Tower Semiconductor to invest $3 billion in Japan, backed by government grants

July 14 : Israeli chipmaker Tower Semiconductor said on Tuesday it will invest $3 billion to bolster chip manufacturing in Japan, including $1 billion in grants from the Japanese government.

U.S.-listed shares of the company rose more than 18 per cent in premarket trading after the announcement, which is expected to support growing AI and data center demand.

The move aims to help the company's production of silicon photonics - which uses light to move data faster between AI chips - and silicon-germanium technology, which enables faster and more energy-efficient semiconductor devices.

The expansion will occur in two phases, with the first phase involving converting Tower's Arai facility in Japan, formerly Fab 6, for 300-millimeter silicon photonics production, with full operations expected by the fourth quarter of 2027.

Following this initial capacity expansion, Tower said it expects its 2028 revenue to reach $3.6 billion and net profit to hit $1.2 billion, compared with its previous expectations of $2.8 billion in revenue and $750 million in net profit.

Tower said the second phase will begin simultaneously with the first, to build an additional 300mm manufacturing facility next to the company's existing Fab 7 facility.

"We anticipate track two to provide the path for continued growth far beyond 2028," Tower CEO Russell Ellwanger said.