TBU
Semiconductor & AI Infrastructure Commentary
GlobalFoundries' margins should rise relative to Tower Semiconductor's, if reports on each company's 8-inch to 12-inch transition and capacity ramp are correct, even though both now have similar net margins. GlobalFoundries also trades at a much cheaper multiple than Tower. x.comÂ
GlobalFoundries' new silicon germanium capacity deal with Marvell doesn't fix its position, because its SiGe is mediocre next to Tower's, though the gap is smaller than in silicon photonics. Semtech, and likely Macom, use Tower. x.com x.comÂ
Tower Semiconductor's 2028 guidance makes its shares attractively valued around $180 despite competition from Silith, GlobalFoundries, STMicroelectronics and others. The stock previously felt too rich to add to. x.com x.comÂ
Tower Semiconductor probably has little upside left, trading at 43x the $500M net profit it projects once its foundry buildout is complete and running at 85% utilization. By contrast, TSMC trades at 24x 2026 earnings. x.comÂ
TSMC may lose pricing power as performance gains shift from shrinking transistors to stacking, interconnects and optics, while logic folding could make older processes competitive. Despite strong leading-edge demand, investors may overestimate the profit share its node leadership can retain. Its cautious expansion and past reluctance toward advanced packaging suggest a risk-averse culture that protects returns but could leave it late to disruptive technologies and key customers. x.comÂ
Tower Semiconductor's stronger-than-expected capacity expansion lets it fill more optical-chip orders itself, reducing customers' incentive to move to foundries they regard as technologically weaker. Its hybrid bonding packs dense connections between photonic chips and their driver electronics, an advantage viewed as effectively unmatched among Western suppliers. Tower remains one of the highest-conviction holdings despite the portfolio trim. x.comÂ
IQE still has plenty of upside as Tower Semiconductor's indium phosphide epitaxial wafer supplier for the NPO-to-CPO buildout. Tower said its multi-year epi wafer agreement with IQE leaves it extremely well positioned against the InP bottleneck. Tower's first NPO deployments come in 2027, with $1.3B of contract value for that year and higher numbers expected after, and it plans to quadruple Japanese silicon photonics capacity, with full readiness in Q4 2027. x.com x.com x.comÂ
The semiconductor market should reach $1.6 trillion by 2030, per McKinsey, lifting leaders across the chip stack. Nvidia holds over 80% of the AI chip market and AMD is the only other AI chipmaker hyperscalers deploy at scale; TSMC is the factory AI can't function without; ASML monopolizes advanced lithography; SK hynix supplies over 60% of HBM and Micron is sold out through 2026; Broadcom, Marvell, Credo and Astera Labs connect GPUs and build custom AI silicon. x.com x.com x.com x.com x.comÂ
GlobalFoundries' patent campaign is a materially adverse complication for Tower Semiconductor but not an existential one, and the most probable end is a settlement or license on narrower terms than the complaint. It touches Tower's core RF, power and radar platforms during its $920M silicon-photonics and SiGe expansion. The two Texas suits and ITC complaint over 11 process patents are unproven. Legal leverage favors GlobalFoundries, but a clean GlobalFoundries sweep looks only 15-25% likely. … Show more
UMC's first high-volume silicon photonics shipment is the bottleneck-resolving traction expected from accessible foundries. TSMC's capacity discipline opens room for foundries advancing in specialty and optical technology, which is why UMC and GlobalFoundries are favored over TSMC. SILITH and UMC shipped the first mass-produced photonic IC wafers from UMC's Singapore 12-inch fab for a 1.6T platform, qualified by a leading cloud customer. UMC targets an open 12-inch platform in 2027. x.comÂ