Key Recommendation | Development Trends and Suggestions for China’s Modified Materials Industry

Abstract:Modified materials serve as vital supporting materials for high-end manufacturing sectors including automobiles, home appliances, electronic communications and new energy. At present, China's annual output of modified materials exceeds 30 million tons, yet the plastic modification rate stands at merely 27%, a considerable gap compared with approximately 50% in developed economies. The industry is characterized by low entry barriers but high technical thresholds, prominent structural imbalance between supply and demand, high product customization, long certification cycles for high-end products, and stringent requirements for market response speed. Driven by industrial upgrading and policy guidance, the industry is shifting from scale expansion to high-quality development, with high-end development, green transition, technological iteration, intelligent transformation and upstream-downstream integration as core development directions. It is suggested that the industry strengthen collaborative R&D across the whole industrial chain to raise the self-sufficiency rate of high-end products; deepen integrated industrial chain layout via joint ventures and equity cooperation to realize resource sharing and complementary strengths; integrate and optimize industrial standards and certification systems to cut operating costs of enterprises, so as to fuel the high-quality and sustainable development of the modified materials sector.

Keywords: modified materials; modified plastics; high-quality development; industrial chain integration

Modified materials refer to polymer composite materials whose mechanical properties, heat resistance, corrosion resistance, processability and other indicators are optimized via physical, chemical or mechanical modification of basic polymer materials, with modified plastics as the core category. As fundamental supporting materials for high-end manufacturing, modified materials are the key enabler of "plastic replacing steel" and "plastic replacing wood", and provide critical support for product upgrading of downstream industries such as automobiles, home appliances, electronic communications, new energy and medical devices.

China's plastics industry took shape after the founding of the People's Republic of China, alongside the rise of the modified materials sector. In the early stage, however, constrained by weak R&D capacity and limited production scale, China relied heavily on imports for high-end modified materials. Entering the 21st century, fueled by rapid domestic economic growth, strengthened independent technological innovation, accelerated global manufacturing transfer to China and expanding market demand, downstream industries including automobiles and home appliances embraced new lightweight and green development trends. Spurred by market demand and the commercialization of technological innovations, China's modified materials industry entered a phase of rapid growth.

1 Current Development Status of the Modified Materials Industry

1.1 Sustained Scale Growth, Expanded Applications Underpin Industrial Profit

In recent years, driven by steady expansion of downstream sectors including automobiles, home appliances and electronic communications, China's modified materials industry has recorded consistent growth in scale, with remarkable increases in output and modification rate. From 2018 to 2024, China's annual output of modified plastics rose from 17.8 million tons to over 30 million tons, representing an average annual growth rate above 9.0%, outperforming the 5.5% annual growth rate of primary plastics. The plastic modification rate climbed steadily from 16% in 2010 to 27% in 2024, reflecting improved overall technical capability and expanded application coverage, though a notable gap still exists versus the 50% level in developed nations.

Against the backdrop of intensifying competition in basic organic raw materials of the petrochemical and chemical industry and sharp declines in return on equity (ROE) of typical petrochemical enterprises, modified materials manufacturers have endured milder impacts overall. In terms of application scenarios, modified materials have expanded from traditional automotive and home appliance fields to multiple high-end manufacturing segments such as electrical and electronic equipment, medical devices, 5G communications and new energy. In the automotive sector, modified materials are widely used in interior and exterior trims and components to advance vehicle lightweighting. For home appliances, they act as core structural materials for refrigerators, washing machines, air conditioners and other products. The rapid expansion of 5G communications and new energy industries has generated new market demand for high-performance modified materials featuring low dielectric constant, high temperature resistance, superior insulation and anti-aging properties.

1.2 Low Barriers for Mid-to-Low-End Segments, Structural Imbalance Between Supply and Demand

The modified materials industry features low market entry thresholds but formidable technical barriers. Mid-to-low-end modified materials mainly adopt physical blending and filling modification with simple processes and low capital requirements, making it easy for micro, small and medium-sized enterprises (MSMEs) to enter the market. In contrast, high-end segments impose stringent requirements on raw materials, additives and synthesis processes. Domestic enterprises also face technical blockades from international players and strict product certification standards, posing substantial obstacles to technological breakthroughs.

Such technical characteristics directly result in a lopsided supply-demand structure. Fierce homogeneous competition prevails in mid-to-low-end product markets due to low entry barriers, creating cutthroat competition at the low end, while supply of high-end products remains insufficient. Taking polyamide 66 (PA66) as an example, the self-sufficiency rate of high-end modified products stands below 30%. Key fields such as automotive electric drive systems and 800V connectors still rely heavily on imported products from DuPont, BASF and other foreign brands, leading to insufficient domestic supply in high-end segments.

