valor 業務利潤的 25%？

So let's handle both questions. Let's start with the timing one. I think it's a little early for us to be able to give a good idea on what the ramp is going to look like next year. We'll start to see the submissions go into the FDA. And we'll begin to get a feeling for what type of regulatory process they want to bring it to and how accelerated they want to -- that make the adoption of Valor. If they choose a highly accelerated rate, then we're going to move much more quickly to its breakout, right? If they choose a more typical conservative rate, then it's going to move a little slower to its breakout. I think the beauty of this particular business is though the regulatory nature of it can make adoption little slower, it makes it way more certain that allows us to put the capacity -- we can put capacity up faster than a particular cycle of adoption of regulatory approval. So it derisks our investment very significantly. And then second, once you win that, it's forever business. So we like it. It could be a little frustrating in the early stages. But long term, I think it builds the type of very robust business that assuming we have a breakout here, we are just going to be delighted with over the next decade and beyond. And then the Gerresheimer question. So the Gerresheimer piece, yes, we acquired their glass tubing business as we explained at that time when they've got a early look at what it was Valor was. They understood what it is they were looking at and decided to have us become the glassmaker for tubing. And it allowed us to get a lower-cost platform for us to do what we just announced. One of the expansions we have is to build a new glass manufacturing line there and that helps us on our cost structure. As to the go-to-market for the actual file and cartridges, that is all still in development. You have seen an announcement from Gerresheimer and from Stevanato just the other day saying how delighted they are to be cooperating with us on this. How we actually end up resolving that go-to-market, what goes through at venture, what goes through 100% us, what pieces of the value chain are carried where? I think that's all ahead of us. Our first hunks of investment that we just announced, they are flowing through 100-owned play, and we'll see how it develops over time. It's all going to be about the best way to serve our customers and the best way to create value for our shareholders.

那我們來處理這兩個問題。先從時程的問題開始。我認為現在要我們對明年的爬坡（ramp）會長什麼樣子給出很好的判斷，還有點早。我們將開始看到申請文件送進 FDA。我們也會開始感受到他們希望採用何種法規流程，以及他們希望以多快的速度——來加速 Valor 的採用。如果他們選擇高度加速的速度，那我們就會更快地看到它的突破（breakout），對吧？如果他們選擇較典型、較保守的速度，那它的突破就會慢一些。不過我認為這項業務的美妙之處在於，雖然法規特性可能讓採用稍慢，但它也讓採用更具確定性，使我們能夠配置產能——我們可以比法規核准帶動的採用週期更快地把產能建起來。因此它非常顯著地降低了我們投資的風險。第二，一旦你贏得那個案子，它就是永久性的生意。所以我們喜歡它。在早期階段可能會有點令人沮喪。但長期來看，我認為它會建立一種非常強健的業務型態；假設我們在這裡出現突破，未來十年乃至更久，我們都會對它感到非常滿意。接著是 Gerresheimer 的問題。關於 Gerresheimer 的部分，是的，我們收購了他們的玻璃管業務，正如我們當時解釋的，因為他們很早就看到了 Valor 會是什麼。他們理解自己看到的是什麼，並決定讓我們成為玻璃管的製造商。這讓我們能以更低成本的平台來做我們剛剛宣布的事情。我們其中一項擴產，是在那裡建置一條新的玻璃製造產線，這有助於我們的成本結構。至於實際用於小瓶（vial）與匣（cartridge）的上市（go-to-market），目前仍在開發中。你們前幾天也看到 Gerresheimer 與 Stevanato 的公告，表示他們很高興能與我們在此合作。我們最終如何解決上市策略、哪些會透過合資企業進行、哪些會由我們 100% 進行、價值鏈的哪些環節由哪一方承擔——我認為這些都還在後面。我們剛宣布的第一批投資，會透過我們 100% 持有的模式來進行，之後再看它如何隨時間發展。一切都將以最佳方式服務客戶，以及以最佳方式為股東創造價值為依歸。

Our next question comes from the line of Vijay Bhagavath with Deutsche Bank.

