Significant Multiples of Silicon Photonics and Silicon Germanium Capacity to Support Accelerating Customer Demand
MIGDAL HAEMEK, Israel, July 14, 2026 – Tower Semiconductor (NASDAQ/TASE: TSEM), a leading foundry of high-value analog semiconductor solutions, today announced a parallel dual-track strategic expansion of its 300mm Silicon Photonics (SiPho), Silicon Germanium (SiGe), and advanced packaging capabilities in Japan, with support from the Government of Japan. The expansion is designed to support the rapidly growing long-term customer demand, substantially increasing the Company’s manufacturing capacity and extending its technology leadership.
Russell Ellwanger, Tower’s CEO, stated: “We are honored and appreciative that the Government of Japan has selected Tower to lead the expansion of these strategically important technologies. Together, we are building a globally differentiated center of excellence founded on technology leadership, manufacturing excellence, and exceptional product quality.
Since becoming the majority owner of the former Panasonic Semiconductor manufacturing operations, now TPSCo, this group has established a reputation for transforming cutting-edge innovation into high-volume manufacturing excellence. For these reasons, with the support of the Government of Japan, we will create a globally differentiated, advanced R&D and manufacturing center of excellence for Silicon Photonics, Silicon Germanium, and advanced optical packaging of very significant scale.
By combining Tower’s specialized technology leadership with Japan’s unparalleled manufacturing expertise, world-class research institutions, and deeply committed workforce, we are building a strategic platform that will drive innovation, economic growth, and semiconductor leadership for decades to come.”
Track one adds significant new 300mm Silicon Photonics capacity, with full production readiness expected during the fourth quarter of 2027. It consists of repurposing the Arai facility, formerly Fab 6, for 300mm Silicon Photonics capacity and advanced packaging capabilities, maximizing the Company’s Fab 7 300mm output in Uozu. Reflecting upon the track one growth outlook, Tower is updating its business model, targeting to achieve $3.6 billion of revenue and $1.2 billion of net profit in 2028.
Track two will commence in parallel with the first track and consists of constructing an additional 300mm manufacturing facility, adjacent to Fab 7, following signing and closing of related agreements. This facility is expected to provide a multi-fold increase in Silicon Photonics and Silicon Germanium capacity, positioning Tower to support continued accelerating customer demand for emerging AI and data center applications, driving next-generation optical connectivity requirements.
As a result of expanded customer engagements, and significant technical milestones achieved through multi-generation strategic partnerships, the new facility is expected to be highly accretive beginning in 2029, demonstrating strong leadership in the optical space, promoting long-term employee pride and strong customer satisfaction, with a business model ensuring long-term viability.
The scope of the dual-track expansion is forecasted to be an approximate $3 billion Tower’s investment, net of grants of $1 billion, to be provided by the Government of Japan. This investment creates long-term value for both Tower and Japan by establishing advanced domestic manufacturing capabilities in Silicon Photonics and Silicon Germanium, strengthening Japan’s semiconductor ecosystem and supply chain resilience.
Ellwanger further added: “Building on our long-standing relationships with Toyama and Niigata Prefectures and supported by our significant investments in the Uozu and Arai facilities, we look forward to deepening our collaboration to strengthen regional semiconductor infrastructure, expand local supply-chain capabilities, accelerate innovation, developing the next generation of highly skilled engineering and manufacturing talent, a workforce renowned for its commitment, individual ownership, dedication and loyalty.
Tower is dedicated to sustaining and creating high-quality employment, recruiting, developing, and retaining world-class engineering and manufacturing talent, expanding collaboration with local suppliers and businesses, and deepening partnerships with Japanese universities and research institutions. By strengthening these industrial and academic ecosystems, Tower seeks to drive innovation, enhance regional competitiveness, and contribute to the sustainable growth and long-term economic development of both prefectures.”
Ellwanger concluded: “The first track results in substantial increases in our updated 2028 business model. By quickly and efficiently adding capacity to an existing profitable operation, track two eliminates the timing concerns and impacts of multi cycles of learning for a greenfield qualification or a fab-to-fab product transfer, ensuring on schedule customer ramps and cash flow. We anticipate track two to provide the path for continued growth far beyond 2028.”
Photo: Russell Ellwanger, CEO of Tower Semiconductor. Photo: Micha Brickman
