Tower Semiconductor - 20-F annual report

In this annual report, “Tower” refers to Tower Semiconductor Ltd., an Israeli company, and “we,” “us,” “our,” and the “Company” and words of similar import, refer collectively to Tower and its then-owned and/or consolidated subsidiaries.

All references herein to “dollars,” “US dollars,” “USD” or “$” are to United States dollars; all references to “JPY” are to the Japanese Yen; and all references to “Shekels” or “NIS” are to New Israeli Shekels. “U.S. GAAP” means the generally accepted accounting principles of the United States. Unless otherwise stated, all of our financial information presented in this annual report has been prepared in accordance with U.S. GAAP.

In 2008, we completed a merger with Jazz Technologies, Inc. (“Jazz Technologies”) and its wholly-owned subsidiary, Jazz Semiconductor, Inc. (“Jazz Semiconductor”), an independent semiconductor foundry specializing in specialty process technologies, which operates a 200mm facility we refer to as Fab 3. As a result of the merger, Jazz Technologies became a wholly-owned subsidiary of Tower and was subsequently renamed Tower Semiconductor NPB Holdings, Inc. (“Tower NPB”) and Jazz Semiconductor was renamed Tower Semiconductor Newport Beach, Inc. (“NPB Co.”).  Following a restructuring, Tower NPB is directly held by Tower US Holdings Inc. (“Tower US Holdings”), a company incorporated under the laws of the State of Delaware and a wholly-owned subsidiary of Tower.

In March 2014, we acquired a 51% equity stake in TowerJazz Panasonic Semiconductor Co., Ltd. (“TPSCo”), a company formed by Panasonic Corporation (“Panasonic”). In June 2014, Panasonic transferred its shares and assigned its rights and obligations in TPSCo to its wholly-owned subsidiary, Panasonic Semiconductor Solutions Co., Ltd. (“PSCS”). In July 2020, TPSCo was renamed Tower Partners Semiconductor Co., Ltd. In September 2020, Panasonic sold its shares in PSCS to Nuvoton Technology Corp. (“Nuvoton”), a Taiwan-based company, which is majority-owned by Winbond Electronics Corporation, a Taiwan-based company. Following the sale, PSCS was renamed Nuvoton Technology Corporation Japan (“NTCJ”). TPSCo currently operates two facilities in Toyama, Japan: a 300mm facility (which we refer to as Fab 7) and a 200mm facility (which we refer to as Fab 5). In March 2026, we signed an agreement for the strategic restructuring of our Japan operations, under which Tower will take full ownership of Fab 7, to be held through a wholly-owned Japanese subsidiary of Tower, while NTCJ will take full ownership of Fab 5. The transaction is targeted to close on April 1, 2027, subject to the satisfaction of customary closing conditions and receipt of applicable regulatory approvals.

In February 2016, we acquired a factory in San Antonio, Texas, from Maxim Integrated Products Inc. (“Maxim”). The assets and related business that we acquired from Maxim are held and conducted through an indirect wholly-owned U.S. subsidiary, Tower Semiconductor San Antonio, Inc. (“Tower SA”) (formerly named TowerJazz Texas Inc.), which is wholly-owned by Tower US Holdings and operates a 200mm facility (which we refer to as Fab 9).

In 2021, we entered into an agreement with ST Microelectronics (“ST”) to share, under a collaborative arrangement, a 300mm facility with ST in Agrate, Italy, and following  the entry into such agreement, Tower Semiconductor Italy S.r.l. (“TSIT”), a wholly-owned Italian subsidiary of Tower, was incorporated. Under this arrangement, the parties agreed to share the cleanroom space and facility infrastructure, with TSIT installing certain of its own equipment inside the cleanroom in an area which consumes approximately one-third of the total cleanroom space for its foundry customers, which we refer to as “Fab 10.”  TSIT and ST invested in their respective process equipment and worked to accelerate the transfer of process flows to the facility, product development, qualification, and subsequent ramp-up. The comprehensive qualification process was completed during 2024, followed by the commencement of volume production and operations,  managed by ST.

