Q3 2025 Tower Semiconductor Ltd Earnings Call
Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to today's Tower Semiconductor third quarter 2025 earnings conference call. At this time, all participants are in listen-only mode. There will be a presentation followed by a question and answer session, at which time if you wish to ask a question, you will need to press *1, 1 on your telephone keypad and wait for your name to be announced.
A master advisor that this conference has been recorded today.
I would like to hand the conference over to a speaker today. Miss no Levy, senior vice president of investor relations and Human Resources. Please go ahead. Madam.
Thank you. Good day, and thank you everyone for joining us. Welcome to Tower Semiconductor's third quarter 2025 financial results conference call. With us today are our CEO, Dr. Russell Ellwanger; our President, Mr. Oren Shirazi; and our CFO, Mr. Orange Chiurazzi.
before we begin, please know that certain statements made. During this call, may be followed looking and are subject to risks and uncertainties that could cause actual results to defer materially. These risks are detailing, our FTC filings from 20, F and 6K, as well. As filings with the Israeli Securities, Authority. All available on our website, Tower films, no obligation to update for all looking statements,
Oh service. Go to 2025 results in accordance with us. Gaap some data presented. May include non-gaap Financial measures as defined under SEC regulation. G reconciliation to get figures and full. Explanations are provided in. Today's press release and financial tables.
For your reference are supporting slide. Deck is available on our website and integrated into this webcast.
With that, I'd like to turn the call over to our CEO, Mr. Raser Russell.
Hello everyone.
Thank you for joining this earnings call.
We are in the best position.
Growing our core Technologies.
Power management. CMOS image sensors.
65 nanometer AREF mobile, each of which is demonstrating year-over-year revenue growth.
Providing an excellent foundation on top of which the extreme AI driven data. Center demand for our silicon photonics and silicon geranium. RF platforms. Is driving unprecedented company growth
At 396 million resulting in net profit of 54 million.
We guide our fourth quarter to be a revenue record of $440 million, plus or minus 5%.
For the filling or beginning of year target of quarter-over-quarter growth throughout the year, with strong acceleration in the second half.
This underscores the increasing demand momentum we see in our served markets.
And as well, there are the results of further manufacturing capabilities.
Namely, the very first step of a large wrap having repurposed with added capacity for factories, towards new Andor, stronger silicon photonics, and silicon germanium capabilities.
The fourth quarter guidance, indeed demonstrates. The burgeoning trajectory we are on
In the following minutes, we will present the successes that we share with our customers, driving top and bottom line growth over the years to come.
Now, to review our third quarter of 2025 revenue breakdown and discuss the key trends, please see slide 4 as reference.
Our RS infrastructure business continues to deliver exceptional growth.
Increasing its contribution to corporate revenue from $67 million, or 18% of corporate revenue in the third quarter of last year, to $107 million, or 27% for the third quarter of this year.
For the full year, we expect this business to grow by 75%.
With silicon photonics, more than doubling.
From the 2024, 105 million.
This significant expansion reflects the strong customer adoption of our Advanced Technologies and validates our strategic investments in these markets.
The momentum we are seeing positions are of infrastructure, silicon photonics, and silicon Romania platforms.
As a key pillar for our long-term growth.
4 to 5 and propelled by Deep Partnerships based Innovations with the foremost industry. Titans
Our silicon photonics business grew in the third quarter to $52 million.
Approximately 70% growth as compared to the third quarter of 2024.
Market demand for silicon and photonics continues to surge.
Driven by a stronger than anticipated wrap at 1.6, T products on top of a robust, 400g, and 800g demand.
We have expanded capacity with our Advanced Cipo Platforms in Fab 9, San Antonio, having shipped revenue wafers in the third quarter, and expecting multiple thousands to be shipped in the fourth quarter of this year.
We are in advanced stages of qualifications and Fabu Israel.
Expecting our first production shipments in the first quarter of 2026.
In 300 mm we have started way for production for the Innovative received products. We announced last quarter and anticipate Revenue contribution from 300 mm silicon photonics to start in the fourth quarter of this year.
Our capacity growth is fully aligned with, and spoken to by, our customer demand outlook.
Silicon photonics continues to increase market share over EML solutions, given its significant cost advantage.
