Shin-Etsu Chemical, a major Japanese chemical company, has announced plans to expand into the semiconductor equipment market as part of its broader strategy to grow its core electronics materials business, according to Nikkei Asia.

Company President Yasuhiko Saitoh stated that Shin-Etsu aims to become a "comprehensive provider" in the industry, offering both materials and equipment. He explained that customers are unlikely to adopt new materials without corresponding manufacturing methods and equipment, which prompted the company to begin developing semiconductor equipment.

According to a forecast from SEMI, global semiconductor equipment sales are expected to rise 3.4% year-on-year to $109 billion in 2024, setting a new record. In 2025, the market is projected to grow by 17% to $128 billion.

Shin-Etsu’s decision to enter the semiconductor equipment space comes as no surprise given its position as one of the world’s largest suppliers of semiconductor materials. Instead of targeting front-end semiconductor manufacturing equipment, the company is focusing on advanced packaging equipment. In June, it announced plans to develop equipment for the backend processes of semiconductor packaging substrates, aiming to introduce new manufacturing methods.

The new equipment will feature excimer laser technology, incorporating Shin-Etsu's proprietary dual damascene method, which is typically used in front-end semiconductor processes. By applying this method to the backend, the equipment will allow for more precise microprocessing and eliminate the need for intermediary layers, reducing costs and capital investment.

The dual damascene method simplifies chip packaging, a process used to assemble high-performance semiconductors. By eliminating the need for an intermediary layer, this approach reduces assembly time and costs. The equipment also utilizes advanced microfabrication techniques to directly form complex circuit patterns on multilayer substrates, offering greater efficiency compared to traditional methods.

Founded in 1955, Shin-Etsu Chemical is a global leader in chemicals, with a wide range of products including electronic materials, fine chemicals, and industrial materials. The company holds around 30% of the global market for semiconductor wafers and is the second-largest supplier of photoresists.

In fiscal 2024, Shin-Etsu reported revenue of ¥2.4 trillion and a net profit of ¥520 billion, with electronics materials accounting for 35% of its revenue. In August, the company acquired Mimasu Semiconductor Industry for ¥68 billion ($470 million), further expanding its presence in the semiconductor equipment sector.

Saitoh emphasized that Shin-Etsu will leverage its substantial cash reserves to enhance capital efficiency, with ¥1.7 trillion in cash held as of June 2024. While analysts have raised concerns about the company’s large cash holdings, Saitoh argued that the reserves are essential for dealing with unexpected events like the COVID-19 pandemic. He also indicated that the company is open to future acquisitions.