Tower Semiconductor to invest $3 billion in Japan expansion as AI drives demand for optical chips

Israeli chipmaker Tower Semiconductor announced a planned investment of approximately $3 billion to expand its semiconductor manufacturing footprint in Japan, backed by $1 billion in grants from the Japanese government. The company said the dual-track expansion will significantly increase production capacity for 300mm Silicon Photonics, Silicon Germanium, and advanced optical packaging to meet rising demand from artificial intelligence systems and data centers. Tower CEO Russell Ellwanger said the group has established a reputation for transforming cutting-edge innovation into high-volume manufacturing excellence and that together with the support of the Government of Japan the company will create a globally differentiated advanced R&D and manufacturing center of excellence. The first phase focuses on quickly increasing existing capacity by converting the Arai facility, formerly known as Fab 6, into a production site for 300mm Silicon Photonics and advanced packaging while maximizing output from the existing Fab 7 facility in Uozu. Tower expects this phase to reach full production readiness in the fourth quarter of 2027. The second phase involves constructing a new 300mm manufacturing facility adjacent to Fab 7, expected to provide a multi-fold increase in capacity and begin making a significant financial contribution from 2029. The company updated its business model and now expects to reach $3.6 billion in revenue and $1.2 billion in net profit in 2028.