Tower plans $3B Japan capacity expansion

Tower Semiconductor announced a dual-track expansion of its 300mm Silicon Photonics, Silicon Germanium and advanced packaging capabilities in Japan. The program is designed to address rapidly growing long-term customer demand and extend the company’s technology position in these areas. The initiative is supported by the Government of Japan, reflecting the strategic importance of these manufacturing technologies.

The total scope of the dual-track expansion is forecast to be approximately $3 billion of Tower investment, net of $1 billion in grants to be provided by the Government of Japan. The company described the plan as a strategic step toward building an advanced research and manufacturing center of excellence for Silicon Photonics, Silicon Germanium and advanced optical packaging in the country.

Track one focuses on adding significant new 300mm Silicon Photonics capacity. Tower plans to repurpose its Arai facility, formerly known as Fab 6, to support 300mm Silicon Photonics manufacturing and advanced packaging capabilities. In parallel, the company intends to maximize 300mm output from its existing Fab 7 site in Uozu.

The additional 300mm Silicon Photonics capacity under track one is expected to reach full production readiness in the fourth quarter of 2027. This phase forms the basis for the company’s updated mid-term financial model, as it will expand the available manufacturing footprint for optical and high-performance analog applications.

Track two is planned to commence in parallel with the first track, subject to signing and closing of related agreements. It calls for the construction of an additional 300mm manufacturing facility located adjacent to Fab 7. This new plant is intended to support further growth in Silicon Photonics and Silicon Germanium capacity.

Tower expects the additional facility in track two to provide a multi-fold increase in SiPho and SiGe capacity once ramped. The company also expects this new capacity to be highly accretive beginning in 2029, positioning the expanded Japanese operations as a key contributor to future profitability.

Reflecting the expected capacity additions from track one, Tower updated its business model to target $3.6 billion of revenue in 2028. The company is also aiming for $1.2 billion of net profit in the same year, based on the planned utilization of the enhanced 300mm manufacturing footprint.

Alongside the growth plan, Tower highlighted various execution risks associated with the expansion. These include potential delays in construction timelines, equipment lead times, and permitting processes, as well as conditions attached to grants from the Government of Japan and its Ministry of Economy, Trade and Industry (METI). The company framed these as standard project risks that could affect timing and outcomes of the expansion if not managed effectively.