The consolidated financial statements included in this annual report include the results and balances of Tower and its following subsidiaries: (i) its wholly-owned indirect subsidiary Tower NPB, (ii) its majority-owned subsidiary TPSCo, (iii) its wholly-owned indirect subsidiary Tower SA, and (iv) its wholly-owned subsidiary TSIT.

As used in this annual report: “Fab 1” means the factory located in Migdal Haemek, Israel, which Tower acquired from National Semiconductor, Inc. (“National Semiconductor”) in 1993 and operated until 2025. “Fab 2” means the factory located in Migdal Haemek, Israel, established by Tower in 2003. “Fab 3” means the factory in Newport Beach, California, operated by NPB Co. “Arai E” means the factory located in Kurihara 4-5-1, Myoko-shi, Niigata, Japan, operated by TPSCo through mid-2022. “Uozu E” or “Fab 7” means the factory located in Higashiyama 800, Uozu-shi, Toyama, Japan, operated by TPSCo. “Tonami CD” or “Fab 5” means the factory located in Higashi-Kaihotsu 271, Tonami-shi, Toyama, Japan, operated by TPSCo. “Fab 9” means the factory located in San Antonio, Texas, operated by Tower SA.  “Fab 10” means the factory located in Agrate, Italy, managed by ST, in which TSIT shares capacity with ST.

We have proprietary rights to trademarks used in this annual report that are important to our business, many of which are registered under applicable intellectual property laws. Solely for convenience, trademarks and trade names referred to in this annual report may appear without the “®” or “™” symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent possible under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other companies’ trademarks, trade names or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other companies. Each trademark, trade name or service mark of any other company appearing in this annual report is the property of its respective holder.

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Our business faces many risks. Any of the risks discussed below may have an adverse impact on our business, financial condition and operating results.

We may decide to try to attract new customers and expand our business with existing customers and/or enter into new markets by expanding our capacity footprint and business, as we have done during the past two years, with regards to our capacity expansion plans, or through acquisitions of, or joint ventures with, existing facilities or establishing new facilities, or through acquiring access to additional capacity or capacity enhancement in advanced technologies, which may be obtained independently, through capital lease transactions or through third-party collaborations. Our success at such expansion is dependent, in part, on finding suitable partners and targets for acquisitions of existing or new fabs and/or capacity through capacity arrangements with companies that already own fabs, successfully negotiating with the seller and/or partner a reasonable price for the acquisition or engagement, securing financing and completing the expansion plans, obtaining approvals for grants and subsidies, integrating the acquired facilities into our business efficiently and effectively achieving desired synergies and anticipated benefits, and loading the facilities with customer engagements sufficient to cover their operating and other costs. The activities related to expanding our manufacturing sites involve potential liabilities and numerous complex steps, including qualification and duration thereof, developing advanced technologies, procuring equipment necessary for production, process qualification, and facility operational ramp-up.We cannot assure you that we will be successful in executing this business strategy or that we will succeed in increasing our market presence and attracting new customers and business and/or expanding our business with our current customers, in order to operate any such additional capacity profitably.

This strategy involves many risks, each of which may negatively affect our profitability and financial position, including, but not limited to, the following:

During the last two years, we have initiated plans to invest an aggregate of $920 million in capital expenditures (primarily machinery and facilities), mainly to expand our silicon photonics (SiPho) and silicon germanium (SiGe) capacity and capabilities, as well as to enhance our power, next-generation and other capacity. There is no assurance that we will be able to complete the installation and qualification of all such machinery in a timely manner to satisfy our customers’ demand, due to reasons such as the conflicts between the United States and Iran, Israel and Iran and Israel and Hezbollah that commenced in February 2026 which has prevented vendors from arriving in Israel and to our fab to install the tools,  and there is no assurance that, by the time all such machinery is installed and qualified, customer demand will require the full or high utilization of such machinery tools.

