Israel’s Tower Semiconductor plans to build its largest optical communications semiconductor production hub in Japan, backed by a planned $4bn investment, CEO Russell Ellwanger told Nikkei Asia.
The move responds to growing demand for silicon photonics, technology that combines optical components with silicon chips to boost speed and energy efficiency in artificial intelligence (AI) servers.
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Tower produces chips that adjust optical signals and convert them into electrical signals, components used in Nvidia’s AI servers.
By 2029, the investment is set to lift Tower’s Japan production capacity to the equivalent of 45,000 300mm wafers monthly, roughly 40 times last year’s capacity.
Tower entered the Japanese market in 2014 by acquiring a factory from Panasonic and currently runs three manufacturing sites there, in addition to facilities in Israel and the US.
In July, the firm confirmed plans to commit $4bn across two of its Japanese plants for mass production of silicon photonics semiconductors and associated capabilities, including $1bn in support from Japan’s Ministry of Economy, Trade and Industry.
Ellwanger pointed to Japan’s advanced technological foundation and the skills of former Panasonic staff as major reasons behind the decision.
Tower intends to introduce co-packaged optics and related earlier-stage production processes at its Toyama prefecture facility.
Co-packaged optics, which involves fitting optical components and chips onto a shared substrate, is a field currently led by TSMC, and one where Tower aims to narrow the gap.
Ellwanger noted that a possible collaboration with Japan’s NTT group on silicon photonics could not be ruled out, though he gave no further details.
Tower said the expanded capacity would let it prioritise sales to Japan, potentially strengthening the country’s domestic supply chain for AI-related infrastructure.
According to the report, the company holds over 80% of the contract manufacturing market for optical communications semiconductors used in servers, ahead of TSMC and GlobalFoundries.