Thyo typically requires half the number of lasers as an equivalent EML product, with performance benefits especially seen at 1.6.
As such, we anticipate this market share shift to be permanent.
Hence.
We are at this point going to add additional capex to address and even increased surging demand.
Looking at Next Generation, 3.2t data rates which will require a doubling of speed for each lane. From the current 200 gigabit per second to 400 gigabit per second. We have multiple programs with industry leaders to both extend silicon capability.
But we are also pursuing integrating in the emphasized, modulators for our previous announcements with open light and as well, our investigating other material systems to ensure that our customer Partnerships are not just ready.
But leading the transition to next generation requirements for 3.2 and 6.4.
In the past quarter, in partnership with Escape Photonics and Nvidia-backed startup, we delivered the industry's first optically pumped on-chip multi-wavelength laser platform for AI data center fabrics.
Leveraging our high-volume Cipher platforms.
We showcase these advancements along with others at a highly successful Tower. Technical Symposium event in China with approximately 300 attendees, where we opted to link delivered, the keynote addressing Towers role and supporting phenomenal market growth.
Later this month, we anticipate another great.
TGs event in Santa Clara with broadcast president Charlie kawas, delivering the invited customer Keynote.
Looking at silicon geranium.
Silicon geranium, transimpedance. Amplifiers and Laser drivers are essential components for optical transceivers.
The growth inside your demand is a function of data center buildout, be it Cipo or EML base solutions, with an additional accelerator. The adoption of linear pluggable optics.
Due to the elimination of the DSP in the lpo module.
Lpo requires both the driver for transmit and the Tia for receive to have an added function of continuous time. Linear equalizer, which significantly adds to the Silicon area of each of the Tia and drivers hence nicely increasing the amount of silicon needed for units.
Multiple Saige customers have begun material, lpo production volumes indicating a clear upward Trend in this market.
We started silicon geranium. Production sap 2 of our most advanced IG platforms and are seeing eager adoption by lead. Customers driving manifolds additional contributions to Saige capacity and shipments projected to Rob throughout 2026 and delivering High volumes thereafter.
In addition to infrastructure, we have secured a new billing geranium, low noise, amplifier designed for a tier 1. Handset customer with an initial wrap in Q4 255.
And then proceeding through 2026 and Beyond adding a significant New Growth opportunity to our existing leading market, share and Optical transceivers, as discussed itself being a high growth Market.
Moving to RF mobile.
It represented about 26% of our Q3 255, corporate Revenue.
RFS SOI has shown steady quarter-over-quarter demand increases with our more advanced 65-nanometer 300 mm platform at higher than 20% increase in the second half of 2025 over the second half of 2024.
We released this quarter and updated RSLI technology that not only provides double-digit better Ron relative to our competitors, as measured by multiple Tier 1 customers, but also reduces layer count by 15%, improving our customers' margins and hence enhancing our market share.
This technology also allows customers the freedom to make a trade-off between the better or the off.
To enable a smaller die size or to have higher power handling. And as such we are seeing strong customer traction, providing much confidence in multi-year growth.
This quarter, we made important advancement in our sensor and displays Technologies which represented 14% of our third quarter, corporate revenue and expected to show big teens full year over year growth.
We received our first production Poe for q1 26 shipments for OLED display backplane silicon.
And continue to enhance this offering having added high-speed logic and high-speed, SRA capabilities, enabling support for 120 HZ, refresh rates critical for next Generations of VR and Mr. Applications
Medical and photography.
Sensor Revenue remains stable while the majority of our growth and strongest position is in Machine Vision where we Supply. The second largest player in this market in addition to other key customers.
Power management represented, 17% of our third quarter, corporate Revenue.
Our power business has performed. Well targeting a year-over-year growth of 15% with disproportionately higher growth for advanced 300 million platforms 1 driver of which being the strong ramp of the handset envelope, tracker etec volume expected to continue through the next multi-year.
Targeting the growing Market of data center power.
% lower RDS than prior technology as well. Introduce new elements to our 1.2V, 3.3V, 65-nanometer BCD flow, improving power conversion efficiency aligned to our key customer needs.