In March 2026, we signed an agreement for the strategic restructuring of our Japan operations, which are currently organized under TPSCo (a Japanese company held 51% by Tower and 49% by Nuvoton Technology Corporation Japan (NTCJ), a wholly owned subsidiary of Nuvoton Technology Corporation, under which Tower will take full ownership of Fab 7, which will be organized under a wholly owned Japanese subsidiary of Tower, while NTCJ will take full ownership of Fab 5. As part of this restructuring, the companies will enter into mutual long-term supply agreements to ensure continued support for existing customers of both companies. Accordingly, Tower customers currently served through Fab 5 and Nuvoton customers currently served through Fab 7 are not expected to experience disruption to supply or operations. The transaction is targeted to close on April 1, 2027, subject to the satisfaction of customary closing conditions and receipt of applicable regulatory approvals. There is no assurance that the transaction will close on that timeline, if at all, or that our customers will not experience disruption, which could impact their relationship with us.

In addition, contingent upon subsidy approval from Japan’s Ministry of Economy, Trade and Industry (METI) following the formal application, and subject to other considerations such as funding, permits and the engagement of contractors and equipment vendors, Tower’s Japanese subsidiary may purchase the adjacent land on pre-agreed terms between Tower and NTCJ, which would be used for a potential new fab shell build-out in order to significantly expand its 300mm capacity and capabilities, through the purchase of machinery and  cleanroom facilities, and related investments, with the necessary capital to be funded in part by us, METI and other cash sources, which may consist of equity investments and/or debt vehicles, or a combination thereof. There is no assurance that METI will grant the subsidy approval, that any subsidies will be in the amount and/or percentage of capital-expenditures as currently expected and needed by the Company to fund part of the cost, that the Company will execute the planned build-out to its fullest extent (if at all), the period it will take to complete this build-out and funding plan, that customer demand will ramp up to levels sufficient to substantially utilize the new capacity following the build-out phase, that future selling prices per wafer and/or costs per wafer will be at the levels currently expected, or that the Company will have sufficient funds to execute such plan, including its related fundraising activities.

An inability to make acquisitions, establish new fabs and/or gain additional capacity for growth, such as the potential new 300mm fab shell that may be build-out in Japan described above, as well as the $920 million capital expenditure plans (primarily machinery and facilities) to (among other things) expand our SiPho and SiGe capacity and capabilities, may require raising funds in amounts that we cannot assure you we will be able to obtain, or which funding may be on unfavorable terms as far as dilution and/or other financing costs or covenants, which may have an adverse impact on our business, financial position and operations.

From time to time, in periods during which demand for our foundry services exceeds our capacity and capabilities and we experience high utilization rates in certain of our facilities, we may (i) be unable to fulfill customer demand in whole or in part, in a timely manner or at all, despite commitments to satisfy such demand under supply agreements and customer prepayment arrangements; (ii) be unable to assure next generation customers’ products; or (iii) experience operational bottlenecks, which may cause low or slow performance and/or halt operations or prevent us from being able to manufacture to committed customer contracts and customer prepayment arrangements, and may adversely affect our cycle time, yield and delivery schedule. As a result, we could lose certain of our current and/or potential customers, and/or we may be required to pay penalties and/or repay advances received from customers and/or manage customers’ potential claims, which may adversely affect our reputation, revenues, profitability, business and operations.

