Tokyo, February 19, 2007: Shin-Etsu Chemical Co., Ltd. (Head Office: Tokyo) announced that it will increase the price in Japan and overseas of rare earth magnets, one of its main products, effective for shipments made starting from April 1, 2007. The average amount of the price increase is 18%.

The prices of such key raw materials for rare earth magnets as the elements neodymium and dysprosium have been continuing to rise steeply since 2004. In particular, the price of neodymium has risen to more than three times its price in 2004. Moreover, in the most recent period, the pace of its rise is quickening. Because China, the main supply source of these raw materials, is restraining the volume of its export of rare earth, there seems to be no prospect of limiting the underlying upward trend of prices.

With regard to its rare earth magnet business, Shin-Etsu Chemical has been making all-out company-wide efforts to reduce costs through implementing such measures as internal rationalization and improving plant utilization rates by endeavoring to increase sales. Nevertheless, it was difficult to absorb the entire burden of the increased costs resulting from the soaring prices of raw materials and other increased costs, and from October 2006 the company put into effect an upward price revision. However, since then the upward trend in raw material prices has not abated, and accordingly, to continue to provide stable supply in the future, it has become necessary to implement a sales price increase.

Rare earth magnets are highly functional permanent magnets that have 10 times the magnetic-force performance of ferrite magnets, and demand for them is rapidly increasing, starting with applications in VCM (voice coil motors) for PC hard disk drives (HDDs) and extending to various other motor applications for such home appliances as energy-saving types of air conditioners as well as for hybrid cars. In the future, it is anticipated that the demand for applications in automobiles and energy-saving products will further increase.