Tower Semiconductor (NASDAQ:TSEM) has announced plans to invest $3 billion to expand its semiconductor manufacturing footprint in Japan, with the project receiving $1 billion in financial support from the Japanese government.
The announcement sent the company’s U.S.-listed shares more than 18% higher in premarket trading as investors welcomed the move to increase production capacity for fast-growing artificial intelligence and data centre markets.
Expansion Targets Next-Generation Semiconductor Technologies
The investment will focus on expanding manufacturing of silicon photonics and silicon-germanium technologies.
Silicon photonics enables faster data transmission between AI processors using light, while silicon-germanium technology supports the development of higher-performance, more energy-efficient semiconductor devices.
Tower said the investment is designed to meet increasing global demand for advanced chips used in AI infrastructure and data centres.
Two-Phase Development Plan
The project will be carried out in two stages.
During the first phase, Tower will convert its Arai manufacturing facility in Japan, previously known as Fab 6, into a 300-millimetre silicon photonics production site. Commercial operations are expected to begin during the fourth quarter of 2027.
Following the initial expansion, the company forecasts revenue of approximately $3.6 billion and net profit of $1.2 billion in 2028, compared with its previous outlook of $2.8 billion in revenue and $750 million in net income.
The second phase will begin alongside the first and includes the construction of an additional 300mm semiconductor fabrication facility adjacent to the company’s existing Fab 7 site.
“We anticipate track two to provide the path for continued growth far beyond 2028,” Tower CEO Russell Ellwanger said.
Investment Strengthens Long-Term Growth Strategy
The expansion reinforces Tower Semiconductor’s strategy of increasing manufacturing capacity in advanced semiconductor technologies as demand accelerates across artificial intelligence, cloud computing and high-performance data processing.
With substantial backing from the Japanese government, the project is expected to strengthen both Tower’s long-term production capabilities and its position within the rapidly expanding global AI semiconductor supply chain.
Tower Semiconductor stock price
