Tower puts $3B into Japan optical-chip capacity, reviving a dead fab

Tower Semiconductor is spending up to $3 billion to expand silicon photonics production in Japan, converting a shuttered Panasonic-era plant.

Tower Semiconductor announced a two-track expansion of its 300mm silicon photonics, silicon germanium, and advanced packaging operations in Japan, committing up to $3 billion net of grants with backing from Japan's Ministry of Economy, Trade and Industry. Track One converts the former Panasonic-era Arai fab, shut since July 2022, into a 300mm silicon photonics plant designated Fab 6, expected production-ready in the fourth quarter of 2027, alongside an expansion of Fab 7 in Toyama Prefecture. The company raised its 2028 target to roughly $3.6 billion in revenue and $1.2 billion in net profit.

The demand behind this is concrete. Tower's silicon photonics revenue reached $228 million in 2025, more than double the prior year, and it has disclosed $1.3 billion in contracted 2027 silicon photonics revenue from its largest customers, backed by $290 million in prepayments. Customers include Innolight, building 400G through 1.6T transceivers, and Marvell, which reported shipping over five million coherent photonic ICs made with Tower.

Optical chips are the plumbing of AI and data center networking, moving data as light instead of electrons. More foundry capacity means the components that carry AI traffic get more available and, over time, cheaper to source. A third-party estimate puts the silicon photonics market at $2.65 billion in 2025, growing to $9.65 billion by 2030.

Watch the Arai timeline and Track Two, which has no signed agreements yet. Tower itself flags risks from construction delays, equipment lead times, permitting, and grant covenants. Margins also assume sustained demand from a concentrated group of large customers through 2028.

Source: Tom's Hardware