The wireless charger IC Market is growing rapidly and demanding, higher voltage, LD Moss to that end working closely with lead customers. We have provided a 40 volt extension to our 300, mm, BCD process.
Specific automotive and Battery management applications. We have multiple engagements for a differentiated 140 volt resurf flow allowing higher voltages without the need for the added High expense of SOI substrates.
We've continued to add to the competitiveness of this platform greatly reducing the cell size through added features and optimized architecture.
Silicon photonics.
To upgrade to update on the progress.
Qualification initial wraps are going well with hundreds of silicon geranium. Wafers shipped in Q2 and thousands in Q3 Q3 from fab 9 in San Antonio.
We met our first internal milestone of customer CIPO shipments in Q3 from San Antonio, with several thousand planned to ship in Q4.
Fab 2 Mick. Israel is on track to ship our first and meaningful number of silicon geranium. Wafers in Q4 2525 and silicon, photonic wafers in q1, 26.
Additionally, we expect to see our first production revenue for cipo at 300, mm, in Fab 7. In this present quarter Q4.
therefore, while we're in the final qualifications and initial ramp of the repurposed Fabs and added capacity, our third quarter utilization level,
Fab 2 in Israel operated about 65% utilization.
Fab 3, maintained our model full utilization of 85% with growing activities for cipo capacity.
Fab 5. Was it 75% utilization?
Fab 7 300 mm was fully utilized, well above our 85% utilization model.
Fab 9 was at 60% utilization.
In summary, what a position to be in with all our core technologies demonstrating year-over-year revenue growth.
The right technologies rolling with the right customers.
On top of this, a long-term silicon geranium, leadership Optical transceivers.
Coupled with correct Market. Insights namely believing in the benefits of silicon photonics having begun. 8 years ago with the right partner and adding those who have become the most momentous adopters of this technology has enabled Us by far to be in the lead position for silicon photonics, manufacturing and development.
This is proven timely to meet the soaring demands of data center, technology, roadmap and build out.
A present and future pathway.
For unprecedented growth for Tower.
In close collaboration with our customers, we have advanced both capacity, increases and Technology roadmap deliverables. Real time addressing the rocketing requirements, for AI infrastructure.
specific to demand-driven capacity, expansions
We target 2025, silicon photonics Revenue to be above 220 million up from 105 million in 2024.
And very importantly at a q425 annualized, revenue, run rate exceeding 320 million.
The 320 million cycle run rate is enabled by the very first steps in qualification in wrap of the previously announced 30050 million investment.
We have begun and additional investment of dollars for further substantial Cipher capacity expansion.
And next-generation capabilities in Fab 3, Fabric 2, and Fab 7.
This investment, targeted to achieve full volume and wafer starts in the second half of 2026.
The total the total capacity is fully aligned to and directly requested by our customers.
The resultant capacity should increase our stipo shipment by over 3x.
Against our targeted, fourth quarter, 25 qualified utilized capacity.
With that, I'd like to turn the call over to our CFO, Mr. Oren Shirazi.
Hello, everyone earlier today, we released our quarterly Financial results and balance sheet.
For the third quarter of 2025, we reported revenue of $396 million, reflecting a year-over-year revenue increase of 7%.
And a quarter of a quarter revenue increase of 6%.
Gross profits for the first quarter was 93 million.
16% higher compared to 80 million in the second quarter and operating profit was 51 million. 27% higher sequentially compared to 40 million in the second quarter.
Net profit for the quarter was $54 million, 15% higher compared to net profit of $47 million in the second quarter.
And earnings per share were 48 cents, basic, and 47 cents, diluted, as compared to 42 cents, basic, and 41 cents diluted earnings per share reported for the second quarter.
Newport Beach families extension.
Ation of our Newport Beach pub. We are extending the Newport Beach pub by up to an additional 3.5 years beyond its previous 2027 term.
An upfront lease payment of 105 million will be recorded as cash used for operating activities in our q425 statement of cash flow with corresponding impact on our balance sheet cash amount.
While the resulted P&L impact would be.
As announced earlier today, $6 million per quarter will be recorded over a 5-year period as required by GAAP in the COGS line.
Hedging, I would like now to inscribe our currency hedging activities in relation to the Japanese Yen, since the majority of TPS cause revenues is denominated in the end and the vast majority of TPS cuz cost are in yen.
