Tower Semiconductor is spending $4 billion to turn its Japanese fabs into the world's biggest hub for optical-connectivity chips.
Tower and Japan's trade ministry, METI, are splitting the bill - Tower is putting up $3 billion, METI another $1 billion. The plan runs on two tracks. Track One converts an idled 200mm fab in Arai, Fab 6, into a 300mm facility for silicon-photonics and optical packaging, while ramping output at the existing Fab 7 near Uozu, which already mass-produces silicon-germanium and silicon-photonics chips. Track One is due to hit full production in the fourth quarter of 2027 and, Tower says, should generate $3.6 billion in revenue and $1.2 billion in profit by FY2028. Track Two, running in parallel, adds an entirely new 300mm fab next to Fab 7, pushing Tower's total Japanese capacity to the equivalent of 45,000 300mm wafers a month by 2029 - about 40 times 2025 levels - and adding roughly 200 jobs.
Tower already controls more than 80% of the contract manufacturing market for optical-communications chips used in AI servers, supplying customers like Marvell, so this reads less like a bet on future demand than a scramble to keep up with current demand. The buildout also closes the book on TPSCo, the Panasonic-founded joint venture Tower used to enter Japan back in 2014: Tower takes full ownership of Fab 7 when that restructuring deal closes in April 2027, while partner Nuvoton keeps Fab 5. It also sets the stage for co-packaged optics, a race where Tower is still chasing Intel, TSMC, and GlobalFoundries.
A 40-fold output jump by 2029 is the kind of projection that ages badly if AI infrastructure spending ever cools - and Tower is making that bet with a government partner's money as much as its own.