我們的下一個問題來自 Deutsche Bank 的 Vijay Bhagavath。

Just a bigger picture question here on 5G, like to hear your thoughts there. And how you see it impacting your optical fiber business heading into next year? Do you see mostly tactical opportunities next year like fiber upgrades to small cells? Or you foresee a bigger and then broader fiber build out opportunity kind of kicking in as 5G starts to unravel at big service providers like Verizon, AT&T, et cetera?

這裡有個較宏觀的 5G 問題，想聽聽你們的看法。以及你們如何看待它在明年對你們光纖業務的影響？你們是否認為明年主要是一些戰術性的機會，例如小型基地台的光纖升級？或者你們預期隨著 5G 在 Verizon、AT&T 等大型服務供應商開始逐步展開，會有更大、也更廣泛的光纖建設機會開始啟動？

So great question. We view 5G as having the potential to be an extremely significant demand driver for our product. If truly 5G, as it is defined by the industry, becomes the standard way to do wireless connectivity, then we are looking at a very significant secular driver for our product, perhaps one of the more significant that we have seen in our long and storied history in this business. It is still too early to make a call on what exact architectures will be used to deploy this tech. If Verizon's view with the right technology to deploy the right architecture to deploy, it is correct, this is a huge opportunity. So we'll have to see as our own work progresses, as our deep engagement with other customers progresses, how will the architectures of all, but there's just no question that it is a positive momentum driver for us. The only question is the size, scale and timing of that momentum. As we get better acuity, we will make sure that we share it with you, because of its significant importance to our shareholders.

所以這是個很好的問題。我們認為 5G 有潛力成為我們產品極其重要的需求驅動因素。如果真正的 5G——以產業所定義的方式——成為無線連接的標準方式，那我們將面臨一個非常顯著的長期結構性（secular）驅動因素，可能是我們在這項業務悠久且具代表性的歷史中所見過最重要的驅動因素之一。但現在要判斷部署這項技術會採用哪些確切架構，仍然太早。如果 Verizon 對於以正確技術、正確架構來部署的看法是正確的，那這會是一個巨大的機會。因此我們必須觀察：隨著我們自身工作的推進、以及我們與其他客戶的深度合作推進，整體架構會如何發展；但毫無疑問，這對我們而言是一個正向的動能驅動因素。唯一的問題在於該動能的大小、規模與時點。當我們看得更清楚時，鑑於它對股東的重要性，我們一定會與各位分享。

Thanks, Vijay. Cynthia, we have time for a couple of more questions.

謝謝你，Vijay。Cynthia，我們還有時間再回答幾個問題。

Okay. The next question will be from the line of Mehdi Hosseini with SIG.

好的。下一個問題來自 SIG 的 Mehdi Hosseini。

I have one regarding margins. When I look at the Display group, revenues were fairly flat, but net income margin was down. And also with THE Specialty Material, relative to Q4 of last year, revenues were kind of flat, but net income margin was down there as well. I just want to better understand the dynamics and how we should think about given what has happened with a specific segment net margin over the past couple of quarters? And I have a follow-up.

我有一個關於毛利率的問題。我看 Display 事業群，營收相當持平，但淨利率下滑。另外在 Specialty Material，相較去年第四季，營收也算持平，但淨利率同樣下滑。我想更了解其中的動態，以及就過去幾季特定事業部淨利率的變化，我們應該如何看待？我還有一個追問。

Yes, Mehdi, on the Display, in Q1, we received a technology payment. If they didn't repeat itself in Q2 and that's the whole difference between the 2. Otherwise, given where price and volume was on a sequential basis, income was flat. And in terms of -- in Specialty Materials in the second quarter, we had a lot of ramp up costs for new production that happened in the second quarter, that didn't happen in the fourth quarter of last year.