We have a natural hedge over most of our Japanese business and operations.
To mitigate part of the remaining Yen exposure. We are executing zero cost cylinder transactions.
To hedge against currency fluctuations, hence while the yen rate...
Against the dollar, May fluctuate; there is limited impact on our margins.
In relation to the Israeli shekel currency, while we have no revenues in this currency, a portion of our costs in Israel is denominated in this shekel currency.
We also had a large portion of such currency Risk by engaging, zero cost cylinder transactions, to mitigate this exposure. Hence,
While the shekel rate against the dollar May fluctuate, the impact on our margins is limited.
Moving to our balance sheet and future cash and cash and cash plans. As I noted earlier, our balance sheet remains very strong as evidenced by the following indicators and financial ratio.
As of the end of September 2025 our assets total over 3 billion dollar primarily comprised of 1.4 billion in fixed assets, net.
Mainly comprised of fehb machinery.
And 1.8 billion of current assets.
Current assets ratio is very strong at about 7 x, while shareholders Equity reached our record of 2.8 billion at the end of September 2025.
Our strong financial position allows us to invest in strategic opportunities that support our corporate Vision as follows.
For our high margin 54 and 5G business. We previously announced plans to invest 350 million to expand our capacity in our 8 inch web Fabs in Israel and Texas.
And in our 12-inch US fab in Japan, this capex includes a large portion of capability capex for advanced development and high-end RF technology related projects.
50% of this amount has been paid today. While the remaining 50% are expected to be paid in the coming year.
In addition, as we announced earlier today, we have decided to allocate an additional million dollar investment.
For capacity growth and next generation capabilities, mainly for machinery for additional 54 and psychic capacity growth for our 8-inch PEP, and for our 12-inch web.
This would put total 5.5 G capacity, and capabilities, related capex, plan as an aggregate of 650 million.
All of these Investments are fully reflected in our previously presented strategic and financial model.
Under this model, we are targeting 2.7 billion in annual revenues at full loading of our existing fed.
And qualified capacity including the previously stated capacity expansion plans.
560 million in annual operating profits and 500 million in annual Network.
That concludes my prepared remark. Now I'd like to turn the call back to the operator.
So we can take your question.
Thank you. Dear participants. As a reminder, if you wish to ask a question. Please press star 1 1 on your telephone keypad and wait for a name to be announced to withdraw a question. Please, press star, 1, 1 1, again please stand by this will take a few moments.
And now we're going to take our first question.
And it comes to the line of Kodi agree from Investment Bank. Your line is open. Please, ask your question.
Yeah, yeah, it may mean that we will achieve these Target earlier than somebody previously expected, but yes, it is included.
Okay, so if no incremental upside then what's the accelerated Pace? Do you expect? I guess? What's the the give and take of that extra uh capex.
Acceleration of achievement toward the $500 million net profit plan. As you know, we are still not there.
So we are accelerating the achievement, and of course, uh...
The accelerated achievement will enable a higher profit.
Sooner.
Okay, great. Thanks, guys. Um, and then, uh, maybe Russell, can you just talk about some of the applications that you see driving, uh, the aggressive growth you're seeing in RF infrastructure?
um,
Yeah. The the biggest and strongest is just really the
the need for build out um specifically I think AI driven but it's continues for high volumes of 400 gigabit per second.
Um very high volume of 800 gigabit per second in multiple um, formulations of it, you know, both.
Um,
dr8 and 2x fr4.
And then, as stated, there is a very high volume right now going into Q1 2026.
Gigabit, um, where we're seeing somewhere about 30% of all of our starts being dedicated to that platform presently. So it's really just for, you know, the the continual buildout of data center and a big movement right now going into the 1.6 G.
Great. Thanks, guys. I appreciate your time.
Thank you.
Your line is open, please ask a question.
Hi. Thanks for taking my question, and congratulations on the stronger results.
Thank you. Thank you.
Uh, I wanted to ask two quick ones on the Silicon Food Clinics, please. Uh, you mentioned the leading position of power. So, who do you see as your main competitors these days?
Given the supply-demand imbalance at the moment, are you able or considering raising prices?
