Cut General Grades, Bet on Electronic-Grade Silicone Oils: How Profitable Is the Shift?-Iota

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News > Dynamic industry > Cut General Grades, Bet on Electronic-Grade Silicone Oils: How Profitable Is the Shift?

Cut General Grades, Bet on Electronic-Grade Silicone Oils: How Profitable Is the Shift?

While prices for general-purpose 201 silicone oil are struggling around RMB 12,000/ton with gross margins falling below 8%, electronic-grade phenyl silicone oils are selling for over RMB 80,000/ton, sustaining margins above 40%. This striking profit gap is driving China’s leading producers to accelerate a strategic pivot up the value chain. In 2025, Hoshine Silicon shut down two general silicone oil production lines; Dongyue Silicon raised the share of high-end silicone oil capacity to 45%; and Xin’an Chemical significantly scaled back its low-end personal care silicone oil business. A full-scale transition from “volume-driven” to “value-driven” growth is underway.

This is not short-term speculation, but a response to hard financial realities. According to 2025 Q3 reports, Hoshine’s overall silicone segment posted a gross margin of only 9.2%, while its electronic-grade silicone oils and silicon-carbide-related materials achieved margins as high as 41.7%. Dongyue Silicon, though only recently returning to profitability on a full-year basis, derived more than 60% of its incremental gross profit from medical- and electronic-grade silicone rubber–related silicone oils. By contrast, amid persistently high costs for metallic silicon and electricity, most producers of general silicone oil are facing “orders without profit”—or even losses on every ton sold.

“General grades are a game of scale and energy efficiency; high-end grades are a game of purity and certifications,” said an insider from Dongyue. Take low-metal-ion phenyl silicone oil used in AI chip packaging as an example: production must meet stringent requirements such as total sodium and potassium below 0.5 ppm, D4/D5 residues under 50 ppm, and batch-to-batch viscosity variation within ±3%, while also securing multiple compliance credentials including REACH and USP Class VI. High technical barriers and high customer switching costs naturally support premium pricing.

Over the next three years, this profit migration is expected to become even clearer:

2026: Leading producers complete upgrades of high-end production lines, doubling capacity for silicone oils dedicated to electronics, medical devices, and photovoltaics.
2027: High-purity vinyl silicone oils and low-cyclic linear silicone oils achieve import substitution, with prices holding at RMB 50,000–100,000/ton.
2028: Functional silicone oils—such as thermal interface, dielectric, and photosensitive grades—emerge as new growth engines, with gross margins potentially exceeding 50%.

For downstream users, this shift will reshape the supply landscape. General-purpose products will increasingly be supplied by smaller manufacturers or traders, with greater price volatility. High-end materials, meanwhile, are entering an era of “co-development plus long-term agreements”—more expensive, but with more reliable supply and deeper technical support.

“We no longer aim to be the biggest, but the most irreplaceable,” Hoshine stated in an investor briefing. When the profit from one ton of electronic-grade silicone oil can match that of ten tons of general-purpose material, the industry’s value equation has clearly been reset.

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