Tower plans $4bn Japanese hub for AI optical chips
Tower Semiconductor says it will invest about $4 billion with Japanese government support to expand silicon photonics, silicon-germanium and optical packaging capacity in Niigata and Toyama.
On September 25, Tower Semiconductor said it plans to invest about $4 billion to turn its Japanese operations into a major manufacturing hub for optical-connectivity chips used in AI infrastructure. The company’s two-stage programme would expand silicon photonics, silicon-germanium and advanced optical-packaging production in Niigata and Toyama prefectures. Tower says the project, backed by $1 billion in support from Japan’s Ministry of Economy, Trade and Industry, could raise Japanese capacity to the equivalent of 45,000 300mm wafers a month by 2029.
A two-track manufacturing plan
The first stage centres on Fab 6, an idle facility in Arai, Niigata Prefecture. Tower plans to convert the site from 200mm production to 300mm manufacturing for silicon photonics and advanced optical packaging. The company also intends to increase output at Fab 7 in Uozu, Toyama Prefecture, where it already produces silicon-germanium electronic integrated circuits, known as SiGe EICs, and silicon-photonics photonic integrated circuits, or SiPho PICs.
Tower has said this first stage should be ready for full-volume production in the fourth quarter of 2027. The company’s approach combines the reopening and conversion of an existing plant with additional equipment at an operating site, rather than waiting for a wholly new factory to be completed. Tom’s Hardware reported that Fab 7 is already qualified for mass production using Tower’s 65nm-class SiGe and 45nm-class silicon-photonics process technologies.
- Fab 6 in Arai is to be converted into a 300mm silicon-photonics and advanced optical-packaging site.
- Fab 7 in Uozu is to receive additional capacity for SiGe EICs and SiPho PICs.
- A new 300mm fab is planned next to Fab 7 as the project’s second stage.
- Tower says Japanese capacity could reach 45,000 300mm-wafer equivalents per month in 2029.
New fab planned beside Uozu operation
The second stage calls for construction of another 300mm factory adjacent to Fab 7 in Uozu. Tower says the new facility would multiply output of SiGe EICs and SiPho PICs. Under the planned arrangement, the Japanese network would combine component fabrication at Uozu with optical-engine assembly at the converted Arai plant. The company says this configuration is intended to support future work on co-packaged optics, a design approach that brings optical and computing components closer together.
Tower has not published a detailed timetable for the new plant’s construction or a technical roadmap for co-packaged optics. The company therefore presents the investment as preparation for that technology rather than as an announcement of a finished co-packaged-optics product. Tom’s Hardware also reported that Tower acknowledges Intel, TSMC and GlobalFoundries are currently ahead in co-packaged optics, an important qualification as competition for AI-related optical interconnect manufacturing increases.
Funding combines corporate spending and state aid
According to Tower, it will provide $3 billion of the planned investment while METI will contribute $1 billion, bringing the total to roughly $4 billion. The company cited Japan’s established technical base and skilled workforce as key reasons for expanding there. The state contribution places the project within Japan’s broader effort to reinforce domestic semiconductor production and supply-chain capacity, although the available material does not set out the detailed terms or conditions of the subsidy.
Tower projects that the completed programme will make its Japanese output roughly 40 times larger than its 2025 level by 2029. This is a company forecast, not an achieved production figure, and depends on the conversion work, the new-fab buildout and demand developing as expected. Tower also plans to add about 200 jobs. The source material does not specify the mix of engineering, manufacturing, construction or support roles, nor the timing of those hires.
Optical links are central to the AI infrastructure buildout
The investment is aimed at chips that move data through optical links in servers and other AI infrastructure. Silicon photonics integrates optical functions on silicon, while SiGe circuits can provide electronic functions that work with photonic components. Advanced optical packaging can join electronic and photonic integrated circuits into optical engines. As AI systems require large numbers of processors and rapid data exchange, suppliers are seeking more capacity for these components, although Tower has not identified customers or committed order volumes for the Japanese expansion.
Tom’s Hardware, citing Nikkei, reported that Tower controls more than 80% of the contract-production market for optical communications semiconductors used in servers and serves customers including Marvell. That market-share figure is attributed to Nikkei through the secondary report and is not independently detailed in the material provided. Tower itself has framed the project around growing AI-infrastructure demand, but it has not disclosed how much of the planned capacity is already contracted.
Ownership changes accompany the expansion
The plan also follows a restructuring of Tower’s Japanese manufacturing arrangements. Tower formed TowerJazz Panasonic Semiconductor in 2014 with Panasonic, which contributed factories in Uozu, Tonami and Arai. Following Panasonic’s exit from the semiconductor business in 2020, its stake moved to Nuvoton Technology Corporation Japan. Under an agreement announced in March 2026 and expected to close in April 2027, Tower is set to take full ownership and operating control of Fab 7 and its 300mm foundry business, while Nuvoton is to take full ownership of TPSCo and Fab 5 in Tonami.
For Japan, the proposal would add a sizeable optical-chip manufacturing programme to semiconductor investments already spreading across regional industrial centres. For suppliers, universities and skilled workers in Niigata and Toyama, the practical significance will depend on execution over the next several years: Fab 6 must be converted, Fab 7 expanded, the new fab built and the ownership transaction completed. Tower’s targets point to a substantial change in capacity, but the promised scale remains dependent on those planned milestones being met.