Um,
You know, probably the answer to that would be yes. But considering know um we're very close with our customers. We understand what their needs are. We have long-term road maps and we're you know, we're we're not opportunistic if you would
Look at it that way of because demand is very very tight to gouge somebody.
For an extra couple of wafers, I think you know that's the shrewdest way to lose goodwill in partnership.
um,
what we are seeing however is extremely strong demand.
Um, and having stated that, that's the reason for after having invested $350 million, which is...
You know, we're seeing the first signs of that ramp right now to increase another $300 million of investment.
Um, I had stated
that we're
Targeting a Q4 CIPo revenue shipment run rate of over $320 million.
And against the qualified capacity that we're shipping the Q4 against, we're increasing that by over 3x.
In start capability.
Within the next four quarters, we expect to have that entire 3x plus available for starts in the second half of 2026.
So you know, that's a quite a bit. If you were to say you know, 3x of a 320 million run rate, that's quite a substantial growth in Cipher that we're projecting for ourselves. So having come from what uh plus minus 28 million 23 to 105 million 24 to this year, we targeting over 220 for the full year, um, with the 320 plus run rate in Q4, but bringing that to well above 900 Million by Target. And that Target is really spoken to by customers. That's not
you know, a
A field of dreams. If you build it, they will come. That's customers saying, "Please build it. We need the capacity."
at stated and
you know that, um,
In the script that we're doing quite a bit on capability.
not just for the present 1.6T generation, but to make sure that our customers are in a leading position.
Position for the capabilities needed for 3.2T or for 6.4T, um, specifically the needs for a faster, um, capability of 400G. And those activities are very real-time. So, we're investing real time in increasing capacity, which is really being demanded by the industry. And fortunately, as stated, we are.
um, by far in the leading position on manufacturing but um believe also to be in the leading position as far as developing Next Generation platforms with the leaders so that we're both prepared well before the demand actually arises. Uh, did that answer your question? I hope, um,
Yeah, just correct. This is the first part. Do you see any changes in competitive dynamics? Is anyone else poised to grow in capital? And does that feel like an attempt to take some share away from you guys?
I believe that most people would like to take a share from us.
You know, it's a good growth market with strong customers.
The point is really.
To the question that you asked,
um,
To be opportunistic on pricing would probably be a good invitation for our customers to say, hey, we don't want to be your long-term partner.
Go look for someone else that you could leverage us with pricing on, and they don't have to do that. We're working very closely with our customers to be reasonable and to, you know, have win-wins on both sides.
So, yeah, I'm sure that there are others that are trying to eat into where we're at. It's very difficult, though, for somebody to break into our position right now. Um, fortunately, and really for this call, we have with us Mark Arock and Ellie from the RF activities.
Report directly under him. I don't know. Marco. If you had any color you wanted to add to that? Yeah, I think on the on the pricing discussion, as you say, we're not taking advantage of the situation, just because capacity is tight uh, in the industry today, but we are adding value, uh, in our Advanced platforms. And so, in that regard, we do price higher technologies that deliver more value to to customers. So, in that aspect over time,
We do anticipate some, uh, price improvement as customers migrate to these more advanced technologies.
and I will say, as well, that
You know, cipo is already very accretive in margin.
So it's, you know, we do get paid.
For the value that we that we add, and that's how things should be based.
You know, we stated very strongly that CIPO has a very strong benefit for our customers against DML.
So, for our customers to be using our platforms now, and if you look at a, a having of lasers,
Um, it's a, it's a big deal. You have as well at this point, then for the 1.6t the use of a silicon modulator, that's inside of the pick itself. First needing an indium phosphide modulator that
Costs much more money and quite a bit of 35 area.
so, there's value in the platforms and, you know, obviously, um, we both share in whatever value is created
Great. I appreciate it. Go back to the queue.
Thank you.
Now, we're going to take our next question.
And it comes to line of Richard Shannon from Craig, halam Capital group, your line is open, please ask a question.
Well thanks, Russell and Orin for uh taking my questions and congrats on some very nice numbers here. Um let me start off with a few questions here on Silicon vitonics um
Russell, you made an interesting comment that I probably didn't transcribe in my own notes here very well. But you mentioned something about the shift to Siliconix. It's permanent. Can you explain what you mean by that, please?
