Tower Semiconductor is spending up to $3 billion to turn a shuttered Japanese fab into a silicon photonics factory, with Japanese government backing and a revised financial target that more than doubles its 2025 revenue.
The Israeli specialty foundry is converting the former Arai facility — idle since July 2022, when it served a single customer rather than Tower's broader foundry base — into a 300mm silicon photonics and optical packaging plant, designated Fab 6. Alongside that, it's expanding Fab 7 in Uozu, Toyama Prefecture, which it gained full ownership of after restructuring a joint venture with Nuvoton in March 2026. Both plants are expected to reach production readiness in the fourth quarter of 2027. A second track, a new 300mm fab adjacent to Fab 7, remains unsigned and contributes nothing to the 2028 targets. Tower's revenue grew from $1.436 billion in 2024 to $1.566 billion in 2025, led by silicon photonics, which nearly doubled to $228 million. The new 2028 model projects $3.6 billion in revenue and $1.2 billion in net profit — a net margin of roughly 33%, against about 14% today. Tower says $1.3 billion in silicon photonics revenue for 2027 is already under contract, backed by $290 million in prepayments collected from customers including Marvell and Innolight.
The choice to reuse a dormant building next to a qualified fab matters more than it might look. Tower's CEO contrasts it explicitly with greenfield construction — a dig at rivals like Rapidus, which broke ground in Chitose in 2023 and won't reach mass production until 2027. Japan's METI, which has already committed billions to TSMC, Micron, and Rapidus, appears to be making its first major bet on a dedicated silicon photonics foundry. The silicon photonics market is estimated at $2.65 billion in 2025 and projected to reach $9.65 billion by 2030.
Three years ago Tower nearly disappeared into Intel before the $5.4 billion deal collapsed on Chinese regulatory inaction. Now it's making the largest capital commitment in its history — in a market where GlobalFoundries, a direct rival it's currently fighting in court, just paid $453 million to build out its own photonics capability. The 2028 targets are ambitious and hinge on AI data center demand staying strong from a concentrated customer base, a risk Tower discloses in its own filings.