Tower Semiconductor expands Japan capacity fourfold with METI backing
Tower takes full control of its 300mm fab in Uozu as Japan's government doubles down on domestic chip production
Tower Semiconductor is reorganizing its Japanese operations in a way that could make it one of the more significant beneficiaries of Tokyo’s push to rebuild domestic chip manufacturing. The company announced on March 25, 2026 that it plans to quadruple production capacity at its 300mm facility in Uozu, Japan, contingent on subsidy approval from Japan’s Ministry of Economy, Trade, and Industry.
What’s actually changing at TPSCo
Tower currently operates in Japan through TPSCo, a joint venture with Nuvoton Technology Corporation Japan. The restructuring unwinds that partnership in a fairly clean way: Tower gets full ownership of the 300mm Fab 7, and Nuvoton takes full ownership of the 200mm Fab 5.
To make the math work, Nuvoton will pay Tower $25 million for the Fab 5 transfer. In exchange, Tower sets up a wholly owned Japanese subsidiary to hold Fab 7. Both companies will sign mutual long-term supply agreements to keep existing customers covered through the transition.
The deal is expected to close April 1, 2027, pending regulatory approvals.
Why photonics, and why now
Tower’s stated rationale for the expansion centers on rising customer demand for differentiated optical and photonics technologies. Photonics, which involves components that generate, detect, or manipulate light, is becoming foundational to data center interconnects, lidar systems, and medical imaging. Tower is positioning Fab 7 as the manufacturing base to capture that demand at scale.
Japan’s semiconductor policy as the real backdrop
TSMC’s Kumamoto fab, which received substantial METI backing, became the template for Japan’s reinvestment campaign. Tower’s expansion follows the same playbook, with METI subsidies functioning as the central mechanism through which Japan is reshoring semiconductor output.
Tower’s stock trades on both NASDAQ and the Tel Aviv Stock Exchange under the ticker TSEM. The company has historically positioned itself as a specialty foundry, focusing on differentiated process technologies rather than competing head-on with TSMC or Samsung in leading-edge logic.
The $25 million payment from Nuvoton for Fab 5 gives Tower a clean balance sheet entry as it transitions to sole ownership of the 300mm operation. The long-term supply agreements between Tower and Nuvoton create a demand floor for both facilities post-split.