In 2025, the silicone industry will witness a structural recovery: emerging demand-driven and technological upgrades will lead to a new cycle

1.The optimization of production capacity and the balance between supply and demand have led to an increase in industry concentration
After experiencing overcapacity in 2023-2024, the silicone industry will reach a crucial turning point in 2025. Data shows that in 2025, the new domestic organosilicon production capacity will only reach 100,000 tons, and all major leading enterprises have announced the suspension of expansion plans. The industry's capacity concentration (CR5) has risen to over 62%, and the operating rate has rebounded to 80.69%. With the recovery of the global economy, coupled with the explosive growth of emerging demands such as photovoltaic, new energy vehicles, and AI terminals, the supply and demand relationship in the silicone market has shifted from excess to tight balance.

It is worth noting that industry inventories have been continuously declining since the end of 2024 and are currently at a median level. Several leading enterprises in the industry stated at their earnings briefings that the current market has gradually digested the new production capacity, and the phased supply-demand mismatch in the industry is tending to balance. It is expected that the demand growth rate will remain at a relatively high level in 2025.


2. Technological innovation breakthroughs and expansion of high-end application fields
On the technical side, Chinese silicone enterprises are accelerating their breakthroughs into high value-added fields. Many enterprises have broken the monopoly of Europe and the United States in the field of third-generation semiconductor materials through technological upgrades such as achieving a crystal yield rate of over 90% on silicon carbide substrates and verifying 8-inch samples. In addition, some military and aerospace projects of chemical enterprises are about to enter trial production. The high-temperature resistant ablation-resistant arrow body coating resin they have developed has raised the ablation-resistant temperature to 1000℃, filling the domestic gap.

The expansion of emerging application scenarios has become the core driving force for growth:
In the new energy sector, the demand for photovoltaic encapsulation adhesives and sealing materials for new energy vehicle batteries has soared. It is estimated that the global market size of silicone for AI terminals will exceed 18 billion yuan by 2025, with a compound annual growth rate of 35%.
High-end manufacturing: The demand for liquid adhesives and electronic adhesives in 3D printing, medical devices and other industries is growing rapidly, forcing enterprises to raise their technological thresholds.


3. With prices stabilizing and rising, the recovery of corporate profits is expected
Since the end of 2024, the price of silicone DMC has entered an upward channel. Leading enterprises have raised their ex-factory prices multiple times, with a cumulative increase of nearly 10%. In May 2025, multiple enterprises plan to jointly reduce production by 20%. Coupled with the traditional peak season effect of "golden March and Silver April", the industry has a strong expectation of price hikes.

The price recovery is underpinned by dual improvements on both the cost side and the demand side:
Cost advantage: Some enterprises, relying on the "coal-electricity-silicon" integrated production base, have compressed the production cost of industrial silicon to an extremely low level in the industry. By the first quarter of 2025, the average gross profit margin of the industry had rebounded to over 14%.
Export growth: In 2024, the export volume of silicone intermediates reached 545,700 tons, mainly flowing to emerging markets such as South Korea and India. The year-on-year growth rate of exports in the first quarter of 2025 was 32.4%.


4. Driven by both policy and capital, the industry has a broad prospect
At the policy level, The State Council's "anti-involution" guidance promotes industry self-discipline, and the Ministry of Industry and Information Technology explicitly supports the integration of artificial intelligence and industry, providing new opportunities for the application of organosilicon in intelligent manufacturing. In the capital market, many leading enterprises have optimized their capital structure by issuing asset-backed securities (ABS), injecting impetus into technological research and development and capacity upgrading.

In terms of international competition, Chinese silicone enterprises are accelerating their global layout. Although the unit price of exports is still lower than that of imports (2.72 vs 7.76 US dollars/kilogram), technological breakthroughs and production capacity advantages have promoted the process of domestic substitution. The silicon carbide substrate technology of some enterprises has reached the level of international giants. It is expected that Chinese enterprises will occupy 20% of the global market share in the next 3 to 5 years.

Conclusion
In 2025, the silicone industry will enter a structural recovery cycle under the resonance of capacity clearance, technological upgrading and emerging demands. Leading enterprises in the industry are moving from "cyclical fluctuations" to a "new growth paradigm" through full industrial chain collaboration and technological innovation. With the deepening of the global energy transition and material upgrading wave, China's silicone industry is expected to occupy a more important strategic position in international competition.