Um, yeah.
What we stated in the script.
Very cost, conducive against EML. It takes half the lasers. So if you look at 2, the cost of 35 and also the capacity constraint of 35
That's both a big benefit.
um, to be able to use silicon photonics,
To have a 3-5 modulator.
so yeah, it's um
By stating that.
There's a cost benefit that certainly drives.
Long-term stickiness. But in addition to the cost benefit, there's performance benefit as well. And when you combine cost and performance, that's really, um, an absolute winning combination for market share stickiness, right?
Mhm. Okay, thanks for that. Um my second question is
um,
Looking at 1.6 here, um, obviously we’re seeing a module maker talk about some nice ramps here starting next year. What kind of mix do you expect to have of 1.6 versus slower speeds in your business? I don’t know, next year or at a particular point; just trying to get a sense of how fast this is scaling versus the older, slower technologies.
Um, right now the 1.6 is close to 1/3 of our starts.
So that gives you a feel for where we're at right now, and that's up, you know, from almost nothingness at the beginning of the year. So it's a very quick ramp movement to the 1.6T. I would expect that that will go to over 50% within the first multiple quarters of the next year.
Okay, that is helpful. Um, my last question is about Siliconix. Is following up on your comments, as well as one of the questions here about, um, reaching three times, uh, I think it was a capacity comment in Siliconix from the run rate of, uh, this current fourth quarter. Um, what do you—what?
Kind of time frame, do you expect to be able to get to your full utilization level on? That sounds like you could be this year or excuse me in 26 but just want to get your sense of what you're expecting, their
um,
the demand is there.
Or will be there by customer forecast.
Um,
By planning, we should be.
Fully installed within the first half of 26.
And having all the tools up and running, being able to hit the full start capability within the second half.
Um, so the the shipment level really depends on what point in the second half. We do the way for starts. You're typically be looking at somewhere of a, you know, a 3, to 4 month cycle between the starts and the shipment, um, given whatever the peel.
The size of the pose are. So we certainly
Would foresee seeing a portion of this?
Increase capacity. Um, coming into revenue within the second half of 2026, but taking into account that the first ramp that we're doing has not been realized yet either. So, the previous $350 million investment is right now in its first stages of ramping.
So, within
the first half and predominantly in the second quarter, we should see a very big pick up in our silicon photonics shipments revenue and that should
Continue in the third and fourth quarter when we hit the full.
um,
3x or 3 plus X.
Shipment capacity in 2026 that I really don't know. The demand is there. It's a question and I'm, I'm, I do believe that will start the full amount within the second half of the year, uh, the the shipment could, you know, dragged on into q1 plus minus. But, but I think we'll see.
We should see a good amount of it. I mean that's why we're doing the investment and certainly that's why we're accelerating it.
Okay, perfect. Uh, 1 last question for me, I'll jump on the line. Um Orin. Can you talk about um kind of gross margin fall through in the next few quarters, obviously knowing that. So the tonics is a margin of created business for you and it sounds like that'll be your major driver here. How do we think about this going forward here? And and um, uh, want to get a sense of also, when you know, in additional depreciation builds in,
Here to think about that going forward. Thank you.
Yeah, so I think, uh, currently the gross profit in Q3 was 24% 93 million over 396, the actual number and the 2, the be better. Uh, as you see, you know, our long-term financial model and uh,
Which has a higher percentages. And usually we speak about incremental margin of 50% and of course, because of the cipher, it will be higher uh nicely and it will be offset by uh 2 elements. 1 is the
Newport Beach, lease amount that we said that we will pay additional 6 million.
And not traditional, we will pay a total of 6 million and the second is what you mentioned here. Uh correctly, the depreciation from the additional capex.
10 million a quarter, but some of that already started. So it's a gradual them to quote, the 10 million
Okay, perfect. I'll jump on the line, guys. Thank you.
Thank you, Richard.
Thank you.
Now, we're going to take our next question.
And it comes to the land of Magi. Husseini from Sig, Yolen is open. Please ask a question.