The semiconductor wafer process technology is highly complex, requires advanced and costly direct and indirect materials as well as equipment, and is constantly being modified in an effort to improve operational metrics and indices such as device yields, wafer performance and delivery times. Microscopic impurities such as dust and other contaminants, difficulties in the operational processes, defects in the key materials and tools used to process wafers and other factors can cause wafers to be rejected as non-functional or partially non-functional. Although we continuously enhance our process capabilities and efficiency, from time to time we have experienced operational, technological and process-related problems that have caused extended production time or quality control issues. Operational issues we may face include difficulties in upgrading or expanding existing facilities and in establishing new fabs; unexpected breakdowns in our equipment and/or related facility systems; unexpected events, such as an electricity outage; difficulties in changing or upgrading our process technologies; raw material shortages or impurities; delays in delivery or shortages of spare parts; and difficulties in maintenance and upgrade of our equipment. Should such problems occur to a material degree, we may suffer loss of income, loss of reputation and/or a loss of customers, any of which may adversely impact our business, revenues, financial results and financial condition.

The semiconductor market is characterized by rapid change, including rapid technological developments, evolving industry standards, changes in customer and end-user requirements, frequent new product introductions and enhancements, and short product life cycles with declining prices as products mature. Our ability to maintain our current customer base and attract new customers is dependent in part on our ability to continuously develop advanced specialized process technologies that can be processed in our fabs and purchase the appropriate equipment, and to keep pace with new technology, including artificial intelligence, evolving standards, changing customer and end-user requirements, new product introductions and shorter product life cycles. If we are unable to successfully develop such process technologies and provide our services in a timely manner or at all, or if we are unable to purchase the appropriate equipment required for such processes and services, we may be unable to maintain our current customer base and may be unable to attract new customers.

Many of our competitors may have one or more of the following competitive advantages over us: greater capacity and/or availability of same; a more diverse and established customer base; greater financial, sales, marketing, distribution and other resources; governmental funding or support (such as receipt of financial incentives under the Chips and Science Act of 2022); better cost structure; and/or better operational performance, including cycle time and yields. If we do not compete successfully, our business and financial results may be adversely affected.

We compete most directly in specialty segments with certain independent dedicated foundries. We also compete with pure play advanced technology node driven foundry service providers, as they each have some capacity for specialty process technologies, and with integrated device manufacturers (“IDMs”) that allocate a portion of their capacity to foundry operations. As our competitors continue to expand their capacity, there could be an increase in specialty foundry capacity. To the extent specialty capacity increases, there may be more competition and pricing pressure on our services, which may result in underutilization of our capacity, decreased profit margins, reduced earnings or increased losses.

In addition, some semiconductor companies have advanced their complementary metal oxide semiconductor (“CMOS”) designs to smaller than 10 nanometer process geometries. These smaller process geometries may provide customers with performance and integration features that may be comparable to, or exceed, features offered by our specialty process technologies. The smaller process geometries may also be more cost-effective at higher wafer volumes for certain applications. We are not currently capable, and do not currently plan to become capable, of providing CMOS processes at these smaller process geometries. If our potential or existing customers choose to design their products in a manner whereby the percentage of digital content in specialty designs increases significantly and requires these advanced CMOS processes, our business may be negatively impacted.

NPB Co. operates our Fab 3 facility and its offices under an operating lease agreement that expires in 2030. The landlord has made claims that NPB Co.’s noise abatement efforts are not adequate under the terms of the amended lease and has sought a judicial declaration that NPB Co. committed a material non-curable breach of the lease. The landlord is party to an option agreement pertaining to the Newport Beach site with a third-party, under which such third party believes it has certain collateral or other rights with respect to the site, and has stated that it is considering filing claims against the landlord and/or the Company.  The landlord and the Company dispute the third-party’s claims. To mitigate possible revenue reduction from Fab 3 customers toward the end of the lease period, we initiated cross-qualification of process technologies at our other fabs. The process equipment tools needed to increase capacity and capabilities at certain of our other fabs are costly and require significant investment and qualification time for the new processes and customer specific product qualifications. Failure to complete these activities in a timely manner may materially and adversely affect our long-term overall business, revenues and profitability, at least until all such process equipment tools and technologies are installed and fully qualified for volume production at our other fabs.

