Tower and Semtech Expand Multi-Year SiGe Agreement to Secure Data Center Manufacturing Capacity
Key Facts
Tower Semiconductor and Semtech announced on October 13, 2026, an expansion of their multi-year silicon-germanium manufacturing agreement, building on a partnership dating back 20 years. Under the arrangement, Semtech is investing to secure dedicated manufacturing capacity at Tower. The capacity serves connectivity components in data centers, where demand for data transmission across optical and copper links is rising. Tower said the reserved capacity is spread across its facilities in the United States, Israel and Japan. The geographic reach gives Semtech diversification in its manufacturing base and supply flexibility, according to the company.
The companies framed the agreement in the context of the shift to faster data center links. Semtech's chief executive said its products currently support copper and optical links at 800G and 1.6T speeds, with generations reaching 3.2T and beyond targeted. SiGe technology is used in transmit and receive components that help carry high-speed signals. Semtech said the expansion of AI infrastructure is increasing the bandwidth required for each link, as power budgets become tighter. It added that this could increase the value its components provide in each link.
The companies' announcement said Semtech's TIA amplifier family, built on Tower's SiGe technology, won the Optical Connectivity Component of the Year award at the 2026 European Conference on Optical Communications. The family includes products at 224 gigabits per lane, according to the announcement. The award links Tower's enabling technology with products Semtech develops for optical communications. It reflects one specific use for the capacity Semtech is seeking to reserve, in a market requiring greater data transmission across data center links. The agreement is intended to support supplies of this type of component as speeds move to higher levels.
Semtech is seeking to expand its share of the data center market, which the company described at its analyst day as a multi-year growth opportunity. It said its potential content in optical modules could exceed 10 times its current level, without implying that this growth has already been achieved. Converting the opportunity into sales depends on customer design adoption and the start of commercial production. The capacity agreement provides a framework for meeting potential demand for SiGe components, while Tower distributes manufacturing across multiple sites. The agreement's impact is therefore tied to the development of demand and the parties' ability to convert designs into production.
The deal comes as Tower reported strong operating results for the second quarter of 2026. It posted record revenue of 460 million dollars, up 24% year over year, and guided to revenue of 520 million dollars for the third quarter, representing year-over-year growth of 31% at the midpoint of the range. Operating profit was 90 million dollars, compared with 40 million in the year-earlier period. Adjusted net income also rose to 91 million dollars from 47 million. Tower said it is targeting an annualized revenue run rate above 1 billion dollars from its silicon photonics business in the fourth quarter of 2026, with significant growth continuing through 2027.
As for the share move, StocksToTrade recorded an intraday gain of 8.25% in Tower shares on October 26, 2026, at 12:32:44 p.m. Eastern Time. This came after the October 13 announcement of the expanded agreement; the intraday update does not identify the reason for the move. EL7 data showed Tower shares closed at 167.56 dollars and Semtech shares at 132 dollars on October 23. Those prices relate to that close and do not represent the share prices on the announcement date or at the time of the intraday update. Separating the announcement date from the time the move was recorded is necessary to read the chronology of the news and prices.
Tower cautions that realizing the expected benefits remains dependent on its ability to install equipment and expand SiGe capacity at its facilities according to the planned schedule. Semtech may also not use all the capacity it has reserved, and winning a product design alone does not guarantee production orders or revenue at the expected time and level. These factors pose execution risks for both parties, particularly as the agreement is tied to future supply and multi-year demand. Tower is scheduled to report third-quarter results on November 2, 2026. The company will hold a conference the same day at 10:00 a.m. Eastern Time to discuss the results and fourth-quarter guidance.