September 28, 2026 / SemiMedia / — Tower Semiconductor is moving ahead with a semiconductor expansion in Japan with a total project scale exceeding JPY600 billion, or roughly $4 billion, as the company builds additional 300mm silicon photonics, silicon germanium and advanced optical packaging capacity for rapidly growing AI data center connectivity demand. Japan's Ministry of Economy, Trade and Industry is providing support of up to approximately JPY160 billion.

The expansion is divided into two tracks. The first will repurpose the former Fab 6 facility in Arai, Niigata Prefecture, which previously operated as a 200mm fab, into a 300mm silicon photonics and advanced optical packaging platform. Tower will also maximize output from its existing 300mm Fab 7 in Uozu, Toyama Prefecture, with full production readiness targeted for the fourth quarter of 2027.

The second track involves construction of an additional 300mm manufacturing facility adjacent to Fab 7. The new fab is expected to substantially increase production of silicon photonics PICs and SiGe electronic ICs while complementing Tower's optical packaging operations, creating a more integrated manufacturing base for next-generation optical connectivity.

Recent reports citing the project plan indicate that Tower's Japanese operations could reach the equivalent of about 45,000 300mm wafers per month by 2029, roughly 40 times the 2025 level. Tower itself has said the second phase will deliver a multi-fold increase in Japanese 300mm output and is expected to become highly accretive beginning in 2029.

AI infrastructure is a major driver behind the investment. Larger GPU clusters are increasing bandwidth requirements between servers and racks, supporting demand for silicon photonics PICs, SiGe drivers and transimpedance amplifiers used in 800G, 1.6T and future optical links. Tower's silicon photonics revenue increased more than 270% year over year in the second quarter of 2026, reaching an annualized run rate above $680 million, with the company targeting a $1 billion run rate in the fourth quarter.

Tower said Japan's semiconductor manufacturing expertise, technical workforce and research infrastructure were important factors behind the expansion. The investment is intended to establish a major R&D and high-volume manufacturing base for silicon photonics, SiGe and advanced optical packaging while strengthening supply for AI and data center applications.

Tower expects to invest up to $3 billion on a net basis after taking Japanese government support into account. Reflecting the first phase of the expansion, the company is also targeting $3.6 billion in revenue and $1.2 billion in net profit in 2028.