On its earnings call on October 27, 2026, Shin-Etsu Chemical disclosed that price increases for semiconductor silicon wafers have begun for some customers. The increases apply to supply above the quantities set in existing long-term contracts and to products for customers without contracts, and in some cases the new prices have applied since October. The company's operating profit for July–September rose 27% year on year to 212.1 billion yen, and its electronic materials production remains at full capacity. Existing long-term contracts, however, expire at different times for each customer, and even the earliest run through the end of 2027. This suggests that wafer price increases will start with additional supply outside contracts, while full-scale increases tied to renewals of existing contracts would come at the end of 2027 or later.
Full Capacity, but Only Limited Expansion: Why Shin-Etsu Is Cautious on Capital Spending
According to the summary of the October 27, 2026 earnings briefing, the 300mm silicon wafer market grew by a mid-single-digit percentage from the previous quarter in July–September, and by a little over 10% from a year earlier. Alongside expanding AI-related demand, recovery is progressing in other segments as well, and wafer demand remains solid. For October–December, the company projected that shipment volumes will be roughly flat from July–September, partly because of scheduled maintenance at wafer makers.
Despite strong demand, shipment volumes cannot be raised much because of capacity constraints. The company explained that brownfield investment, meaning capacity additions within existing plant sites, will allow limited output increases in the first half of 2027. However, this is not on a scale that would significantly raise current capacity. It remains cautious about greenfield investment, in which factories are built on new sites, because construction costs have risen sharply.
At its July 24, 2026 earnings briefing, the company had also explained that capital spending costs have increased substantially. Beyond construction, equipment, raw materials and transport costs have all risen, and it estimates that building a new plant alone would cost more than double the previous investment. Rising demand alone therefore does not justify an immediate decision on large-scale investment; the company must carefully weigh future utilization rates and the payback on any investment.
Results have been solid. According to the second-quarter financial summary for the fiscal year ending March 2027, operating profit for April–September 2026 rose 15.6% year on year to 385.9 billion yen. Full-year forecasts are unchanged at 2.7 trillion yen in sales and 700 billion yen in operating profit. Meanwhile, the company revised its fiscal 2026 capital expenditure outlook to 380 billion yen, mainly because its investment plans are progressing ahead of schedule. This figure covers the whole company, not only the silicon wafer business.
President Yasuhiko Saito said at the briefing that the top executives of customer companies he has recently met have all asked for additional supply and place importance on securing future volumes. The company recognizes the need to invest to meet demand, but it also needs pricing that allows it to recover those costs. For this reason, it is reviewing selling prices and contract terms that support capital investment across a wide range of products, not just silicon wafers. The fact that supply capacity cannot be expanded quickly in the face of growing demand is the backdrop to the price negotiations.
Price Increases Start with Additional Supply Outside Contracts
Silicon wafer prices for semiconductors move differently for the portion covered by long-term supply agreements (LTAs), which fix volumes and prices, and for the portion outside them. At the October briefing, Shin-Etsu explained that it is negotiating prices that reflect rising costs for supply above the volumes in existing contracts and for customers without long-term contracts. For some customers, the higher prices have applied since October 2026, and the company continues to ask for and discuss increases on additional supply. In other words, wafer prices across the market have not been raised all at once; repricing is advancing first in transactions not bound by existing contracts.
The situation is different for existing transactions whose prices and volumes are fixed under long-term contracts. According to Shin-Etsu, most of its recent contracts were concluded all at once during the COVID-19 period of 2020–2021, when semiconductor demand surged. Demand then reversed after peaking in the summer of 2022, and the wafer market stayed sluggish for a long time. Given that experience, wafer makers have become cautious about contract terms and volumes, and Shin-Etsu is wary of the risk that customers' excessive order plans could lead to future oversupply.
Contract expiry dates also deserve attention. At its July briefing, Shin-Etsu explained that expiry timing varies widely by customer: the earliest is the end of 2027, and the latest would take another three to four years. At the October briefing as well, there was no announcement that prices under existing contracts had been revised before expiry. As long as current contract terms remain in place, price increases are therefore likely to proceed first on additional supply outside contracts and on new transactions, with a full-scale review of prices under existing long-term contracts coming at the end of 2027 or later.
This does not, however, mean it has been established that prices will not change at all until contracts expire. If supply and demand stay tight, customers may prioritize securing volumes and prices or supply terms could be revised during the contract period. What can be confirmed at present is two things: price increases began for some non-contract transactions from October 2026, and even the earliest existing contracts expire at the end of 2027. There is a gap of about one year and two months between the two, and how far prices under existing contracts move during that period will be a focus going forward.
