Tower Semiconductor has signed silicon photonics customer contracts valued at $1.3 billion in projected 2027 revenue, underscoring surging demand for optical connectivity technologies supporting AI infrastructure and hyperscale data centers.
The company also announced it received $290 million in customer prepayments for production capacity reservations. Tower said these commitments represent reserved manufacturing capacity, while actual customer demand forecasts for 2027 are expected to be higher.
Tower further disclosed that it has secured an even larger contractual wafer commitment for 2028. Additional customer prepayments linked to those agreements are expected by January 2027.
The announcement reflects the growing role of silicon photonics in AI computing infrastructure. The technology integrates optical communication functions directly into semiconductor chips, enabling faster data transfer speeds, lower latency, and improved power efficiency compared with conventional electrical interconnects.
Demand for silicon photonics is rising rapidly as cloud providers, AI companies, and semiconductor firms scale infrastructure for large AI model training and inference workloads. Optical interconnect technologies are increasingly viewed as critical for handling growing data traffic inside data centers and high-performance computing systems.
Tower said its silicon photonics business now supports more than 50 active customers across multiple applications, including AI networking, cloud computing, optical communications, and advanced data center systems.
To support increasing demand, the company is expanding silicon photonics manufacturing capacity across its global multi-fab network. Tower said the capacity ramp is part of its broader financial roadmap targeting $2.8 billion in revenue and $750 million in net profit by 2028.
Russell Ellwanger said the long-term agreements strengthen Tower’s strategic position in the rapidly growing optical connectivity market. He said the customer commitments reflect confidence in the company’s silicon photonics roadmap and manufacturing scale as AI infrastructure requirements continue expanding.
Tower’s current technology portfolio supports pluggable optical transceivers widely used in modern data centers. The company is also investing in next-generation Near-Packaged Optics (NPO) and Co-Packaged Optics (CPO) technologies aimed at increasing bandwidth density while reducing power consumption and latency.
The company said it is also advancing technologies for future AI hardware architectures. These include 400GHz-per-lane modulators and detectors, optical circuit switching systems for low-latency networks, high-power dense wavelength division multiplexing (DWDM) lasers, and hybrid bonding technologies for 3D integrated circuit packaging.
Tower confirmed ongoing collaborations with customers on emerging modulator technologies based on thin-film lithium niobate (TFLN), indium phosphide (InP), silicon electro-absorption modulators, microring modulators, and microLED technologies for ultra-dense data transmission applications.
The company said these investments are intended to support future generations of AI networking and optical communication infrastructure as global demand for high-speed data connectivity continues to accelerate.
