Tower Semiconductor Posts $414M Q1 2026, Pours $920M Capex Into 5x Silicon Photonics Expansion

By NineScrolls Team · 2026-05-13 · 4 min read · Industry

The Headline Numbers

Tower Semiconductor (NASDAQ/TASE: TSEM) reported first quarter 2026 results before the open on May 13, 2026, posting revenue of $414 million — up 15% year-over-year from $358 million in Q1 2025. Gross profit climbed 52% to $111 million, and operating profit nearly doubled to $65 million from $33 million a year ago.

Net profit attributable to the company was $65 million, or $0.58 basic earnings per share, compared with $40 million and $0.36 per share in the prior-year quarter.

The company guided Q2 2026 revenue to $455 million at the midpoint — a company record, representing 22% year-over-year growth and 10% sequential growth.

Silicon Photonics Drives the Story

The most striking line in the quarter sits in the cash flow statement: Tower received $290 million in prepayments from silicon photonics customers during Q1 alone. CEO Russell Ellwanger said the company holds $1.3 billion of contracted silicon photonics revenue for 2027 from its largest SiPho customers.

Tower is the dominant foundry for 1.6T and 3.2T optical transceivers used inside AI data centers, holding an estimated 85% market share for that segment. In February the company disclosed a deal with NVIDIA to manufacture 1.6T data center optical modules built around NVIDIA networking protocols, doubling the data rate of prior generations.

$920M Capex and the 5x Build-Out

Tower invested $156 million in property and equipment in Q1 2026. Full-year capex is now planned at $920 million — split between roughly $650 million of base spending and $270 million specifically directed at silicon photonics capacity. Management has stated the goal is to install and fully qualify all of this capex by Q4 2026, with full production starts in 2027.

The expanded build-out is targeted to deliver more than five times the annualized SiPho wafer shipment run-rate that Tower exited Q4 2025 at. That is one of the steepest single-platform capacity ramps any specialty foundry has committed to this cycle.

Uozu, Japan — Full Control of Fab 7

Ellwanger also highlighted Tower's restructuring transaction in Japan, announced March 25, 2026, in which Tower is taking full ownership of the 300mm Fab 7 in Uozu, currently operated through TPSCo. Nuvoton Technology Corporation Japan takes full ownership of the 200mm Fab 5 in the same deal.

Tower is planning a shell expansion on land adjacent to Fab 7 — contingent on METI subsidy approval — that would push combined Uozu 300mm capacity to four times its current level. Photonics processes are already qualified and shipping in volume from Fab 7, which Tower says will accelerate the ramp of the new shell. The transaction is expected to close by April 1, 2027.

Guidance Through 2028

Tower reiterated its 2028 model targets of $2.8 billion in annual revenue and $750 million in net profit. The company is guiding sequential quarter-over-quarter revenue and margin growth throughout 2026.

On May 5, 2026, S&P Maalot reaffirmed Tower's "ilAA" corporate credit rating and raised its outlook from "stable" to "positive."

What This Means for Plasma Processing and Thin Film Deposition

Silicon photonics is one of the most plasma- and deposition-intensive process flows in the foundry world. A 5x SiPho capacity expansion is a 5x equipment order book for specific tool categories.

Plasma etch. Photonic waveguides, grating couplers, edge couplers, and modulator structures are defined by deep reactive ion etch (DRIE) and high-aspect-ratio plasma etch with angstrom-level sidewall control. The taller the waveguide stack and the tighter the loss budget, the more etchers Tower needs per wafer start. Hardware drivers include high-density ICP plasma sources, advanced RF generators, and end-point detection systems.

Thin film deposition. SiPho stacks lean heavily on PECVD silicon nitride and silicon oxide for waveguide cores and cladding, PECVD amorphous silicon for some heterogeneous flows, and PVD metal stacks for low-loss contacts. Heterogeneous laser integration — the path Tower has taken with Scintil for DWDM lasers — adds plasma activation steps for wafer bonding and additional ALD for conformal coatings on III-V dies. Every one of those steps is a tool slot in the new Uozu shell.

Equipment supply chain. A capacity ramp of this size pulls demand across the entire upstream stack: plasma sources, RF matching networks, electrostatic chucks, gas delivery panels, mass flow controllers, vacuum pumps and abatement, high-purity precursor delivery for SiN and SiO2, sputter targets for metal layers, and process monitoring (OES, RGAs, in-situ ellipsometry). Tower's $920M outlay flows through these vendors before a single optical transceiver ships.