Tower Semiconductor to invest $4 billion in Japan for AI optical chip hub

Tower Semiconductor has announced a $4 billion investment plan to transform Japan into a major hub for AI optical communication chips. The expansion aims to meet the rising demand for high-bandwidth data center connections required by AI infrastructure.

The project will be executed in two phases. The first phase involves converting the idle Fab 6 facility in Arai, Niigata Prefecture, into a 300mm silicon photonics and advanced optical packaging plant. Simultaneously, the company will increase production capacity for silicon-germanium (SiGe) and silicon photonics (SiPho) at Fab 7 in Uozu, Toyama Prefecture. This initial phase is expected to reach full production readiness by the fourth quarter of 2027.

The second phase includes the construction of a new 300mm wafer fab adjacent to Fab 7 to further scale SiGe and SiPho capacity. By 2029, Tower Semiconductor expects its Japanese capacity to reach 45,000 300mm wafers per month, representing a 40-fold increase from 2025 levels. The total investment is comprised of $3 billion from Tower Semiconductor and a $1 billion subsidy from Japan’s Ministry of Economy, Trade and Industry.