[Company analysis] Shin-Etsu Chemical Co., Ltd. (信越化学工業)

「Shin-Etsu Chemical Co., Ltd. (信越化学工業)」is a general chemical company headquartered in Tokyo. Its main products are vinyl chloride resin, semiconductor wafers, silicon resin, and rare earth magnets. In particular, as for vinyl chloride and silicon wafers, they have the world's top shares, respectively. As of February 12, 2020, it is the No. 1 market capitalization of Japanese chemical companies. The number of consolidated employees is about 21,735.

 

1. Company Profile

2. Summary and Features

3. Major Business

4. Financial Information

 

 

 

1. Company Profile

 

※Unit is JPY million, as of 2019

Company name	Shin-Etsu Chemical Co., Ltd.
Company name (Japanese)	信越化学工業
Date of establishment	Thursday, September 16, 1926
Headquarters location	東京都千代田区大手町二丁目6番1号
Capital	119,319
Consolidated sales	1,594,036
Consolidated operating profit	403,705
Consolidated total assets	3,038,717
Consolidated capital	2,532,556
Capital adequacy ratio	83.3%
Consolidated number of employees	21,735

 

 

 

2. Summary and Features

 
「Shin-Etsu Chemical 」began in 1926 with「Japan Nitrogenous Fertilizer Company(日本窒素肥料株式会社)」, which was established in Nagano Prefecture in 1926 by working with local capital in Nagano Prefecture. Similarly, there are famous companies originating from this「Japan Nitrogenous Fertilizer Company」such as「Sekisui House, Ltd. (積水ハウス)」,「Sekisui Chemical (積水化学」and「Asahi Kasei Corporation (旭化成)」.

Currently, total sales of「Shin-Etsu Chemical 」have increased for the 13th consecutive quarter, and they have many products with topclass market share in the industry. Their core businesses are the vinyl chloride and chemical products, semiconductor silicon, electronic and functional materials, and functional chemicals.

The biggest feature of this company is that it is a company that is resilient to recession. At the time of the economical crisis caused by bankruptcy of「Lehman Brothers」, the world economy experienced global depression including the semiconductor industry. And this forced the competitors of「Shin-Etsu Chemical 」suffered a deficit. However, at that time,「Shin-Etsu Chemical 」still maintained a high operating margin. Even now, they have extremely solid financial structure with a capital adequacy ratio of over 83%, as of 2019.

These achievements are based on company characteristics of「Shin-Etsu Chemical 」who act decisively and spontaneously with full of energy. For example, an investment made in 2007 for semiconductor silicon wafer manufacturing facilities. While other competitors were hesitant, Shin-Etsu Chemical made a huge additional investment of approximately 120 billion yen at production factory in Japan and the United States to increase production of 300mm wafers quickly. This investment is now all came back to them with Japan's top market share.

Besides,「Shintech(シンテック)」, a core subsidiary of「Shin-Etsu Chemical 」, has one of the world's largest vinyl chloride production plants in the United States, and in terms of sales, accounts for more than one-third of Shin-Etsu Chemical's overall sales. In fact, in the US vinyl chloride market,「Shintech」was a latecomer. But as a result of miniority elite training, they are now America's number one manufacturer of vinyl chloride.

 

 

 

3. Major Business

 

■ PVC / Chemicals business
Vinyl chloride resin, caustic soda, methanol, chloromethane

■ Semiconductor silicon business
Semiconductor silicon, silicone business, silicone

■ Electronics and functional materials
Rare earth magnets, sealing materials for semiconductors, package materials for LEDs, photoresists, mask blanks, synthetic quartz products, liquid fluoroelastomer, pellicles

■ Functional Chemicals Business
Cellulose derivative, metal silicon, poval, synthetic pheromone, vinyl chloride / vinyl acetate copolymer resin

■ Processing / Trading / Technical Service Business
Resin processed products, technology / plant export, product import / export, engineering

 

 

 

4. Financial information

 

※Unit is JPY million

		2016	2017	2018
Consolidated sales		1,237,405	1,441,432	1,594,036
Consolidated operating profit		238,617	336,822	403,705
Consolidated total assets		2,655,636	2,908,328	3,038,717
Consolidated net assets		2,190,082	2,413,025	2,532,556
Breakdown of sales	PVC / Chemicals business	411,600	501,346	524,270
	Silicon business	179,275	206,268	233,383
	Functional Chemicals Business	108,058	117,197	121,143
	Semiconductor silicon business	252,612	308,390	380,349
	Electronics and functional materials	187,938	207,454	226,098
	Processing / Trading / Technical Service Business	97,919	100,775	108,790