Wendell P. Weeks
Chairman and Chief Executive Officer at Corning
Thank you Ann. Good morning, everyone. Today, we reported fourth quarter and full year 2023 results. Sales for the fourth quarter were $3.3 billion, and EPS was $0.39 in line with expectations. Free cash flow was $0.5 billion. Gross margin was 37%, consistent with the third quarter, despite lower sequential sales. As I shared with you last quarter, demand in most of our markets is temporarily depressed due to supply chain corrections and macroeconomic factors.
Therefore, our sales are well below long-term trends. Nevertheless, the actions we took to improve our profitability and cash flow generation throughout 2023, are evident in our financial performance And based on detailed assessments, we are confident that we have extended our leadership positions across our markets. While our current sales are below trend, we expect that to change in the midterm as our markets begin to normalize.
This creates an opportunity for us to increase our sales by more than $3 billion when that happens. As we capture that growth, we expect to deliver powerful incrementals because we already have the required production capacity and technical capabilities in place and the cost is already reflected in our financials. The incremental profit and cash flow annuity created by increasing sales by $3 billion plus is a terrific opportunity for our shareholders, and we expect to start making progress towards realizing that opportunity in 2024.
Now it's difficult to call the specific timing of a recovery, but we continue to see signs that it will occur in 2024. As a result, we expect the first quarter to be our low quarter of the year. So, that's a summary of where we are and how we seek to create value in the medium term. I'd like to provide some additional facts and perspective. At the start of 2023, we introduced plans to improve profitability and cash flow in this lower demand environment.
Throughout the year, we took action to restore our productivity ratios to historical levels and to raise price to more appropriately share inflation with our customers. I'm happy to report, we delivered on our plans. When you look at our fourth quarter results on a year-over-year basis, the evidence of our progress is quite clear. We increased gross margin by 330 basis points and free cash flow by $110 million to $0.5 billion despite sales being down by more than $350 million.
Our profitability and productivity improvements led to significantly improved free cash flow conversion, and we expect to continue converting profit to cash at attractive rates going forward. Overall, our results in the quarter and throughout 2023, demonstrate that we continue to make solid progress advancing our market leadership, strengthening our profitability and improving our cash flow generation even in the lower demand environment we're experiencing.
As a result, we're entering this year operationally strong. Now we intend to build on this strength. As I previously mentioned, we have an opportunity to increase our sales by more than $3 billion in the medium term. Let's take a deeper look as to why we believe this. I shared a bit of how we're thinking about optical communications on the last call. I'll start there again today, because it's a significant part of our opportunity. We anticipate optical Communications sales will spring back, because we believe and our carrier customers have confirmed that they purchased excess inventory during the pandemic and that they've been utilizing this inventory to continue deploying their networks.
We believe these carriers will soon deplete their inventory and execute on the increased broadband deployment plans they've communicated to us over the last several months. As a result, we expect them to return to their normal purchasing patterns to service their deployments. We also continue to expect speed funding for network builds in underserved areas to begin in the second half of 2024 and continue adding to our addressable market for several years.
Additionally, we expect to grow hyperscale sales in support of the growing role of cloud computing and the need to build the second optical network necessary to directly connect the GPUs that drive artificial intelligence. Last quarter, I shared trend lines for fiber shipments, which showed that we are significantly below trend and outline why we expect our sales to get back on track.
I'd now like to update you on progress during the fourth quarter. Here, you see Corning's fiber shipments measured in fiber kilometers since the beginning of 2007. The trend line shows a 7.3% compound annual growth rate over the last decade compared to a 6.6% CAGR for industry fiber shipments over the same period. As I explained during our third quarter call, our fiber shipments in quarter one of 2023 were basically in line with expected market trends, but started to drop below our trend line in quarter two and even more so in quarter three, with our shipments more than 30% below trend line, primarily due to elevated carrier inventory levels.
We now have another quarter of data to share. In the fourth quarter, we saw a small uptick in fiber shipments, but they remain more than 30% below trend. More importantly, our regular sit-downs with key customers indicate that they are deploying at a higher rate than they are purchasing as they continue to make progress on drawing down inventory. Additionally, they have plans to increase deployments in 2024. We look forward to updating you on takeaways from our next round of sit-downs.
We're also seeing encouraging signs in hyperscale. Overall, orders grew in the fourth quarter, and we're seeing the earliest edge of AI-related network builds in our order books. Returning to trend adds more than 40% to our revenue run rate for optical communications, and we are laser focused on doing just that. Beyond that, we expect the strong underlying growth trend to continue far into the future and our sales to grow faster than the market through more Corning innovations.
