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TOKYO, Sep 20 (Reuters) Shin-Etsu Chemical Co., the world's largest silicon wafer maker, said on Wednesday it was boosting production capacity of 300-mm silicon wafers to propel capacity ahead of its rivals.

Shin-Etsu said it would invest 120 billion yen ($1 billion) to build two new domestic plants, as well as expand production lines at another Japan plant and at its U.S. plant.

In doing so, it will lift production capacity of 300-mm wafers by 43 percent to 1 million wafers per month by autumn 2007, the company said.

Shin-Etsu, which had some 530 billion yen in cash or cash equivalent as of end-August, will use its own funds for the investment, the company said..

With a sharp boost in production capacity, Shin-Etsu would easily outpace rival SUMCO Corp., which has agreed to buy a 51 percent stake in Komatsu Electronic Metals Co -- a move that had brought the two neck-and-neck in global market share.

Last year, Shin-Etsu held 31.7 percent of the world's wafer market while SUMCO had 221.1 percent and Komatsu Electronic had 8.7 percent, according to Gartner Dataquest.

Other competitors include Siltronic of Germany and MEMC Electronic Materials Inc.

REUTERS DKS BST0721