是的，Mehdi，關於 Display，在第一季我們收到一筆技術款項。第二季沒有重複發生，這就是兩季之間的全部差異。除此之外，就價格與出貨量的季比表現而言，獲利是持平的。至於 Specialty Materials，在第二季我們為新產能的投產爬坡承擔了許多成本，這些在去年第四季並沒有發生。

Okay, got it. And as a follow-up to Specialty Material, it seems to me that there was some kind of a pull-in in revenues and some of the handset OEMs are introducing the new product later in the year. And in that context, how should we think about: a, the volume shipment; and b, the increased content? Is it going to be lumpy? Or the initial material push in done and now we have to wait to see how the demand is going to look like, which means there could be a spill over into Q1 of next year? Just trying to understand the dynamics of that specific part of a Specialty Material.

好的，了解。作為對 Specialty Material 的追問，我看起來似乎有一些營收提前拉貨，而部分手機 OEM 會在今年稍晚才推出新產品。在這樣的背景下，我們應該如何看待：a，出貨量；以及 b，單機內容量提升？會不會呈現不均勻（lumpy）的型態？或者前期材料推進已經完成，現在要等需求端的樣貌，這表示可能會延伸到明年第一季？我只是想了解 Specialty Material 這一特定部分的動態。

Yes. For sure, it's going to be lumpy. I mean, our Specialty Materials business has always been lumpy since we've gotten into the Gorilla Glass business and we'd expect that to continue on a going forward basis. I said in Q3, we think we'll be up low to mid-teens. Where we're going end up for the full year, we're not sure, because it depends on the adoption of the technologies. But there is no doubt that this will be lumpy as we go forward.

是的。毫無疑問，會是不均勻的。我的意思是，自從我們進入 Gorilla Glass 業務以來，Specialty Materials 一直都是不均勻的，我們預期未來也會持續如此。我在第三季的指引是，我們認為會成長低到中十位數百分比。至於全年最後會落在哪裡，我們還不確定，因為這取決於技術的採用情況。但毫無疑問，未來會是不均勻的。

Could there be a scenario where March quarter will be less seasonal, if the new product introduction has a tailwind?

如果新產品導入帶來順風，是否可能出現三月季度的季節性較不明顯的情境？

Sure.

當然。

Would you be able to do more than 50% probability?

你能給出超過 50% 的機率嗎？

No, I'm not going to handicap. I appreciate the question, but we're not going to talk about Q1.

不，我不會去做機率評估。我理解你的問題，但我們不會談第一季。

Last question?

最後一個問題？

Our final question will come from the line of Stanley Kovler with Citi Research.

我們最後一個問題來自 Citi Research 的 Stanley Kovler。

I just wanted to ask a question about the use of cash and potential M&A. After SpiderCloud, it seems like you're continued to make some small acquisitions, particularly in the optical space. And kind of as we head into 5G, I just wanted to follow up on the question about M&A. Should we expect to wait on more significant M&A as -- Wendell, you talked about some architectural things that you still have to shakeout in the industry before you can make bets on how to augment or add complementary technology to your optical offerings? And I'll squeeze my follow-up in -- just on free cash flow. How should we think about that going into the second half of the year and planning for next year as

我想問一個關於現金運用與潛在併購（M&A） 的問題。在 SpiderCloud 之後，看起來你們持續進行一些小型收購，特別是在光學領域。隨著我們邁向 5G，我想追問一下關於併購的問題。我們是否應該預期更具規模的併購會再等等——Wendell，你提到在產業中仍有一些架構性的事情需要釐清，之後你們才能押注如何強化或加入互補技術到你們的光學產品組合？我也把追問塞進來——關於自由現金流。我們應該如何看待今年下半年，以及規劃明年時的自由現金流，因為

well?

呢？

Why don't you start with free cash flow? And then I'll handle 5G.