Optical fiber remains the ascendant technology with growing applications in wireless, cloud computing, including AI and broadband efforts to connect the unconnected. As those applications grow, we have new product innovations in each that will increase our revenue per installed fiber. Government incentives to ensure everyone has Internet access also extend the long-term trend line. Display provides another example, of how our sales will spring back.
Retail sales, during the fourth quarter selling season, were softer than industry expectations. Panel makers responded by reducing their fourth quarter utilization levels. Additionally, industry reports indicate the panel makers plan to run at lower utilization levels in the first quarter, as they continue to align panel supply to demand with fab shutdowns planned during the Lunar New Year holidays in February. For the first quarter of 2024, we expect the glass market and our volume to be down by a mid-single-digit percentage sequentially.
For the full year of 2024, our expectations are in line with the industry. We anticipate relatively flat television unit volume, another year of TV screen size growth and some recovery in PC demand. Combined, this adds mid-single-digit growth in glass volume, at retail versus 2023. We expect panel maker utilization to increase after the first quarter to meet the expected retail demand. As a result, we expect our financial performance to significantly improve from our first quarter run rate.
Longer term, we expect continued volume growth in retail to be being driven by television screen size growth, as it has the past several years. And for some improvement in units as consumer demand normalizes. We expect to win in this market because we are the undisputed technology leader our successful development and capability in Gen 10.5, aligns with the continued move to larger-sized TVs produced, on the lowest cost platforms for large displays.
Life Sciences, is another segment where market normalization contribute significantly to our expected growth. Customers in North America and in Europe are completing their inventory drawdowns. We are continuing our productivity and operations improvements. And we're refocusing our commercial and production efforts on drug discovery and production as the market returns. We also continue to evolve our products and business model for vials in our Pharmaceutical Technologies business.
In addition to markets returning to normal, we continue to execute our more Corning content opportunities across the company. In mobile consumer electronics and automotive, we see more Corning, as the primary growth mechanism. Let's look first at Mobile Consumer Electronics. Since 2016, handhelds have declined 21%, while our sales of Gorilla Glass have increased 41%. Now we've done this by advancing the state of the art for cover materials. And this is just a classic more Corning play.
We have a strong innovation portfolio in support of our close collaborations with leading OEMs. And we expect to continue delivering new products that increase our content per device. You saw a great example of this earlier in January in our announcement with Samsung about Corning Gorilla Armor, which dramatically enhances sunlight readability and scratch resistance. Extreme ultraviolet lithography or EUV, a market we serve with our advanced optics products is another great more Corning opportunity.
We are the market leader for the photomask and mirror materials of choice for GPUs and other advanced semiconductors. In automotive, proposed US EPA regulations would require adoption of gasoline particulate filters and provide an incremental driver of demand for our market-leading GPF offerings. In terms of more Corning, GPF adds two to three the content opportunity in ICE vehicles. This would meet significant growth in our environmental business, even in the face of global BEV adoption.
Additionally, we're winning both interior and exterior auto glass business as customers increasingly view our solutions to be system-enabling components. As I wrap up, here's what I'd like to leave you with. A majority of our markets are operating below trend. And as a result, our 2023 full year sales are down from the prior year. In this lower demand environment, we have successfully taken actions to improve our profitability and cash flow, and we believe we have extended our leadership positions across our businesses.
We are confident that our markets will normalize and as they do, we have an opportunity to increase our annual sales by more than $3 billion. As we capture that growth, we expect to deliver powerful incrementals. Since the required capacity and technical capabilities are a rent in place and the costs are already in our financials. This represents a terrific opportunity for our shareholders.
We expect to make progress on this opportunity in 2024, and we believe the first quarter is a low quarter of the year. It's difficult to call the specific timing of a recovery. We will continue our regular engagements with our large optical customers to review their recent deployments in detail and better understand their plans for deployments in 2024 and beyond. Following the Lunar New Year, we'll have similar meetings with our display customers.
And we look forward to updating you in the next few months at investor conferences on our learnings and our progress. As I conclude, I'd like to remind you that the essence of what we do here at Corning is invent, make and sell. We drive durable multiyear growth by inventing category-defining products, developing scalable manufacturing platforms and building strong trust-based relationships with our customers who are the leaders in their industries.
Now I'll turn the call over to Ed so that he can get into the details of our results and our outlook.
