Tower Semiconductor (TSEM) Q2 FY26 earnings call: guidance and Q&A

Clarification on the $1.3 billion SiPho bookings for 2027 and the likelihood of sustaining or accelerating current growth rates.

Russell clarified that the $1.3 billion SiPho contracts for 2027 were previously announced. He indicated that the Q4 '26 wafer start rate will be 3x Q2 '26 shipments and pointed to the updated 2028 model ($3.6 billion revenue) as an indicator of expected growth.

“No, I was just going to state that I think there was no update given on the contracts and the bookings, but there was an update given pretty much on what is started or will be started for shipments.”

asked by Cody Grant Acree · answered by Russell Ellwanger

Understanding the wafer volumes or revenue support from the Japanese projects, especially Track 2, beyond the 2028 model.

Russell confirmed that Track 1 assumes full utilization at 85% for the 2028 model. He stated that Track 2 will quadruple 300mm capacity, primarily for SiPho and SiGe, with a target of being fully installed and functioning by Q4 2028 to provide seamless growth into 2029. Exact numbers are not yet finalized due to ongoing negotiations.

“We stated that the Track 2 would quadruple the 300-millimeter capacity and that is predominantly for SiPho and SiGe. We didn't give specific numbers.”

asked by Cody Grant Acree · answered by Russell Ellwanger

Whether Near Package Optics (NPO) will increase content per transceiver, especially with heterogeneous integration of SiGe and SiPho.

Russell explained that NPO itself is a different product rather than increasing content per transceiver. He clarified that heterogeneous integration (die-to-wafer, wafer-to-wafer bonding) for next-generation technologies beyond NPO would indeed increase content and is a focus, mainly embedded in the Phase 2 capacity expansion.

“I think you're in the correct frame of mind, and I think the answer is yes. But I believe that, that focus is more not on NPL, but on next generation.”

asked by Mehdi Hosseini · answered by Russell Ellwanger

If U.S.-based customers will be supported primarily by Japanese facilities or if U.S. capacity will also increase.

Russell stated that capacity is increasing in both Newport Beach and San Antonio. He highlighted Japan's geopolitical neutrality, strong workforce, quality culture, and education as key reasons for choosing it as a growth location.

“We have and we continue to increase capacity in both Newport Beach and in San Antonio, and we're still planning to increase further capacity in both sites. But one of the reasons for having chosen Japan, sorry, is its geopolitical neutrality.”

asked by Mehdi Hosseini · answered by Russell Ellwanger

To quantify the ultimate 300mm silicon photonics and SiGe capacity after Track 2, specifically the mix between 200mm and 300mm capacity.

Russell indicated that after mid-2027/mid-2028, all SiGe and SiPho growth will be in 300mm. The 4x increase in Japan capacity is focused on optics (SiPho/SiGe), aiming for a minimum of 20,000-25,000 wafer per month SiPho capacity. He noted that the exact split is not announced, but predominant growth will be in SiPho.

“after I would say, '27 mid '28, all of the growth that we have in SiGe and SiPho, and definitely in SiPho, will be in 300 millimeter.”

asked by Richard Shannon · answered by Russell Ellwanger

Characterizing the size or significance of NPO as a contributor to SiPho revenues in 2027.

Russell stated that NPO will be a significant contributor, likely in the tens of percentage of shipments, especially in the second half of 2027.

“I think it will be significant. The exact percent, I don't yet know. But I would think it will be in the -- not in the single digits, but in the tens of the percentage of what we'll be shipping, especially in the second half of the year.”

asked by Richard Shannon · answered by Russell Ellwanger

Identifying where the most variability or risk lies in the business model (e.g., expenses, timing, product pricing).

Oren Shirazi stated that the key assumptions for the model are wafer selling price, cost assumptions, installation and qualification timing, and 85% fab utilization. He highlighted that the wafer selling price typically has the biggest range of outcome as it directly impacts the bottom line.

“Per wafer because if you have more or less quantity, so you have more or less variable costs associated with that. But if the price goes up, it goes all the way to the bottom line and vice versa. So maybe usually, but it's a general statement. So usually, the selling price is just 100% reflection over the margin.”

asked by Lisa Thompson · answered by Oren Shirazi