你先從自由現金流開始吧？然後我來回答 5G。

Sure. I think from a free cash flow standpoint, we said our capital spending part of free cash flow will be about $1.5 billion. It could be on the heavier side of that given all of the investments that we're making today but somewhere in that neighborhood. And then in terms of operating cash flow, remember, the second half of the year is where we generate very strong operating cash flow. So it'll certainly be stronger than it was in the first half of the year and relatively consistent with what we did last year.

好的。就自由現金流而言，我們說過資本支出（自由現金流的一部分）大約會是 15 億美元。考量到我們目前所做的各項投資，可能會偏高一些，但大致就在這個區間。至於營運現金流，請記得下半年是我們產生非常強勁營運現金流的時期。因此它肯定會比上半年更強，並且與我們去年所做的相對一致。

And as to how do we see the role of acquisitions. Well, we currently perceive is that far and away the bulk of our growth is going to be organically-driven and innovation-driven. That being said, we're in a very privileged position at peak knowledge as we work with our customers on these architectures. Really, whether it's in the cloud, in buildings or in 5G network densifications, fiber-to-the-home, you can expect us to take advantage of that privilege position if we start to believe in a technology that can augment what we do and be driven through our market-access platform. That's really the story of SpiderCloud. It was a small acquisition, right? But we really like the tech, and it has an opportunity for us to significantly increase demand for our fiber in the horizontal in buildings and run right through our market-access platform.

至於我們如何看待收購的角色。我們目前的看法是，我們的成長絕大部分將由內生成長與創新所驅動。話雖如此，當我們與客戶共同打造這些架構時，我們在知識高峰上處於非常有利的位置。無論是在雲端、建築物內、或 5G 網路加密、光纖到府（FTTH），如果我們開始相信某項技術能夠強化我們的能力，並可透過我們的市場進入平台推動，你可以預期我們會善用這個有利位置。這正是 SpiderCloud 的故事。那是一筆小型收購，對吧？但我們非常喜歡那項技術，而且它讓我們有機會在建築物內的水平佈線領域顯著提升對我們光纖的需求，並且可直接透過我們的市場進入平台推進。

Expect us to continue to do that, but...

你可以預期我們會持續這麼做，但……

The bulk of our growth is all driven organically and about innovation. I hope that answers your question.

我們的成長主體仍是由內生與創新所驅動。希望這回答了你的問題。

Thanks, Stan. Wendell, closing comments?

謝謝你，Stan。Wendell，結語？

First, thank you to everyone for joining us today. I just want to close by reiterating how pleased we are with the continued positive momentum in both our financial results and against our framework goals. Our focused and cohesive portfolio continues to produce milestones, and we're particularly excited to share our breakthrough moment with Valor. We look forward to staying in touch.

首先，感謝各位今天加入我們。最後我想重申，我們對財務結果以及框架目標所展現的持續正向動能感到非常滿意。我們聚焦且一致的產品組合持續達成里程碑，我們也特別興奮能與大家分享我們在 Valor 上的突破時刻。期待持續保持聯繫。

Thanks, Wendell. Before we close, I just wanted to let everyone know that Investor Relations is going to be at the Jefferies Conference at the end of August. And we'll be meeting with investors at the Citi Conference in early September. A web replay of today's call will be available on our site for 1 year starting later this morning. There's also a telephone replay available for the next 2 weeks with today -- details in today's news release. Once again, thank you all for joining us. Cynthia, that concludes our call, please disconnect all lines.

謝謝你，Wendell。在結束之前，我想讓大家知道投資人關係團隊將在 8 月底出席 Jefferies 研討會。我們也會在 9 月初的 Citi 研討會與投資人會面。今天電話會議的網路重播將自今天稍晚起在我們網站提供，為期 1 年。另外也提供電話重播，為期接下來 2 週，相關細節請見今天的新聞稿。再次感謝各位加入我們。Cynthia，本次電話會議到此結束，請切斷所有線路。

Thank you. And ladies and gentlemen, that does conclude your conference call for today. Thank you for your participation. You may now disconnect.

謝謝。各位女士、先生，今天的電話會議到此結束。感謝各位的參與。您現在可以掛線。