Yes. Thanks for taking my question, a couple of follow-up and I apologize. I joined the college apologize, if I'm repeating some of the questions or the covered Russell, when you look at the opportunities associated with transceiver, are you also baking increased content. In other words I'm under assumption that most of the opportunities currently on the uh transmit side uh and whether receive side of the transmitter would also give you uh opportunity to increase content.
Um, certainly to increase volumes.
but,
Stated that.
Really, um, a very nice immediate upside was, uh,
A pretty Advanced platform that shipping at 300 millimeter receives bifo in the fourth quarter.
And um, we'll go into some several formulations beyond what we're doing in the fourth quarter in.
Uh 2026. So yes the receive is incremental serve Market that right now most well, everything we're doing other than this first 300. Mm.
Activities is for transmit. So very, okay. Very good question. Thank you.
Is there. Thank you. Is there any way we could kind of uh, think about how this Capac sci-fi capacity, increase by 3x would be split into increased content versus units of transceiver shipped to the End Market.
Um,
I'm not really sure exactly what you mean by increased content, but it is.
It's units being used in transceivers.
So and at the 1.6, I'm sorry, go ahead.
Right. Right. Right. Right. Right as as you as you, uh, increase the mix of receive and transmit within the same transmitter. Um,
how, how much of that is baked into capacity, increase of 3 3 times or 3x
um,
right now, the increase of 3x is including very little receipt.
Its most all transmit.
So, would you need to increase capacity again, as you as your customers?
Migrate to receive size with CYO.
Um, yes, and we'd be really thrilled to do so.
We have platforms that are doing it. I mean, it's not that we're not proactive against it, it's that right now. The, the transmit demand is so high, but yes to receive, but to receive really comes into very strong capabilities with demux and that's, you know, a big area that we're focused on.
Okay, thank you. Thanks for the details. Just a quick follow-up on the longer term. Where are we with packaging? I think a couple of quarters ago you highlighted doing R&D so you would extend your addressable market to include some packaging. Is there an update you can share with us?
Um,
We have.
An activity with a leading packaging house, um, focused on.
Uh, formulating.
Uh, a CPO, a full CPO. Uh, we certainly have other activities around NPO. Um, big activities with through silicon via that's required for um, NPO and potentially for CPO as well.
So we're making progress there. It's not that there's a lot of CPO being used right now; it's not. But, um, we're making good progress. We also have other activities.
um, driving
additional.
Really strong capabilities. We're talking, you know, multiple generations down the road, but a really big program focused on 51.2T to have a very, very advanced modulation that would.
You know, it may possibly be required, um, within a pick structure for whatever CPO would be used.
Okay, and this is the opportunities are more if if the materialized into Revenue more later, this decade it would take a couple of years for commercialization, right?
Only commercialized period independent of Tower.
Yeah. Okay. Thanks for detailing, congrats.
Thank you.
Thank you.
Now, we're going to take our next question.
Just give us a moment.
And the question comes from Lisa Thompson from Zach's Investment Research. Your line is open; please ask your question.
Yes. Hi. I I was wondering if you could talk a little bit about 3.2t.
It seems like the technology may not be able to go from 160 to 32. Can you tell tell us kind of where they are specifically was trying to solve that problem? And is there still a risk that an entire new technology might be needed?
um,
I don't think an entire new technology will be needed. There are certain issues even around the DSP that's being worked on. But no, I don't think a new technology from our standpoint. The thing that's really required is the modulation at 400G, and as stated in the script, we're working on 3s, depending on customers' needs and desires to do the 400G modulator. So, from the pure modulation standpoint, I think we're addressing it very strongly with very good progress.
um,
from the
you know, the, the entire transceiver, the build out or CPO, I mean, those are other issues but I don't think that they're
um,
not attackable or solvable.
So I I don't think that 3.2 T will be held up now.
okay, and let me just, um, clarify
Is the revenues from cipo totally gated by capacity. I mean, is the demand there? If you can build it.
Okay. And then one more question: when are you going to start reporting a great utilization? Is that way far off?
Um,
it needn't be, we could start reporting it anytime we just, haven't we, we're in the midst of the, the first ramp there, so but we could start reporting it. There's no reason that we wouldn't
Okay, great. That's it. That's all my questions. Thank you so much. Thank you.
Thank you.
And now we're going to take our last question for today.