The average selling price of wafers is also not determined by contract price revisions alone. Shin-Etsu explained that for wafers used in advanced logic semiconductors, it segments prices according to product specifications and the processing and inspection costs involved. If the share of advanced products rises, the average selling price goes up even without changing the price of any individual product. When assessing future changes in average prices, it is therefore necessary to distinguish between higher contract prices and a shift in sales mix toward higher-value products.
Early Revisions to Existing Contracts Are Possible
That said, existing long-term contracts will not necessarily remain unchanged until the end of 2027. At the October briefing, Shin-Etsu said that most customers recognize that wafer supply and demand are tight, and that more of them, worried about future shortages, are starting negotiations on their next contracts even while existing ones are in effect. If these negotiations progress and lead to agreements that revise prices in exchange for extending contract terms, price revisions could occur without waiting for existing contracts to expire.
Other companies' moves also show how much chipmakers value securing supply through long-term contracts. On July 9, 2026, Micron announced a plan to provide $500 million in funding for the 300mm silicon wafer plant that Taiwan's GlobalWafers is building in Texas. The two companies also indicated they would enter a 10-year supply agreement, and Micron is seeking to secure the wafer supply capacity needed for long-term chip production. At the time of the announcement, the plan was subject to conditions such as the signing of final agreements and necessary approvals.
At its July briefing, Shin-Etsu explained that the move toward a long-term contract between Micron and GlobalWafers reflects customers' view that, driven by AI demand, strength in semiconductor devices will continue for a long time. AI-related chip demand is indeed expanding, centered on advanced logic and memory for data centers. Because expanding supply capacity takes large investment and time, securing future volumes, not just prices, has become important for chipmakers.
However, customers beginning negotiations on their next contracts must be distinguished from prices under existing contracts actually being revised. Shin-Etsu says it is discussing contract periods and prices in light of rising capital spending and raw material costs, but it has not said when it will change prices under existing contracts. The fact that increases on non-contract transactions began in October 2026 therefore cannot by itself be taken to mean that long-term contract prices have also been raised. If prices under existing contracts are revised before the end of 2027, the outlook that increases will spread gradually as contracts expire will need to be amended.
The Earnings Gap with SUMCO Shows the State of the Wafer Market
The recovery in the silicon wafer market has not translated into improved profits for every manufacturer. According to SUMCO's earnings presentation announced on August 6, 2026, its January–June sales were 215 billion yen, while it posted an operating loss of about 6.4 billion yen. The company's forecast for January–September 2026 is also an operating loss of 6.3 billion yen, which implies roughly break-even operating results for July–September alone. While demand recovers, burdens such as depreciation tied to capital investment are weighing on earnings.
In the same materials, SUMCO explained that for April–June 2026, long-term contract prices were maintained while negotiations to revisit prices began for spot transactions. Its July–September outlook likewise recognized that long-term contract prices would be maintained while there were moves to revise spot prices. The fact that price negotiations are advancing first outside contracts is a point it shares with Shin-Etsu. However, because the two companies differ in fiscal periods, product mix and capital investment, their profit levels cannot be compared simply.
Both Shin-Etsu and SUMCO are listed on the Tokyo Stock Exchange, and their earnings materials and management explanations make it possible to keep tracking supply and demand and price trends in the silicon wafer market. Wafers are an essential substrate material for semiconductor manufacturing, and higher wafer prices affect chipmakers' manufacturing costs. However, the prices of finished semiconductor products are determined by many factors, including manufacturing yields, capital investment, supply and demand, and product mix, so wafer price increases are not passed directly through to product prices.
Will Prices Under Existing Contracts Move Before the End of 2027?
The key question going forward is at what stage the increases that began with additional supply outside contracts will spread to existing long-term contracts. If Shin-Etsu discloses that it has revised prices under existing contracts before the end of 2027, the outlook that repricing will center on contract expiries no longer holds. Conversely, if prices under existing contracts are maintained even as non-contract increases advance, the situation will continue in which the price of the same silicon wafer moves differently depending on contract terms.
Shin-Etsu's next quarterly earnings briefing is expected in late January 2027, judging from past announcement schedules. SUMCO's July–September 2026 results are also expected in mid-November and will serve as a reference for judging price negotiations and earnings improvement across the industry. Of particular interest are the progress of increases on additional supply outside contracts and whether agreements on price revisions for existing long-term contracts have been reached.
Shin-Etsu's electronic materials business continues to run at high utilization on expanding AI-related demand, but significantly increasing supply capacity takes time and money. For the time being, therefore, not only volume growth but also revisions to contract terms and a rising share of advanced products are likely to shape earnings. Will the increases that began in some transactions in October 2026 spread to existing contracts before the end of 2027? Progress in price negotiations, as shown in upcoming earnings briefings, will be an important clue to the silicon wafer market's next shift.