Doing business in the same silicone industry, profits can differ by more than 15 times. According to Xinan Chemical's 2025 annual report, its silicon-based terminal products achieved a gross margin of 22.25%, while silicon-based basic products recorded a gross margin of only 1.44% during the same period. Behind this stark gap lies the deeper logic of the silicone industry's transition from "scale expansion" to "technology value-added."

"Bringing Business into the Customer's R&D Process"

According to reports from Jiuyan Gongshe, Xinan Chemical has not added new silicone terminal production capacity in the past two years, focusing its efforts instead on product adjustments for existing facilities and the R&D and sales of customized materials. Its core order-taking model is: application-side customers bring new requirements and jointly develop products with the company, which then arranges production based on sales—essentially moving the materials company's work forward into the customer's R&D process.

The value of this model lies in the added dimension of technical collaboration beyond price. Whether the material can meet the application, coordinate with production, and ensure stable subsequent delivery all enter into the procurement decision.

Terminal-Oriented Layout Taking Shape

According to disclosures made by Xinan Chemical during investor communications, its business organizations for industry lines including electronic technology, automotive, energy and power, and personal care have been established, with multiple leading customers having completed product validation. In the liquid cooling application sector, the silicon-based immersion liquid cooling commercial project located in China Data Valley was commissioned in February 2026, with PUE stable below 1.1, and some liquid cooling projects have entered the batch supply stage.

In the robotics materials sector, Xinan has signed a strategic cooperation agreement with the Zhejiang Humanoid Robot Innovation Center, having delivered more than 10 types of silicon-based new materials for robot applications, used in end effectors, housings, bionic skin, and flexible sensing, with some products achieving batch supply.

A Reference for Industry Recovery

Xinan's terminal-oriented path is not an isolated case. According to reports from SMM, Xingfa Group's silicone segment achieved a turnaround to profitability in the first half of the year, contributing approximately 190 million RMB in gross profit, benefiting from coordinated industry production cuts and the recovery in DMC prices. This change confirms that, against the backdrop of supply contraction in the industry, enterprises with downstream deep-processing capabilities can realize profit recovery more quickly.

However, the journey from joint development and product testing to sustained procurement still requires crossing the threshold of scale. Some projects may stall at the small-batch stage, and relatively high gross margins may also be consumed by R&D and service investments. Xinan's 2025 silicon-based terminal product revenue declined 2.71% year-on-year, also indicating that the growth of the terminal-oriented path is not achieved overnight.

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