Corning Cleared in Chinese Fiber Fracas

Corning Inc. (NYSE: GLW) announced today that it got a favorable ruling from China's Ministry of Commerce (MOC) on allegations that it was selling its fiber more cheaply in China than in other countries (see Chinese Ministry Agrees With Corning). Because of the ruling, the MOC has lifted a 16 percent "dumping" duty it had been applying to Corning's fiber sold in China since June 16.

The dumping duties collected so far will be refunded to Corning customers. Corning says the investigation was based on a complaint filed by two Chinese fiber manufacturers against several optical fiber producers.

Indeed, not all the companies involved were as fortunate as Corning. The MOC hit OFS, for instance, with a 46 percent dumping duty penalty that OFS customers will have to pay when they buy that company's fiber.

OFS, formerly the optical fiber solutions division of Lucent Technologies Inc., is majority-owned by Furukawa Electric Co. Ltd. The company did not respond to a request for comment.

China's MOC initiated its anti-dumping investigation on July 1, 2003, against certain standard singlemode optical fiber products originating from the U.S., Japan, and Korea, alleging that foreign products were being imported and sold at lower prices than the market conditions justified, and that Chinese domestic producers were injured as a result, Corning said.

Corning protested the MOC's initial dumping penalties and set out to prove that the prices it charged for singlemode fiber in China were on par with the prices it charged in the rest of the world. Interestingly, Corning usually isn't regarded as one of the vendors counted as a price leader. "We tend to be more expensive," says a Corning spokesman.

In 2003, Corning's total sales to China -- including all products -- were $134 million, and its Asia/Pacific sales were $1.043 billion, says Corning spokesman Daniel Collins.

"This was an unexpected win for GLW in the second largest fiber market… GLW only garners 6 percent of its fiber revenue there today but the ruling enhances its ability to take share going forward," writes Smith Barney analyst Daryl Armstrong, in a research note release today.

"Successful execution here would provide the company with better fiber revenue diversification and reduce its dependence on FTTx initiatives to support its fiber business," he writes.

— Phil Harvey, News Editor, Light Reading

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