Tower Semiconductor to Invest $3 Billion in Japan Expansion, Boosts 2028 Outlook

Tower Semiconductor announced Tuesday it will invest $3 billion to expand its chip manufacturing operations in Japan, a move aimed at capitalizing on surging demand from the artificial intelligence and data center sectors. The investment is supported by $1 billion in grants from the Japanese government.

Expansion Plan and Government Support

The project will proceed in two phases to increase the company's 300-millimeter wafer production capacity. According to the announcement, the first phase involves converting Tower’s Arai facility, known as Fab 6, for advanced silicon photonics manufacturing. The company expects this facility to be fully operational by the fourth quarter of 2027.

The second phase, which will begin concurrently, involves constructing an additional 300mm manufacturing facility adjacent to the company's existing Fab 7. Tower CEO Russell Ellwanger stated this second track will "provide the path for continued growth far beyond 2028."

Strategic Focus and Updated Financials

The expansion will focus on specialized technologies critical for AI applications. These include:

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• Silicon photonics, which uses light to transfer data more rapidly between AI chips.
• Silicon-germanium technology, which enables the creation of faster and more energy-efficient semiconductor devices.

Reflecting the anticipated growth from this expansion, Tower Semiconductor significantly raised its financial projections. The company now expects 2028 revenue to reach $3.6 billion and net profit to hit $1.2 billion, up from previous forecasts of $2.8 billion and $750 million, respectively.

Market Reaction

Investors responded positively to the news. In the wake of the announcement, Tower Semiconductor's U.S.-listed shares (TSEM) surged more than 18% in premarket trading on Tuesday.