"Demand for solar power will grow, but we really don't know by how much," Muranaga said. "It's too early to commit to more investment at this stage."

The global solar market, which some of Tokuyama's clients expect will grow by as much as 40 percent a year, depends on uncertain factors including how much governments such as Germany's are willing to subsidise solar energy use, Muranaga said.

Investors have criticised Tokuyama for falling behind in a capacity race against its rivals, who are betting that demand for clean energy and semiconductors in zippy gadgets will boost demand for polysilicon.

Polysilicon prices are now 15 percent to 20 percent higher than a year ago.

Hemlock, nearly two-thirds owned by Dow Corning Corp, plans to more than triple annual capacity by 2010 to 36,000 tonnes of polysilicon, while Germany's Wacker plans to more than double capacity to 14,500 tonnes.

That would mean the two companies would outpace Tokuyama, which plans to raise annual capacity by 60 percent to 8,200 tonnes in the spring of 2009.

Until then, Tokuyama's sales of silicon, are capped by capacity, even while prices of raw materials such as coal surge, limiting growth.

The company, which forecasts 0.8 percent growth in operating profit this year, sometimes has to turn down orders for 500 or 1,000 tonnes, said Muranaga.

Its shares have fallen 16.7 percent since January, compared with a 5.6 percent fall in the benchmark Nikkei average

WAITING FOR TECHNOLOGY

But Tokuyama, which supplies silicon to wafer makers such as SUMCO Techxiv Corp, is not about to rush into expansion.

Unlike Kyocera Corp or Sharp Corp, which are expanding solar cell production after spending decades developing solar technology, recent entrants don't understand how variable the market can be, Muranaga said.

Burned when the IT bubble burst in 2000, the company still remembers having to halt production at its newly built plant as polysilicon prices fell by half.

"That's a trauma that is going to make them very, very cautious," said Yoshihisa Toyosaki, president of IT consulting firm J-Star Global Inc.

The company is now concentrating on developing a new production process that would slash costs and allow it to undercut its rivals in solar-use silicon, if successful.

The vapor-to-liquid deposition (VLD) process could take "a few years" before it is ready for commercial use, but that's no cause for concern, Muranaga said.