Low entry thresholds further lead to low industrial concentration. There are over 10,000 active and surviving enterprises engaged in modified plastics production nationwide, most of which are MSMEs, while fewer than 50 manufacturers possess large-scale production capacity. The combined market share of the top five enterprises (CR5) is merely 16%. Kingfa Science & Technology ranks first with an approximate 8% market share, far below leading international peers. Low industrial concentration restrains overall industry R&D investment and technological upgrading, exacerbating the structural dilemma of overcapacity in low-end products and undersupply of high-end ones.

1.3 High Product Customization, Complicated Certification System

High customization and diverse product grades define modified materials production. Downstream clients across different application sectors have vastly different requirements for material performance, color, texture and other indicators. For automotive modified materials, for instance, multiple color options are available, and different manufacturers demand distinct color matching formulas, with textures categorized as high-gloss, matte and other types. To meet personalized downstream demands, enterprises must develop numerous product grades; leading industry players usually maintain thousands or even tens of thousands of active product grades annually.

Modified materials must pass both third-party certifications and proprietary qualification audits of downstream clients to gain access to their supply chains. Third-party certifications mainly include ISO9001 quality management system certification, IATF16949 international automotive quality management system certification, post-consumer recycled (PCR) material certification and UL safety standard certification. Major downstream OEMs including Mercedes-Benz, BMW and BYD have formulated proprietary access standards, requiring modified materials manufacturers to complete additional product or system certifications. Enterprises can only apply for various system certifications after internal systems have operated in compliance with relevant standards. IATF16949 certification, for example, mandates one full year of internal system operation, and the whole process from preparation to certificate acquisition generally takes five months. After certification, enterprises are subject to surveillance audits every six or twelve months, with recertification required three years after initial approval. Cumbersome certification procedures not only raise corporate operating costs but also raise entry barriers for high-end sub-sectors such as automotive, medical and recycled materials.

1.4 Strict Requirements for Market Response Speed, Integrated Solutions Become Mainstream

As a downstream link of the industrial chain, the development of China's modified materials industry is deeply tied to downstream market demand. Given product customization and clients' demand for technical support, direct sales prevail across the industry. Meanwhile, low industrial concentration and full market competition force enterprises to boost customer stickiness by accelerating market response and enhancing client services. Rapid iteration of downstream demand imposes tight deadlines for modified material delivery; the standard delivery cycle for general products within the industry is within seven days, a benchmark explicitly recorded in the annual reports of many leading manufacturers.

Moreover, top-tier enterprises provide full-process technical support for clients, covering material selection, structural design, on-site injection molding guidance and technical training. Companies such as Kingfa and Dawn Polymer have developed targeted service packages. Sales on credit are the dominant business model in the industry, with a typical receivable collection cycle of 3 to 6 months after product delivery. Long capital occupation exerts heavy pressure on corporate capital strength and cash flow management, serving as a major bottleneck restricting the growth of small and medium enterprises.

2 Development Trends of the Modified Materials Industry

Driven by technological upgrading of downstream industries, green and low-carbon policy orientation and internal industrial evolution, China's modified materials industry is gradually shifting from scale expansion to high-quality development. Three core trends — high-end & green development, technological iteration & intelligent transformation, and upstream-downstream integration — will trigger profound changes to the industry's competitive landscape and development model.

2.1 High-End and Green Development Are Inevitable

Technological iteration of downstream industries and low-carbon policy mandates have pushed China's modified materials industry into a new phase of product upgrading. Import substitution, emerging sectors and green development constitute three major driving forces for high-quality industrial advancement. Based on China's macroeconomic trends, expansion pace of modified plastics applications and inherent industrial growth potential, the domestic modified plastics sector is projected to sustain steady growth with a compound annual growth rate of nearly 5%. Demand is expected to reach 50 million tons by 2035, ushering in a prolonged period of industrial expansion.

2.1.1 Deepening Import Substitution of High-End Products

Despite sustained expansion of the domestic modified materials industry over years, high-end segments still rely heavily on imports. Thanks to improved domestic independent R&D capacity, import substitution has achieved breakthroughs in certain fields and will continue to deepen. High-end modified special polyamides were long imported at premium prices, yet domestic enterprises including Wanhua Chemical, Sinopec and Kingfa have begun related layout. Kingfa has independently developed polydecamethylene terephthalamide (PA10T) and realized its industrialization. Composite oil-resistant and corrosion-resistant sheet extrusion & thermoforming materials developed by Kebaier have solved the problem of inner liner cracking in refrigerators, breaking multinationals' monopoly on refrigerator liner materials. Nevertheless, high-end products and their raw auxiliary materials such as medical-grade transparent materials, continuous fiber-reinforced thermoplastic composites, high-flame-retardant and weather-resistant materials still face high import dependence in high-end medical treatment, automotive lightweighting and power battery sectors, representing key directions for future high-end product development.

