Specialty and Functional Chemicals FY2026 Full Year: Chip demand widens earnings gap

Across the six companies, average revenue growth was 0.5%, while average net income fell 21.1%. The net income average covers five companies with known year-on-year figures, excluding Denka. Kuraray's fiscal year ended in December 2025, unlike the other companies.

• Semiconductor materials drive growth

Demand from AI servers and the semiconductor industry helped Nissan Chemical and Tokuyama post higher sales and profits. Shin-Etsu also increased earnings in electronic materials.

• Weak markets weigh on basic chemicals

Soft demand and product markets hurt Shin-Etsu's PVC business and Tosoh's petrochemicals and chlor-alkali operations. Weak demand in China has also intensified price competition.

• Restructuring can lift earnings

Denka's operating profit rose 82.0% after it halted production at a U.S. plant. By contrast, impairment losses weighed on net income at Kuraray and Tosoh.

• Input costs affect sales and profits differently

Lower prices reduced revenue at some companies, while cost improvements and a shift toward higher-value products supported profits elsewhere.

Nissan Chemical stood out for growth. Revenue rose 11.2% to ¥279.6 billion, operating profit increased 11.8% to ¥63.6 billion, and net income grew 15.5%. Its operating margin was 22.7%, second only to Shin-Etsu. Semiconductor materials and agricultural chemicals both performed well.

Kuraray had the toughest period. Revenue fell 2.2% to ¥808.4 billion, operating profit dropped 30.8% to ¥58.9 billion, and net income plunged 76.5% to ¥7.5 billion. Weak demand in Europe and the U.S., along with about ¥29.6 billion in impairment losses on businesses including isoprene-related operations, hurt results.

Shin-Etsu, the leader by scale, generated ¥635.2 billion in operating profit. That was down 14.4% year on year, but still far above its peers. Growth rates and earnings scale told different stories.

Companies are focusing on growth areas and reviewing underperforming businesses.

• Shin-Etsu reported firm semiconductor materials sales, but weaker PVC market conditions reduced operating profit. It announced a share buyback of around ¥500 billion and gave no forecast for the next fiscal year.
• Kuraray recorded about ¥29.6 billion in impairment losses. For the year ending December 2026, it forecasts revenue of ¥850 billion and operating profit of ¥70 billion as it seeks a recovery.
• Tosoh benefited from strong engineering demand, including water-treatment equipment for semiconductor manufacturing. An impairment loss of about ¥19.6 billion at a U.S. subsidiary weighed on results.
• Tokuyama increased operating profit 23.5% on semiconductor materials sales and cost improvements. It is also reviewing its business portfolio, including the transfer of its cement business.
• Denka restored profitability after halting production at a U.S. subsidiary. For the next fiscal year, it forecasts revenue of ¥450 billion and operating profit of ¥30 billion.
• Nissan Chemical grew both semiconductor materials and agricultural chemicals. For the next fiscal year, it forecasts revenue of ¥289.7 billion and operating profit of ¥66.8 billion.

Shin-Etsu ranked first in both revenue and operating profit, and retained the top operating margin at 24.7%. Its combination of large-scale basic materials and highly profitable electronic materials supports both scale and margins.

Nissan Chemical led on growth and also posted a high 22.7% operating margin, showing how product value can matter more than sales scale in driving returns. Tokuyama and Denka also benefited from semiconductor materials and business reforms. The earnings focus is shifting from materials volume to higher-value products.

• Continued weakness in demand in China, Europe and the U.S. could further depress chemical markets and sales volumes.
• Changes in raw material and fuel prices, as well as foreign exchange rates, can create delays in passing cost changes on to customers.
• Even with strong semiconductor materials demand, shipments may fluctuate with the investment cycle.
• Impairments at underperforming businesses and plant shutdowns can affect near-term earnings and employment.
• Cement and other businesses face rising investment burdens from decarbonization and environmental regulations.
• In high-value fields, competition with overseas companies and customer quality requirements are intensifying.

In semiconductor materials and agricultural chemicals, research and development, quality assurance and technical coordination with customers underpin growth. At companies such as Nissan Chemical and Tokuyama, where demand in specific fields can directly affect performance, employees may have opportunities to build specialized expertise.

Basic chemicals and business restructuring also require factory efficiency and cost management. Denka and Kuraray show that companies need the ability to review their businesses as well as invest in growth. Job seekers should look beyond sales scale and consider both a company's growth areas and the direction of its reforms.