Wedbush: Tower Semiconductor (TSEM.US) SiPho capacity ramps up rapidly, Q2 revenue likely to exceed expectations

According to information from the Zhihu Finance APP, the investment bank Wedbush has released a report stating that Tower Semiconductor (TSEM.US) will announce its second-quarter results after the U.S. market close on Tuesday (August 4), and its revenue is expected to exceed market expectations. With the continuous ramp-up of silicon photonics (SiPho) capacity, the company’s outlook is set to become even clearer.

Wedbush analyst Matt Bryson noted in an investor report on Monday (August 3): “SiPho capacity has completed qualification in the first quarter and will make a more comprehensive contribution in the second quarter.” He said that Tower Semiconductor achieved first SiPho revenue shipments from Fab 2 and Fab 7 in the first quarter (with Fab 7’s first wafer yield reaching 95%), SiPho capacity utilization at Fab 9 is increasing (about 80%, compared to about 65% in the fourth quarter last year), and as new SiPho and SiGe qualifications are completed, Fab 3’s capacity utilization is recovering to around 85%.

Silicon photonics is a technology that uses light instead of electricity to transmit data. Tower Semiconductor is working with Marvell Technology (MRVL.US) to jointly develop silicon photonics integrated circuits to meet the growing bandwidth and energy efficiency needs of data center interconnect networks. As of mid-June, the two parties had shipped more than 5 million units cumulatively.

Last month, the Israel-based chipmaker announced plans to invest about $3 billion to expand its advanced semiconductor manufacturing capacity in Japan, and has already secured around $1 billion in subsidy support from the Japanese government. This expansion aims to meet the growing demand from AI and data center customers.

Bryson pointed out: “The first path is to transform the Arai plant (formerly Fab 6) to produce 300mm silicon photonics products and advanced packaging, with full-scale mass production expected by the fourth quarter of 2027, while maximizing output from the Uozu Fab 7. The second path is the construction of a new 300mm wafer fab near Fab 7, which is expected to multiply silicon photonics and silicon-germanium capacity and contribute to profits starting in 2029.”

Tower Semiconductor is scheduled to announce its second-quarter results after the U.S. market closes on Tuesday (August 4). The market generally expects adjusted earnings per share of $0.76 and revenue of $454.68 million.

Bryson added: “Management’s guidance for second-quarter revenue is $455 million ±5%, with the midpoint implying a 10% sequential increase and a 22% year-on-year increase. For the past eight quarters, Tower Semiconductor’s quarterly revenue has met or slightly exceeded the midpoint of guidance (actual first-quarter revenue was $413.6 million versus guidance of $412 million), and we believe it is unlikely that this trend will be broken in the second quarter, especially considering continued favorable pricing for bulk components.”