2.1.2 Emerging Sectors Spearhead New Industrial Growth

Booming emerging hot sectors have opened new growth tracks for modified materials. The rapid rise of low-altitude economy, industrial robots, service robots and commercial aerospace has raised higher standards for modified materials in weather resistance, lightweight performance, high strength, flame retardancy and environmental friendliness. Several enterprises have taken the lead in layout and realized industrialized applications. With vigorous domestic development of PEEK, carbon fiber, PI and other new materials, in-depth research on modification technologies for these materials has been gradually implemented in production, delivering solid support for the growth of emerging sectors. Beyond emerging fields, the industry continues to advance in traditional high-end segments including automotive smart cockpits, 5G communications and optical materials. Special appearance modified materials developed by Polyplastics for automotive smart cockpits have been mass-produced and applied in mainstream vehicle models from BYD, NIO and other brands, further enriching the portfolio of high-end integrated material solutions. In the future, with enhanced independent innovation capacity of enterprises, the market share of domestic high-end modified materials will keep rising to become a new engine driving industrial growth.

2.1.3 Degradable and Recycled Materials Fuel Green Low-Carbon Transition

Green development stands as a core trend enabling sustainable industrial growth under low-carbon policy impetus. Two major directions define the green transformation of modified materials: first, the production and modification of bio-based and biodegradable plastics. Major domestic modified plastics manufacturers including Kingfa, Dawn Polymer and Goen have launched production and modification businesses for degradable materials, promoting their application in packaging, agriculture, home appliances and other fields. Second, recycling and modification of waste plastics, forming a closed loop of "recycling — pre-treatment — reutilization" to realize circular utilization of plastic waste. Huitong New Materials boasts an annual production capacity of 180,000 tons of post-consumer recycled (PCR) materials, while Polysail has obtained certifications for over 10 types of PCR products.

2.2 Technological Upgrading & Digital-Intelligent Transformation: Shift from Labor-Intensive to Technology-Intensive Operation

China's modified materials industry is accelerating high-tech upgrading and digital-intelligent transformation in production, gradually breaking away from traditional labor-intensive manufacturing models. This shift serves as a critical pathway for cost reduction, efficiency improvement and core competitiveness enhancement, propelling the industry toward technology-intensive development.

High-tech development has gained widespread attention with continuous growth in industrial R&D investment. Leading manufacturers including Kingfa, Polyplastics, Huitong and Dawn Polymer recorded an R&D intensity above 4% in 2024. The number of patent applications related to modified materials in China maintained an upward trend from 2016 to 2025, with a focus on translating technological innovations into practical products. BASF combined thermoplastic polyurethane Elastollan® with supercritical fluid foaming technology to produce sneaker midsoles. The foaming process eliminates crosslinking agents and chemical foaming agents, delivering recyclable products with lower production energy consumption while maintaining superior performance and sustainability. The in-line PP flame retardant modification technology developed by Sinopec Beijing Research Institute of Chemical Industry has been successfully applied at Sinopec Guangzhou Branch. Integrating modification into the PP production process preserves fundamental resin properties while boosting flame retardant efficiency, eliminating secondary processing and cutting costs drastically. The technology can also be extended to antibacterial modification and other fields.

Digital-intelligent transformation also empowers modified materials enterprises in multiple dimensions, supporting quality improvement, productivity growth and cost control. At the R&D end, artificial intelligence (AI) and digital simulation drive innovation; Huitong New Materials has adopted AI for formula optimization. On the production side, intelligent manufacturing systems are established; Kingfa's digital workshops have lifted per capita efficiency by 50%. At the management layer, system integration is promoted; Dawn Polymer deployed UFIDA Business Innovation Platform (BIP) to realize closed-loop management of strategy, operation and performance. For finished products, full-chain digital traceability is implemented; Huitong built a full-life-cycle PCR management platform for carbon footprint tracking. The industry is evolving from single-link upgrades to cross-chain coordinated development.

2.3 Upstream-Downstream Integration: Two-Way Convergence Between Refining & Chemical and Modified Materials Enterprises

Upstream-downstream integration represents a core development direction for China's modified materials industry to overcome weak industrial chain integration capacity and achieve high-quality growth. Integrated layout fully leverages modified materials enterprises' strengths in capturing end-market demand and refining enterprises' advantages in raw material production, enabling precise matching of supply and demand, cost reduction and efficiency improvement across the whole chain. It also drives the high-end and customized upgrading of basic raw materials and strengthens the industry's overall risk resistance and core competitiveness.

