ANNUAL REPORT 2023

Contents

02

Value Creation Story

44

Management Foundation

45

02

At a Glance

Corporate Governance Approach and Initiatives

04

Milestones in Establishing and

46

Assessment of Board of Directors Effectiveness

06

Strengthening Business Foundations

47

Management

Our Competitive Advantage

48

Messages from Outside Directors

08

Value Creation Process

50

Activity Status of Outside Directors and

10

Financial Highlights

Outside Audit & Supervisory Board Members

11

Non-Financial Highlights

51

Risk Management

12

Management Message

52

Sustainability

53

12

President's Message

Basic Sustainability Policy

14 Sources of Our Competitiveness

53

Structure of Sustainability Initiatives

54

Identifying Key Issues (Materiality)

55

Risks and Opportunities Related to the Key Issues

15

Financial Capital

56

Main Sustainability Initiatives

16

Manufacturing Capital

18

Human Capital

58

Data Section

22

Intellectual Capital

58

25

Social and Relationship Capital

Ten-Year Summary

26

Natural Capital

60

Shin-Etsu Group Major Companies

31

Business Activity

62

Investor Information

63

Corporate Information

  1. Technologies, Materials and Products of the Shin-Etsu Group
  2. Business Overview
  3. Infrastructure Materials
  1. Electronics Materials
  1. Functional Materials
  1. Processing & Specialized Services

Editorial Policy

This report is compiled and published annually for the purpose of providing shareholders, investors, and other stakeholders with an overview of the Shin-Etsu Group's corporate activities. The organizations covered by this report are Shin-Etsu Chemical Co., Ltd. (Shin-Etsu Chemical) and its consolidated subsidiaries in Japan and overseas. In editing this report, we consulted the International Integrated Reporting Framework published by the Value Reporting Foundation (VRF) and Guidance for Collaborative Value Creation published by Japan's Ministry of Economy, Trade and Industry.

In the 2023 edition, we have expanded the sections on each of the six forms of capital that constitute the source of the Group's competitive advantage, focusing on human capital, intellectual capital, and natural capital. We also added a new section, "Messages from Outside Directors."

For more detailed information, follow the links below:

IR Information

Sustainability Information

https://www.shinetsu.co.jp/en/ir/

https://www.shinetsu.co.jp/en/sustainability/

Shin-Etsu Chemical has committed to carbon neutrality by 2050

At the end of May 2023, the Company committed to becoming carbon neutral by 2050 and formulated a plan to reduce greenhouse gas emissions generated in the course of Shin-Etsu Group's business activities (Scope 1*1 and 2*2) to net zero. We will also further focus on reducing greenhouse gas emissions through the Shin-Etsu Group's products and technologies to help achieve carbon neutrality around the world.

*1 Scope 1: Direct emissions from facilities owned and controlled by the Company (e.g., emissions generated during the combustion of substances such as heavy oil and natural gas)

*2 Scope 2: Emissions generated when producing energy purchased by the Company (e.g., emissions triggered when generating purchased electricity)

For more information on our commitment to carbon neutrality by 2050, please see "Sources of Our Competitiveness: Natural Capital" (page 26) in this report.

Business Principle

The Group strictly complies with all laws and regulations, conducts fair business practices and creates unrivaled value for society and industry through the provision of key materials and technologies.

Vision

Contribution to the Earth's future

Five areas for sustainable growth

Connectivity

Smart Productivity Health Energy/

infrastructure enhancement enhancement Resource efficiency

ANNUAL REPORT 2023

1

Value Creation Story

At a Glance

Our Business Portfolio

PVC

Infrastructure Materials

In addition to polyvinyl chloride (PVC) resin, which is widely used in categories that are essential to our lives, from water supply and sewerage systems and other infrastructure (social infrastructure) to housing, agriculture, and everyday prod- ucts, we also supply caustic soda, polyvinyl alcohol (POVAL), and other products. For PVC in particular, we have a combined annual production capacity of 4.44 million tons at our three bases in the United States, Europe, and Japan, providing a stable supply worldwide.

Silicon Wafers

Photoresist

Rare Earth Magnets

Electronics Materials

We produce silicon wafers, a key semiconductor material, as well as photoresists, photomask blanks, and encapsulant materials used in the semiconductor manufacturing process. We also supply rare earth magnets, which are essential for power-saving motors used in eco-friendly vehicles and electrical appliances, and high-purity synthetic quartz, which is used as a raw material for optical fibers and for other applications.

5%

¥131.6 billion

17%

¥493.3 billion

31%

¥875.6 billion

47%

3%

54%

¥1,308.0 billion

¥26.3 billion

¥541.3 billion

13%

¥130.6 billion

Net sales

Operating income

¥2,808.8 billion

¥998.2 billion

30%

¥301.4 billion

Infrastructure Materials

Electronics Materials

Functional Materials

Processing & Specialized Services

(Fiscal year ended March 31, 2023)

Silicones

Cellulose Derivatives

Silicon Metal

Functional Materials

In 1953, we were the first Japanese company to commercialize silicone, which is used in a wide range of industries, and since then we have continued to develop our product lineup, which now includes more than 5,000 varieties. We also supply a wide variety of materials that deliver superior functionality, including cellulose derivatives, which are widely used in pharmaceuticals, food products and industrial applications, as well as synthetic pheromones, silicon metal, liquid fluoroelastomers, pellicles, and anode material for lithium ion batteries.

Input Devices

Wafer Cases

Wrapping Films

Processing & Specialized Services

As a processing manufacturer of various resins such as PVC and silicone, Shin-Etsu Polymer Co., Ltd. meets the diverse needs of customers in a wide range of fields including the automotive, information equipment, semiconductor, packaging material, and construction material industries. Shin-Etsu Engineering Co., Ltd. is involved mainly in the design and construction of the Group's manufacturing plants.

2 Shin-Etsu Chemical Co., Ltd.

Profile (Fiscal year ended March 31, 2023)

In business

Market capitalization

Operating income

Number of employees

ratio

(consolidated)

97 years

¥8,653.1billion

36%

25,717

Overseas bases

Composition ratio of

Ratio of employees

overseas sales

outside Japan

22 countries

81%

63%

Net sales and number of employees by region (Fiscal year ended March 31, 2023)

Net sales

Net sales

Japan

¥538.7 billion (19%)

U.S.

¥979.8 billion (35%)

Employees

Employees

9,401

3,745

Net sales

Asia and

¥805.1 billion (29%)

Oceania

Employees

10,935

Net sales

Europe

¥277.7 billion (10%)

Employees

1,636

Other Regions

Net sales

¥207.2 billion (7%)

ANNUAL REPORT 2023

3

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Disclaimer

Shin-Etsu Chemical Co. Ltd. published this content on 26 July 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 26 July 2023 23:43:22 UTC.