Company history

Shin-Etsu began in September 1926 as an arbitrage on electricity. Nagano prefecture had more hydroelectric power than it could use; Koshi Jusaburo of Shinano Electric brought the cheap surplus, Noguchi Shitagau of Nippon Nitrogenous Fertilizer brought the process, and together they founded Shin-Etsu Nitrogenous Fertilizer to turn that power into calcium cyanamide. Plant equipment was dismantled at Nippon Nitrogenous’ Kagami and Minamata works and moved to Naoetsu, on the site of a former oil refinery, where carbide, calcium cyanamide and graphite electrodes went into production in October 1927.

The single-product model failed almost immediately. The cyanamide industry fell into ruinous overcapacity, the Depression reached Japan, rice prices collapsed and farm demand with them. Naoetsu suspended operations in December 1931 and closed outright in February 1932 — barely five years after the company was founded. Kosaka Junzo, president of Nagano Electric, bought out Koshi’s shares and took the presidency in May 1931, unified the capital structure, and reopened Naoetsu in October 1937. The Kosaka family would run the company for some forty years.

What that near-death taught was the danger of depending on one product, and by 1940 magnesium metal and metallic silicon had grown enough in the mix that the name was changed to Shin-Etsu Chemical. Daido Chemical was absorbed in May 1945, adding the Takefu works. Diversification into adjacent materials, paid for out of disciplined capital, became the company’s standing answer to the fragility it had already survived once.

In January 1953 Shin-Etsu licensed silicone manufacturing from General Electric and became the first company in Japan to make it in volume. Vice-president Kosaka Tokusaburo told the company that silicone must not be left as a stunted bonsai but grown into a full tree. The staff newsletter’s first issue carried a letter from an employee saying the “fertilizer shop” label would never wear off — the discomfort was mutual, and deliberate. Silicone offered heat resistance, electrical insulation and water repellency that no other material substituted for cheaply, which meant it could be carried into electronics, construction and medicine.

The pattern that followed was not one new business but a chain of them, each hanging off the chemistry of the last. Shin-Etsu entered PVC in 1957 as the thirteenth and final Japanese producer, differentiating on a proprietary non-scale polymerization process rather than on being early. In 1960 it began making high-purity “Super Silicon” from a silicone by-product, and in 1967 it founded Shin-Etsu Handotai with Dow Corning to supply silicon wafers.

None of this paid quickly. Kosaka later described the years after commercialization plainly: for five years the product “could hardly be called merchandise, let alone contribute to sales” (日経ビジネス, 22 September 1980). Fertilizer still carried the company through that stretch. The willingness to fund a long unprofitable period, rather than count it, is what made the chain of adjacent entries possible at all.

In July 1973 Shin-Etsu and the American pipe maker Robintech each put up half the capital for Shintech, a PVC venture based in Houston. Kanagawa Chihiro, a mid-career hire from Mitsui & Co., had designed the project around a fact of geography rather than of technology: Texas had cheap rock salt and cheap natural gas, the two raw materials PVC is made from, and Japanese producers importing everything could never close that gap. The Freeport plant started in October 1974 at 100,000 tonnes a year — thirteenth of twenty-one US producers.

When Robintech ran into trouble in 1976, president Odagiri Shintaro overrode a majority of his own board and bought all of its shares. What made that possible was a right of first refusal Odagiri had written into the original joint-venture contract years earlier. The point was not rescue: as long as a partner’s consent was required, Kanagawa’s strategy of expanding capacity during downturns could never be approved. Sole ownership was the precondition for the strategy, not a consequence of it.

Odagiri then ran the same play again. When Dow Corning proposed dissolving the Shin-Etsu Handotai venture in 1979, he exercised the same kind of clause and took the company whole. With both of its future profit engines wholly owned, all of their earnings accrued to the group and every capacity decision could be made alone — which is what “run flat out, sell everything” required.

Kanagawa became president in August 1990 — a mid-career trading-company hire who had spent twelve years personally running Shintech in Texas, an unusual résumé for the head of a major Japanese chemical firm. He took the method he had already proved in one subsidiary, “run flat out, sell everything”, and applied it to PVC, silicone and silicon wafers alike: never cut output in a recession, hold utilization high, and take share precisely when competitors are retrenching. No debt was the discipline that made the countercyclical bet survivable.

The results were not incremental. Consolidated sales roughly tripled, operating margin passed 30%, and market capitalization rose about twenty-two-fold — the largest gain of any listed Japanese company’s tenure through the “lost thirty years.” Shintech became the largest PVC producer in the United States in 1990 and in the world in 2001.

The other half of the doctrine was to stop buying anything it could make. Shintech integrated backwards step by step: chlor-alkali through to vinyl chloride monomer at Plaquemine, Louisiana in 2008, then its own ethylene plant in 2020, completing a chain that runs from salt and natural gas to finished resin. In the year to March 2023 the group posted a 35.5% operating margin, a level with no parallel among Japanese chemical makers — the structural payoff of insulating input costs from the market entirely.

Kanagawa died in January 2023 at ninety-six, closing forty-five years of leadership that began with the Shintech presidency in 1978. The succession had been arranged the way he tested everything — by vacating a seat. He gave up Shintech’s presidency in January 2011 and put Saito Yasuhiko in it, six months after handing the parent company to Mori Shunzo; the order made clear which post he considered the real examination. Having said that successors cannot be taught, only put through on-the-job training, he made his candidate walk the same twelve-year road he had walked himself.

What Saito inherited was a balance sheet with no debt and an equity ratio of 83% at March 2024 — enough to expand and return capital at the same time. New capacity at Plaquemine lifted PVC to 3.64 million tonnes a year; in November 2024 Shin-Etsu took full ownership of Mimasu Semiconductor for about $448.8M (¥68bn), tightening vertical integration in wafers. Buybacks of up to $660.1M (¥100bn) were authorized in May 2024 and up to $3.3B (¥500bn) in April 2025, with returns explicitly benchmarked against the cost of capital.

The open question is whether a method this personal survives being institutionalized. Saito still holds the Shintech presidency more than a decade on, which means the seat Kanagawa used to test a successor is not free to test the next one.