Tower Semiconductor has caught a wave of demand for chips supporting the AI boom, the company president Marco Racanelli told EE Times. The Israeli chip foundry is rivals with production of silicon photonics and silicon germanium that speed data transfers and save power, analysts say.
The new tech gives Tower, ranked seventh in the foundry business, a competitive advantage over bigger competitors like number one TSMC and Intel, which are also entering the photonics business. In China, some believe silicon photonics can help the nation skirt a U.S.-led ban on exports of EUV tools that have blunted China’s progress making advanced chips.
“For AI, we are seeing very large demand both in silicon photonics and silicon germanium,” Racanelli said. “We build the amplifiers, the transimpedance amplifiers and drivers in silicon germanium that go into those modules. In silicon photonics, we build all the optical components.”
The company is counting on laser tech from partner OpenLight to extend its photonics portfolio. Tower and chip designer/IP provider OpenLight are creating an ecosystem to make silicon photonics chips.
“Next generation, at some point we see the opportunity to integrate a laser using the OpenLight process,” Racanelli said.
Tower expects to more than to double its silicon photonics revenue this year to about $100 million. The company is likely to double that number again next year, according to Racanelli. The business will grow to account for about 10% of the total company revenue within a year or two, he added.
Tower has more than 50 silicon photonics customers, seven of which are the top 11 datacom transceiver makers, according to Richard Shannon, an analyst with Craig-Hallum, who also is an electronics engineer.
“We believe silicon photonics enables lower cost-and-power transceivers and expect it to make big headway into the 800G and 1.6T generations,” Shannon said in a report provided to EE Times.
The latest 800G transceivers move huge amounts of data. Most photonics parts for data centers have standardized plugs insertable into a switch or a GPU board. That pluggable form is shifting to silicon-based co-packaged optics, where the conversion interface is closer to compute.
“Tower believes it has this commanding share in pluggables because it has a highly customizable process that can help tailor solutions to customer requirements that others do not,” Shannon said. “Tower has versions that also integrate the laser in a hybrid, to come to market in the near future.”
AI surge
Anyone using optical fiber for AI, data center interconnects or networking is going to buy optical transceivers, Racanelli says.
“The huge surge is because of AI. It’s a little bit difficult to break out, but in total, we believe most of the growth is AI,” he said.
All datacom optical transceivers require transimpedance amplifiers (TIAs) and drivers, and Tower is the market leader with a share greater than 50%, serving leaders Macom Technology and Semtech, according to Shannon.
“If LPO [linear pluggable optics] takes off, the value of TIAs and drivers will increase, providing even more growth potential,” Shannon said. “Tower is the primary foundry for ACC
[active copper cables], which are being used extensively in Nvidia Blackwell racks
Intel, ST Micro deals
After Tower’s acquisition by Intel was nixed by market regulators in China last year, the smaller foundry got capacity at an Intel fab in New Mexico for an investment of $300 million. In 2021, Tower made a similar investment in STMicroelectronics’ Agrate fab in Italy.
The tie-up with Intel will help Tower ramp production of its power management ICs.
“That is a significant amount of capacity for us and our customers in 300 millimeter,” Racanelli said. “We are transferring one of our power management flows there, our most advanced power management flow, which is right now only in one of our factories in Japan, a smaller 300-millimeter factory.”
Tower got a bargain, Racanelli said.
“We didn’t have to build the fab. We’re just taking a portion from one of their factories to enable our power management flow. We expect to start production in 2025, so we’ll start seeing some benefit next year.”
Tower has become one of the new customers that Intel needs.
“We are effectively an Intel Foundry customer, but it is with our technology,” Racanelli said. “We are putting our tools in one of their factories. Really, we are renting a piece of their factory. But it is their people: this is part of a larger factory, so it’s a very efficient way to do it. There’s a lot of sharing, operators and the infrastructure, and all of that is shared across a much larger factory. It’s cost effective to run because it’s leveraging a much larger factory, even though we only have a piece of it.”
Legacy chips
Tower’s most advanced process technology is in what some call the legacy nodes, ranging from 45 nm to below a quarter of a micron. Racanelli is not afraid of a flood of cheap legacy chips from China just yet.
Tower’s fabs are in Israel, the U.S. and Japan.
“The expectation is that in some very low-end parts of our market, China is building capacity and could become a threat,” he said. “On the flip side, because of the geopolitical situation where U.S. and Western companies are being discouraged from using Taiwan and China manufacturing—obviously Taiwan has a ton of foundry manufacturing today—we’re also seeing an opportunity of that moving to Western foundries, and all of our factories are in the Western world.”
Racanelli returned to the subject of legacy chips. “There’s a little bit of threat perhaps from China for the very low end. We have a discrete business, for example, the MOSFET business that’s at the lowest end of the scale. We’re not putting a lot of emphasis in that business, partly because we suspect that we will see much stronger competition from China. On the flip side, we’re seeing many customers interested in moving some of their production from China, but not China itself, but more Taiwan to Western foundries. We’re benefiting from that.”
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