Denka says its soft-type SNECTON material is progressing toward de facto standardization for the latest generation of high-speed communications substrates, while favorable evaluations of a next-generation M10-equivalent grade are creating an additional AI-related growth opportunity. At the same time, restructuring of the company’s U.S. chloroprene rubber operation is expected to add ¥6.2 billion to full-year operating income compared with fiscal 2025.
SNECTON is Denka’s low-dielectric organic insulation resin for rigid copper-clad laminates. The company describes the material as combining an exceptionally low dielectric dissipation factor, which reduces transmission loss, with processability needed for semiconductor and high-speed communications applications.
Denka completed a dedicated SNECTON plant in May and shipped samples from the facility as scheduled in August. Certification procedures are progressing, while the company’s latest M9-equivalent grade continues moving toward what Denka describes as de facto standardization.
The next product generation is also advancing. Evaluation results for the M10-equivalent grade have been favorable, while Denka continues final-stage consideration of capacity expansion for hard-type SNECTON products and is evaluating higher-value applications based on customer testing and feedback.
The company is seeing similar demand trends elsewhere in its AI materials portfolio. Sales volumes of low-dielectric spherical fused silica continue to increase, and Denka expects sales of SNECTON for AI-related applications to enter full swing during the second half of fiscal 2026.
AI and power-infrastructure demand already contributed to stronger first-quarter profitability. Denka’s fiscal first-quarter sales increased to ¥97 billion from ¥94.1 billion, while operating income increased to ¥11 billion from ¥2.3 billion and operating margin expanded to 11.3% from 2.4%.
The improvement was not entirely demand-driven. Denka said a favorable inventory effect added approximately ¥6 billion to operating income, while the production suspension at Denka Performance Elastomer, its U.S. chloroprene rubber manufacturing subsidiary, contributed another ¥3 billion.
The DPE restructuring is expected to produce a ¥6.2 billion full-year operating income improvement versus fiscal 2025, including the ¥3 billion benefit already realized in the first quarter. Denka expects another ¥3.2 billion of benefit in the second quarter.
DPE has nearly completed the removal of raw materials and intermediate materials from its manufacturing facilities and is cleaning equipment and carrying out post-treatment work. Its workforce has fallen from approximately 140 employees at the end of December 2025 to about 80 at the end of July 2026, with further workforce optimization planned.
The shutdown also carries restructuring costs. Denka recorded approximately ¥4.7 billion of DPE-related extraordinary losses in the first quarter, including labor and other costs associated with removing materials from the operation. Additional extraordinary losses are expected, although the company plans to offset them with extraordinary gains and other items.
Denka increased its first-half operating income forecast to ¥17 billion from ¥12 billion, reflecting stronger Electronics & Innovative Products performance and remaining favorable inventory effects. The company left its full-year operating income forecast unchanged at ¥30 billion because raw-material, fuel-price and Middle East-related uncertainty could cause the current positive inventory effect to reverse later in the year.
The resulting earnings mix reflects two different transformation efforts moving simultaneously. Denka is attempting to expand its role in next-generation AI and communications materials through SNECTON and related products while restructuring a legacy chloroprene rubber operation that is expected to materially improve the company’s cost base.
