Tower puts Japan at the center of its optical-chip strategy
The Israeli chipmaker plans to make Japan its largest production hub for optical chips and already has $1.3 billion in contracted Silicon Photonics revenue for 2027.
Tower Semiconductor is making Japan the center of its global optical-chip manufacturing strategy, with CEO Russell Ellwanger telling Nikkei Asia that the country will become the Israeli chipmaker’s largest production hub for optical chips.
Tower is investing approximately $3 billion in its Japanese operations, backed by about $1 billion in grants from the Japanese government. The expansion is aimed at meeting growing demand for Silicon Photonics and Silicon Germanium chips used in AI and data-center infrastructure.
The investment will expand Tower’s existing Japanese manufacturing footprint rather than rely solely on a new factory. The company plans to convert its Arai facility, formerly known as Fab 6, into a production site for 300mm Silicon Photonics and advanced optical packaging, while increasing output at its Fab 7 facility in Uozu.
That first phase is expected to reach full production readiness in the fourth quarter of 2027.
Tower will then build a new 300mm manufacturing facility next to Fab 7. The company says the new plant will increase its Silicon Photonics and Silicon Germanium capacity several-fold and begin making a significant financial contribution from 2029.
The scale of the expansion reflects the demand Tower is seeing for optical chips. Tower has contracts representing about $1.3 billion in Silicon Photonics revenue for 2027, while customers have already made about $290 million in prepayments to reserve capacity. Contracted wafer commitments for 2028 are even larger.
The technology has become increasingly important as AI systems grow more powerful and data centers need to move enormous amounts of data between processors and other components. Silicon Photonics uses optical rather than conventional electrical connections to move data at high speeds.
Tower has consequently raised its financial targets. It expects to generate $3.6 billion in revenue and $1.2 billion in net profit in 2028, compared with $1.6 billion in revenue and $220 million in net profit in 2025.
The Japanese expansion will be carried out through Tower’s local operations, including facilities held through its majority ownership of TPSCo, the former Panasonic Semiconductor manufacturing business. Tower is also planning to expand cooperation with Japanese suppliers, universities and research institutions.
