EU probes Gorilla Glass impact on smartphone prices

Specifically, the Commission is looking at Corning's Alkali-AS Glass, which is used to protect the displays of portable electronics devices, and is often marketed under the better-known brand name Gorilla Glass.

It is concerned that Corning has brokered anti-competitive exclusive supply agreements with mobile phone manufacturers and with companies that process raw glass, also known as finishers.

These deals could have excluded rival glass producers from large sections of the market, the Commission said – and let's face it, who can name a Corning rival in this area? – "thereby reducing customer choice, increasing prices, and stifling innovation to the detriment of consumers worldwide."

In particular, the Commission is examining the exclusive sourcing obligations in agreements between Corning and device manufacturers, that require them to source all – or almost all – of their Alkali-AS Glass from Corning. OEMs are also granted rebates to make sure they comply with those sourcing requirements. And there are clauses in the agreements that require OEMs to report competitive offers to Corning and basically give it the chance to match them.

The US-based firm has similar exclusivity requirements in its deals with finishers, and it also includes what the Commission terms 'no challenge' clauses that prevent finishers from challenging its patents.

Without wanting to prejudge the outcome of the investigation, those grounds for its very existence seem pretty damning.

"It is [a] very frustrating and costly experience to break a mobile phone screen. Therefore, strong competition in the production of the cover glass used to protect such devices is crucial to ensure low prices and high-quality glass," said Margrethe Vestager, Executive Vice-President in charge of competition policy, in a statement.

"We are investigating if Corning, a major producer of this special glass, may have tried to exclude rival glass producers, thereby depriving consumers from cheaper and more break-resistant glass," she explained, expressing a sentiment that doubtless resonates with many, if not most, mobile phone and tablet users.

Cheaper glass, and by extension cheaper devices, would clearly be a win for consumers – and potentially for the OEMs and their margins – although Corning's scale would make it difficult to undercut. But the possibility of stronger glass from a different supplier adds another dimension to the argument.

Gorilla Glass is such an important business to Corning that it separates it out in its financial results statements. Last year it brought in US$1.14 billion in revenue, or around 9% of the company's total net sales. It's worth noting that the Gorilla Glass top line has decreased slightly over the past few years – it was a $1.4 billion business in 2021 – but this is not a small revenue stream. And given the apparent lack of market competition, it's hardly surprising that the European Commission wants to take a closer look.

"In parallel to the opening of proceedings, the Commission has adopted a Preliminary Assessment summarising the main facts of the case and identifying its competition concerns. To address the Commission's concerns, Corning may now submit commitments," the Commission said.

Essentially, Corning can offer some sort of competition remedy to allay Brussels' concerns. And it seems pretty likely that that's exactly what it will do. A raft of new mobile screen glass suppliers suddenly entering the market seems unlikely, but Corning may well offer to make it easier for such a company to do so...in theory, at least.