From an international perspective, modified materials production overseas is predominantly undertaken by large chemical conglomerates. Relying on self-sufficient raw material supply, these firms have formed an integrated development model covering "raw material production — modification processing — finished product application", featuring robust industrial chain coordination, stable supply chains and outstanding cost control capabilities. In contrast, China's modified materials sector was initially dominated by specialized modification processors focusing solely on downstream processing, relying heavily on external upstream raw material supply and suffering substantial cost pressure amid raw material price fluctuations.

In recent years, the domestic modified materials industry has prioritized upstream-downstream integration, forming a two-way convergence trend: local modified materials manufacturers extend upstream, while refining and chemical enterprises expand downstream. Leading firms have explored integrated layouts one after another, targeting independent raw material supply and demand-driven production via industrial chain synergy. Local modified materials enterprises build full "raw material — modification — finished product" industrial chains through upstream expansion, effectively mitigating cost risks caused by raw material price volatility and incorporating end-product performance requirements into raw material R&D. Leveraging production capacity and technical strengths, refining enterprises extend downstream to connect closely with terminal markets, directly addressing high-performance material demands from automotive, robotics and low-altitude economy sectors. This makes basic raw material production better aligned with modification processing and downstream application needs, advancing high-end and customized development of base resins.

Going forward, deepening two-way integration between modified materials manufacturers and refining enterprises will foster a sound industrial ecosystem where raw material production caters to modification demands, modification processing matches end-product applications, and downstream demand drives raw material optimization, significantly boosting coordination across all industrial chain links. Upstream-downstream integration will become a major force reshaping industrial competition patterns, with enterprises possessing full-chain layout gaining upper hands in market competition.

3 Suggestions for High-Quality Development of China's Modified Materials Industry

3.1 Target Core Technical Bottlenecks, Boost Industrial Technical Capacity Through Multi-Party Collaboration

The industry still faces prominent technical shortcomings. On one hand, base resins, composite materials and additives for high-end modified materials remain import-dependent with insufficient domestic supply capacity. On the other hand, overall industrial production automation levels lag behind advanced standards, with manual operations prevailing in certain links and restraining production efficiency and product stability. It is recommended that upstream and downstream enterprises carry out joint research. Modified materials manufacturers shall specify performance requirements for high-end raw materials, while refining enterprises focus on synthesis technology R&D to jointly build a systematic R&D system for modified materials. Collective efforts shall be made to break domestic supply bottlenecks of high-end polyolefins, engineering plastics, modified additives and other raw materials and raise the self-sufficiency ratio of core feedstocks. Meanwhile, enterprises are encouraged to accelerate the application and promotion of advanced technologies including in-line modification and intelligent batching, steadily advance automated and intelligent renovation of production lines, reduce reliance on manual labor, and raise standardization and efficiency in manufacturing.

3.2 Deepen Integrated Industrial Chain Layout to Drive Coordinated Supply-Demand Development

Current industrial integration mainly relies on independent vertical expansion by individual enterprises. Both refining and modified materials manufacturers face high capital, technology and talent investment for cross-sector layout, making it difficult to rapidly generate synergistic benefits and limiting integration effectiveness. Additionally, overcapacity exists in petrochemical base resin segments, while the modified materials industry features strict downstream client service and product certification requirements, exposing new entrants to high operational risks. It is proposed that upstream and downstream enterprises break the limitation of independent expansion to form joint development forces, and deepen integrated layout via joint ventures, equity cooperation and other models. Refining enterprises contribute base resin resources and large-scale production strengths, while modified materials manufacturers give full play to advantages in formula R&D and market application, achieving resource sharing and complementary strengths. This approach can absorb excess upstream capacity, enhance product competitiveness of the modified materials sector, and advance its high-quality and sustainable development.

3.3 Integrate and Optimize Industrial Standards & Certification Systems to Lift Overall Standardization Level

At present, certification standards within the modified materials industry are fragmented, with separate access certification requirements stipulated by different downstream clients. Enterprises must complete independent certification procedures for distinct customers, incurring substantial time and capital costs and wasting industrial resources to a certain extent. It is suggested that industry associations take the lead to unite leading modified materials manufacturers, core downstream clients and authoritative third-party certification bodies to sort out existing certification requirements across various sectors. A unified industrial certification system covering product performance, production processes, green environmental protection and other dimensions shall be developed, alongside special standards for modified materials applied in low-altitude economy, robotics, aerospace and other fields. Gradually promote the recognition and implementation of unified certification across the industry to expand the influence of standardized certification frameworks, eliminate redundant certification for enterprises, cut overall industrial operating costs, standardize market competition through systematic standard construction, and support the high-quality growth of the modified materials industry.