Tower Semiconductor announced a major capital expansion in Japan totaling $3 billion, accompanied by $1 billion in grants from the Japanese government. The Israeli foundry said the investment is aimed at meeting mounting demand from artificial intelligence and data center workloads by boosting production of silicon photonics and silicon-germanium (SiGe) process technologies.
Following the announcement, the company's shares listed in the United States jumped more than 18% in premarket trading. The move signals investor support for Tower's strategy to increase capacity in technologies the company says can move data faster between AI chips and deliver faster, more energy-efficient semiconductor devices.
The capital program will be executed in two parallel phases. The initial phase converts Tower's Arai site - previously known as Fab 6 - into a 300-millimeter silicon photonics manufacturing line. Tower expects that converted capacity to be in full operation by the fourth quarter of 2027.
At the same time, the company will commence a second phase to construct an additional 300mm fabrication facility adjacent to its existing Fab 7. Tower said this second track is intended to create a pathway for continued growth beyond the initial ramp.
Management updated its financial outlook tied to the expansion. Tower now expects 2028 revenue of $3.6 billion and net profit of $1.2 billion, up from prior projections of $2.8 billion in revenue and $750 million in net profit. The company has linked these higher targets to the additional capacity that will come online as the expansion progresses.
Russell Ellwanger, Tower's chief executive officer, commented on the longer-term trajectory for the new facility program, saying, "We anticipate track two to provide the path for continued growth far beyond 2028."
The announced program focuses on two specific technology areas. Silicon photonics uses light to transfer data at higher speeds between AI processors, a capability that supports heavy interconnect and throughput needs in data centers. SiGe technology, Tower noted, enables semiconductor devices that are both faster and more energy efficient - attributes that are often prioritized in networking, communications and compute infrastructure.
Sectors affected: semiconductor manufacturing, artificial intelligence hardware, and data center infrastructure.