Silicon Photonics Foundry and Co-Packaged Optics

Tower Semiconductor (TSEM), headquartered in Migdal HaEmek, Israel, has become one of the world's most important silicon photonics foundries — manufacturing the optical transceivers that move data between AI accelerators in hyperscale datacenters. In November 2025, Tower announced new co-packaged optics (CPO) foundry technology on its mature 300mm platform, and plans to triple silicon photonics manufacturing capacity by mid-2026 as part of a $300 million investment. The company operates SiPho fabs in Israel, California, and Texas.

Silicon photonics replaces copper electrical interconnects with light-based communication on silicon chips, enabling dramatically higher bandwidth and lower power consumption for datacenter networking. As AI training clusters scale to tens of thousands of GPUs, the electrical interconnect bottleneck becomes the binding constraint on AI performance. Tower's foundry services enable fabless chip designers to build custom photonic integrated circuits without owning their own fabs.

Strategically, silicon photonics is the critical enabling technology for the next generation of AI infrastructure. Tower is one of only a handful of foundries globally with mature SiPho process technology, giving Israel an unexpected but significant role in the AI compute supply chain. Unlike Israel's better-known chip design activities (Hailo, Mobileye), Tower actually manufactures silicon — making it one of Israel's few domestic semiconductor fabrication capabilities and a strategically valuable asset in the global chip supply chain.