Tower Semiconductor is investing $4 billion to establish a major optical connectivity hub in Japan, targeting 40x output growth by 2029 compared to 2025 levels.

Tower Semiconductor and Japan's Ministry of Economy, Trade and Industry (METI) plan to co-invest $4 billion to transform the company's Japanese operations into a major manufacturing hub for optical-connectivity semiconductors. Tower will contribute $3 billion while METI provides $1 billion. By 2029, the expansion will boost Tower's Japanese capacity to the equivalent of 45,000 300mm wafers per month—roughly 40 times current levels—and create approximately 200 jobs.

The expansion unfolds across two parallel tracks. Track One involves converting Tower's idle 200mm Fab 6 in Arai, Niigata Prefecture, into a 300mm facility for silicon photonics and advanced optical packaging—the bonding of electronic and photonic integrated circuits. Simultaneously, Tower will expand output at its 300mm Fab 7 near Uozu, Toyama Prefecture. Fab 7 already qualifies for mass production of Silicon-Germanium Electronic Integrated Circuits and Photonic Integrated Circuits across multiple process nodes, including the latest TPS65SG and other TPS65-series 65nm-class SiGe technology, as well as TPS45PHD 45nm-class SiPho manufacturing. This approach allows Tower to ramp output incrementally as equipment arrives, rather than waiting for an entirely new facility and process flows to qualify. Track One is scheduled to reach full production readiness in the fourth quarter of 2027, with Tower expecting approximately $3.6 billion in revenue and $1.2 billion in net profit in fiscal year 2028.

Track Two, running in parallel, is considerably more ambitious. Tower intends to construct another 300mm facility adjacent to Fab 7 in Uozu, substantially increasing output of Electronic Integrated Circuits and Photonic Integrated Circuits. This second stage is expected to contribute materially to Tower's financial results in 2029. Once complete, Tower will operate two sites in Japan producing these components and one—the converted Fab 6—assembling finished optical engines.

Tower controls more than 80% of the contract production market for optical communications semiconductors used in servers and serves industry leaders including Marvell. The investment reflects rapidly accelerating demand for optical connectivity in AI infrastructure. While companies like Intel, TSMC, and GlobalFoundries currently lead in co-packaged optics, Tower is positioning the Uozu site to eventually support CPO manufacturing. The company has not disclosed details on its CPO roadmap, but its latest process technologies for Electronic and Photonic Integrated Circuits should enable bringing optics closer to compute silicon.

The expansion coincides with a restructuring of Tower's Japanese operations. Tower established its Japanese presence in 2014 through TowerJazz Panasonic Semiconductor Co., holding a 51% stake with Panasonic retaining 49% and contributing three fabs. When Panasonic exited semiconductors in 2020, its stake transferred to Nuvoton Technology Corporation Japan. Under an agreement announced in March 2026 and expected to close in April 2027, Tower will assume full ownership and operational control of Fab 7 and its 300mm foundry business, while Nuvoton takes full ownership of Fab 5 in Tonami. At the same time, Tower is resurrecting Fab 6 in Arai as a 300mm SiPho and advanced optical packaging facility and planning to build an additional 300mm fab adjacent to Fab 7. What began more than a decade ago as a relatively inexpensive path to Japanese manufacturing capacity has evolved into a major Tower-owned production hub poised to multiply the company's output and revenue.