When Tower reported a record quarter this week, one figure that stood out concerned a field most people have never heard of: silicon photonics. According to the company, its annualized revenue run rate in the field is expected to pass $1.1 billion in the fourth quarter. So what is it, and why is it growing so fast?
Start with the problem. A large AI model does not run on one chip but on thousands working together in a data center. For that to work, the chips must constantly exchange enormous amounts of data. Usually data travels over copper wires as electrical signals. But at the pace AI chips work, copper hits a limit: the signal weakens over distance, heats up and uses a lot of power. The bigger data centers get, the worse the problem.
The solution is light. Optical fibers have carried data with light for decades, for example in undersea internet cables. Light carries far more data, over longer distances, with less wasted energy. The challenge is converting a chip's electrical signals to light and back cheaply, compactly and quickly. Silicon photonics does that: it builds tiny optical components, such as waveguides and modulators, directly on silicon wafers, in the same fabs and with the same methods used for ordinary chips.
That is where Tower comes in. Tower is a foundry, a plant that manufactures chips to order for other companies. It spent years developing silicon photonics processes, and companies building optical communication parts for data centers now manufacture with it. As demand for optical links soars because of AI, Tower is in exactly the right place, which also explains why it said this week it will add about 150 employees in Israel.
Tower's story illustrates something broader about Israeli tech: not all AI-era success lies in models or apps. Much of the money is in infrastructure, chips, equipment and connections, fields where Israel has decades of experience. Anyone who wants to understand where AI money is going should look at Migdal HaEmek too.
