Tower Semiconductor to Invest US$3 Billion in Japan to Expand Silicon Photonics and AI Chip Manufacturing
Government-backed expansion will boost 300mm silicon photonics and SiGe production, supporting rising demand for AI data centres, high-speed optical interconnects and advanced communications.
Tower Semiconductor will invest approximately US$3 billion to significantly expand its manufacturing footprint in Japan, backed by around US$1 billion in financial support from the Japanese government, as the speciality foundry seeks to capitalise on surging demand for semiconductors powering artificial intelligence, high-performance computing and advanced communications.
The Israeli chipmaker said the expansion will focus on strengthening production of 300mm silicon photonics and silicon-germanium (SiGe) technologies, both of which are becoming increasingly important for AI infrastructure. Silicon photonics enables data to be transmitted using light rather than electrical signals, delivering higher bandwidth, lower latency and improved energy efficiency for data centres and next-generation networking systems. SiGe technologies, meanwhile, are widely used in wireless communications, automotive radar and high-speed analogue applications.
The investment will be executed in two phases. The first phase will upgrade the company's Arai facility (formerly Fab 6) to support high-volume manufacturing of 300mm silicon photonics products, with commercial production expected to begin by the fourth quarter of 2027. The second phase will involve constructing a new 300mm fabrication facility adjacent to its existing Fab 7 site, providing additional capacity to support long-term customer demand.
Tower said the expansion is designed to address the rapidly growing need for optical interconnects and specialised semiconductor technologies used in AI servers, cloud computing infrastructure and advanced networking equipment. As AI models become larger and data centres continue to scale, demand for high-speed optical communication solutions is expected to rise substantially over the coming years.
The Japanese government's financial backing reflects its broader strategy to strengthen domestic semiconductor manufacturing capabilities and secure resilient supply chains. In recent years, Japan has committed billions of dollars to support semiconductor investments from both domestic and international manufacturers as it seeks to regain a leading position in advanced chip production and reduce dependence on overseas manufacturing.
Tower Semiconductor also raised its long-term financial outlook, reflecting the expected contribution from the new manufacturing capacity. The company now forecasts 2028 revenue of approximately US$3.6 billion and net profit of around US$1.2 billion, significantly higher than its previous projections of US$2.8 billion in revenue and US$750 million in net profit.
Chief Executive Officer Russell Ellwanger said the expansion represents a strategic investment that will support customers' future technology roadmaps while positioning Tower for sustained growth beyond 2028. The announcement was well received by investors, with the company's US-listed shares rising sharply following the news as markets responded positively to the strengthened growth outlook and government-backed expansion plans.
