China Imposes Deposits of Up to 99.2% on Japanese Semiconductor-Material Imports

Dichlorosilane is easy to overlook. At room temperature it is a colorless, flammable and toxic gas. In a semiconductor fabrication plant, however, the compound—SiH₂Cl₂, usually shortened to DCS—helps form extraordinarily thin layers of silicon, silicon nitride, silicon oxide and related materials on wafers. Those films become working parts of logic, memory and analog chips.

On September 7, China’s Ministry of Commerce published Preliminary Determination No. 37 of 2026. It concluded provisionally that DCS originating in Japan had been dumped, that China’s domestic industry had suffered material injury and that the two were causally connected. The ministry ordered deposits of 99.2% for Shin-Etsu Chemical Co., 80.8% for Denal Silane Co., and 99.2% for all other Japanese suppliers.

The legal payer is the Chinese importer, not the Japanese exporter. The ministry’s formula applies the deposit rate to the customs value and then accounts for the import-stage value-added-tax rate. That creates an immediate financing burden. An importer can absorb it, seek a lower price, delay orders or accelerate qualification of a Chinese supplier. Public information does not establish which path individual customers will take.

Why the margin reached 99.2%

Dumping in trade law is not merely selling for less than a competitor. The standard inquiry compares an export price with “normal value,” usually derived from comparable home-market sales. Authorities must separately find injury to the importing country’s industry and a causal connection. Those elements are embedded in the WTO Anti-Dumping Agreement and in China’s implementing rules.

Procedure mattered enormously here. According to the Chinese determination, Shin-Etsu reported figures for its exports to China but did not supply sales contracts, invoices, shipping records, payment evidence, Japanese home-market transaction data, or cost documentation requested by the investigators. The authority therefore calculated Shin-Etsu’s margin using “facts available,” including evidence supplied by the Chinese applicant.

Denal and affiliated Air Liquide Japan submitted responses, and the authority considered their production and sales together. Yet it said an affiliated Chinese reseller had not independently documented its resale transactions and costs. China consequently used applicant information to construct part of the export-price calculation. Denal’s lower 80.8% rate was therefore not based exclusively on the companies’ own records either.

Sumitomo Seika Chemicals also answered the investigation. The ministry decided not to calculate a separate producer margin because the company had DCS filling equipment but, in the authority’s view, not a complete installation that produced the compound through chemical reaction. Interested parties may submit written comments within ten days of the announcement, leaving the methodology open to challenge before a final decision.

A falling market share—and an injury finding

The ministry’s own data complicate a straightforward import-surge story. Japanese DCS shipments to China fell in 2023, rebounded to 292,750 kilograms in 2024, and were nearly flat year on year in the first half of 2025. Their share of Chinese demand declined steadily from 79.63% in 2022 to 59.52% in the first half of 2025.

Chinese output and sales, meanwhile, rose quickly from a small base. Demand expanded from 333,260 kilograms in 2022 to 446,000 kilograms in 2024. The domestic producer’s market share increased, and the determination said there was no evidence that its ability to raise capital had been impaired.

China’s injury theory instead centers on price suppression. The accepted dataset shows the import price falling from 323 yuan per kilogram in 2022 to 245 yuan in 2023, 223 yuan in 2024 and 220 yuan in the first half of 2025—a drop of roughly 31% between 2022 and 2024. The authority said downstream buyers used Japanese quotations to demand lower prices from the domestic producer. Although Chinese production, sales and revenue increased, the domestic business remained under profit pressure and accumulated inventory.

These figures require a prominent caveat. Customs code 28539090 contains products other than DCS, so the ministry said Customs statistics alone could not isolate the relevant volume. It provisionally accepted third-party industry data supplied by the applicant after comparing them with exporter responses. Japan’s total DCS production and the suppliers’ China-specific sales are not publicly disclosed. The record therefore does not support a precise estimate of lost revenue or earnings.

Making the molecule is only the beginning

Semiconductor-grade gases are not interchangeable merely because their molecular formulas match. Trace metals, moisture and particles can damage yields. Cylinder cleanliness, lot-to-lot consistency, analytical capability and dependable delivery matter. Before changing suppliers, a fabrication plant generally has to qualify the material in its own process.

Shin-Etsu describes purification, ultra-trace analysis, quality control and container management as core strengths of its high-purity silane business. Denal is a joint venture created by Japan’s Denka and France’s Air Liquide in 1987; it has supplied silicon-based electronic materials for decades. A deposit can change purchasing economics immediately. It cannot transfer a supplier’s process record or customer qualifications overnight.

China is nevertheless building an alternative. The petitioner, Tangshan Sunfar Electronic Materials, is part of Tangshan Sunfar Silicon Industries. China’s ministry accepted the subsidiary as representative of a major proportion of domestic DCS production. Its parent’s 2026 interim disclosure said electronic-grade DCS and related specialty gases were moving into scaled supply, while also acknowledging that Chinese-made DCS remained relatively scarce.

The short-term issue is whether importers can finance deposits and maintain deliveries. The medium-term question is whether Chinese fabs accelerate approval of domestic material. The long-term contest will be decided less by the nominal rate than by purity, yield, reliability and the ability to prove all three at production scale.

A trade case inside a political storm

Tangshan Sunfar Electronic Materials filed its petition on December 8, 2025. China opened the case on January 7, 2026. The dumping period covers July 1, 2024 through June 30, 2025; the injury period runs from January 1, 2022 through June 30, 2025. The ordinary deadline for completion is January 7, 2027, with a possible six-month extension.

The WTO agreement permits provisional cash deposits or bonds after affirmative preliminary findings of dumping and injury when authorities judge them necessary to prevent further injury during the investigation. Such measures are intended to last as briefly as possible and ordinarily no more than four months. The architecture itself underscores that China’s current action is an interim step.

The case also unfolded amid deteriorating Japan–China relations and alongside Chinese restrictions on exports of dual-use goods to Japan. That context is commercially relevant: companies must price political risk into sourcing decisions. It does not, by itself, prove that the DCS determination is political retaliation. Whether the calculation and procedure comply with trade rules must be judged on the case record, not inferred solely from the diplomatic climate.

Japan’s response—and what comes next

Chief Cabinet Secretary Minoru Kihara said on September 8 that Tokyo would work closely with the companies, examine the investigation and its effects, and respond appropriately so that business activity was not unfairly harmed. Options range from submissions within China’s proceeding and bilateral consultations to potential WTO action if Japan ultimately identifies a breach of applicable rules.

The companies face three immediate choices. They can provide additional evidence and contest the margins. They can negotiate price, inventory and contract arrangements with Chinese customers. And they can diversify sales beyond China. Because supplier-level DCS revenue, customer contracts and inventories remain undisclosed, it is too early to know which response will dominate.

Japan.co.jp’s assessment is that the deposit rate is the short-term headline, but qualification decisions are the long-term story. If Chinese chipmakers approve domestic DCS for more production lines, the market structure may change even if the final duty is reduced. If Japanese suppliers preserve their process advantage and successfully challenge the calculations, the immediate shock may prove less durable. A gas used to build microscopic films has become the latest surface on which the larger contest for semiconductor autonomy is being written.