And it comes line of Richard Shannon from Craig, halam Capital group, your line is open. Please ask your question.
Great, let me, uh, thanks for letting me ask one more question here. Um, Russell, kind of big picture, um, looking across your business with the obvious angle, also inclusive of silicon photonics. Um, how do you think about 300 millimeter? You obviously have some through a couple of, uh, joint ventures or whatever the right term is there with Intel and ST, and then have some capacity in Japan here. But how do you think about acquiring more of that? It seems very, uh, important for you to have here and obviously, uh, very important for selling photonics. It's clearly your big growth driver here. Is this something where you can find more partnerships like you have with the two partners you've already announced in the past, or do you see Greenfield? How do you, how do you intend to address that? Thank you.
Richard, it's an excellent question.
And it's 1 that we're focused on.
Um, no. I don't think that we'll be addressing it through.
uh, Partnerships such as what we have with st, or what we, you know, have with with Intel
Um, we'd be addressing it somewhat organically should we go forward there. But I think, um,
It's an excellent preface to be excited for our Q4 release.
and uh,
we'll be talking more to it at that point.
All right, we'll look forward to that call. Then that's all for me, guys. Thank you.
Thank you.
Thank you.
For any closing remarks.
Well.
Truly, thank you for your continued interest in Tower. Thank you for the support of Tower. Um,
Certainly, I appreciate the questions that were asked during the call.
um,
Really, we're very excited to update you over the coming quarters.
As this.
More than 3x capacity that we talked about for the, the cipo Sai growth as that comes online.
Update you about the other progressives and activities.
Uh again very good question. Question about how this capex investment impacts the financial model where Orin mentioned about it bringing in the timeline of reaching certain Revenue levels. Um and it's you know, accelerating the timeline at um due to
uh,
The cipo was mentioned a creative margins um doing it at uh somewhat different financial model.
So we're very excited to update on all of these things and as we
get ready and prepare and give uh the end of year comments which is always a summary of the year and an Outlook of what we're doing in the coming years, I think there's many exciting things that we'll be talking about with you about
the direction of the company and, um, how all of these creative actions.
Um, this really turns out to be a very strong benefit and a strong ROI. If we look at what we're doing with CIPO, as far as capex,
Um, the really nice thing with the CIPO and the CapEx is that
it's
Truly from the time that you start shipping Wafers, you're dealing with a half year Roi on the capex that you put into the tools, so that's not from the time of ordering the, the the capex. But from the time of actually being qualified and shipping Wafers, and doing that ramp rois are very, very quick. So as Oregon stated knowing that we're doing a very big expansion knowing that
Um, that expansion is spoken to by customers requesting the capacity and seeing the quick turn.
With this market on an ROI, you can see that the timing of revenue is really greatly accelerated.
And, um, hope to give, well, not hope, we will be getting much color on that as we give the end of year and the Q4-looking statements when we release Q4. So again, very looking forward to going over that with you. An extremely exciting time for the company, um, extremely exciting.
I think for our customers and for us, in the midst of customer partnerships with people that trust us and look for us for their solution and for growing their own businesses.
Very excited to host our Q3 2025.
Technical, Global Symposium in Santa Clara next week.
Um, be November 18th, open for all customers, very happy that you would be coming and listening to us.
um, as stated
um,
Dr. Charlie kowas from broadcom will be giving the customer invited talk. There should be extremely interesting. I've heard him speak at times before and a great speaker with tremendous amount of knowledge and capability.
Um, Dr. Rock and Ellie will be giving an an in-depth.
Overview. It sounds contradictory, but here is an in-depth overview of all our technologies.
And I'll give the introductory talk. Um really talking about the culture of tower where we're going and what is the basis of
What I believe to be one of the kind customer partnerships.
Now, in addition to this technical symposium on December 10th, we will be participating in the 23rd Barkley's Annual Global Technology Conference in San Francisco. On January 13th and 14th, we will also attend the 28th Annual Growth Conference in New York.
And of course any of you as investors or analysts that wish to have additional calls with the company. You know, please contact know eat or on eat and very happy to accommodate those according to your needs and desires. So with that I'll end the call and again, thank you, very exciting time.
This concludes the conference call. Thank you for participating. You may now disconnect. Have a nice day.