Tower Semiconductor and Japan’s government plan to invest a combined $4 billion in the company’s Japanese operations, aiming to turn regional fabs into a major manufacturing base for optical-connectivity semiconductors. The project, reported by Nikkei, is driven by growing demand for optical engines in AI infrastructure. Tower will contribute $3 billion, while Japan’s Ministry of Economy, Trade and Industry (METI) will provide $1 billion.
The expansion is split into two tracks. Track One converts Tower’s idle 200mm Fab 6 in Arai into a 300mm facility for silicon photonics and advanced optical packaging, while expanding output of SiGe electronic integrated circuits and silicon-photonic photonic integrated circuits at the existing 300mm Fab 7 in Uozu. Track Two adds another 300mm fab next to Fab 7. Together, the plan lifts Tower’s Japanese capacity to the equivalent of 45,000 300mm wafers per month by 2029, roughly 40 times 2025 levels.
Tower expects Track One to reach full production readiness in Q4 2027 and to generate about $3.6 billion in revenue and $1.2 billion in net profit in FY2028. Track Two should contribute materially starting in 2029. The company also plans to hire about 200 people. According to Nikkei, Tower controls more than 80% of the contract production market for optical communications semiconductors used in servers, with customers including Marvell.
The investment coincides with a restructuring of Tower’s Japanese operations. Under an agreement announced in March 2026, Tower will take full ownership of Fab 7, while Nuvoton Technology Corporation Japan will take full ownership of TPSCo and Fab 5 in Tonami. Tower acknowledges that Intel, TSMC, and GlobalFoundries are ahead in co-packaged optics, but says the Japanese investment is also meant to lay groundwork for its own CPO plans, which have not yet been detailed.