Our revenues, expenses and operating results may fluctuate significantly from quarter to quarter due to a number of factors which may be beyond our control. These factors include, among others: the cyclical nature of the semiconductor industry and the volatility of the markets served by our customers; changes in the economic conditions of geographical regions where our customers and their markets are located (including global recession, credit crises, export control limitations, banned areas and countries and/or tariffs); increasing energy costs, inventory and supply chain management of our customers; the loss of a key customer, not attracting new designs from key customers, postponement of an order from a key customer or the rescheduling or cancellation of large orders; the occurrence of accounts receivable write-offs, failure of a key customer to pay accounts receivable in a timely manner, the financial condition of certain of our customers and regulatory or other tariffs or charges that may be imposed in a region in which customers reside; the occurrence of an unexpected event, such as environmental events, an epidemic or pandemic, industrial accidents such as fire or explosions, or electricity outage, that may affect the manufacturing process or shipment of quality products without charging our customers significant additional costs; the timing and volume of orders from customers; regulations applicable to us preventing business engagement with sanctioned entities and embargoes that may restrict our customers and vendors from engaging with us; increased tariffs; our ability to obtain raw materials and equipment on a timely and cost-effective basis; price erosion in the industry and our ability to negotiate prices with our current and new customers; our susceptibility to intellectual property rights’ disputes; our dependency on export licenses and other permits required for our operations and the sale of our services; our ability to maintain existing partners and customers; interest, price index and currency rate fluctuations that were not hedged; and changes in accounting rules affecting our results.

Loss or cancellation of business from, or decreases in the sales volume or sales prices to, our significant customers, or our failure to replace lost business with new customers, may seriously harm our financial results, revenues and business. We have relationships with several customers that represent a material portion of our revenues. In 2025, 11% of our revenues were generated from NTCJ, 39% of our revenues were derived from an additional seven customers, each of which generated between 4% to 7% of our revenues, and the remaining 50% of our revenues were derived from many other smaller customers. In 2024, 13% of our revenues were generated from NTCJ, 27% of our revenues were derived from an additional four customers, each of which generated between 3% to 11% of our revenues, and the remaining 60% of our revenues were derived from many other smaller customers.  While we renegotiate the terms of our commercial agreements from time to time with our customers, there is no assurance as to the financial impact of any revised terms between us and our customers or the volume of orders they may continue to place based on any revised terms. The loss or reduction in volume or sales price to any of our key customers, whether due to business negotiation, termination or expiration of their signed contract(s), the lack of demand in their markets, their insolvency or their unwillingness or inability to perform their obligations under their respective engagements with us, or our inability to (i) renew our engagements with them on commercially reasonable terms, (ii) fulfill their demand and supply them with wafers with successful performance metrics, or, alternatively, (iii) attract new customers or develop new products and business to replace such lost business, may materially negatively impact our overall business, revenues and profitability.

As is common in our industry, a large portion of our total cost is comprised of fixed costs. Therefore, while during periods in which we operate at high utilization rates we are able to cover our costs, at times when the utilization rate is low, the reduced revenues may not cover all of the costs since a large portion are fixed costs which remain constant, irrespective of our capacity utilization. In addition, our depreciation costs and capital expenditure investments, as common in our industry, are relatively high. Our financial results, including our gross, operating and net profits, may be adversely impacted if customer demand for our products is not sufficient to enable us to operate our facilities consistently at satisfactory utilization rates necessary to generate and maintain revenue levels that would cover all of our costs. This issue may be further exacerbated with the ramp-up of new capacity, where we incur fixed costs upon the start of operations while gradually ramping up utilization, causing a decrease in our profit margins.

In periods of high market demand, the lead times from order to delivery of equipment could be as long as 12 to 18 months. We also procure used equipment, which can take a long time to qualify, potentially causing delays in our operations. There may be delays in the delivery of equipment and/or raw materials and other supplies to us. Delays in the delivery, installation and qualification of equipment may also result from the recent conflicts between the United States and Iran, Israel and Iran, and Israel and Hezbollah that commenced in February 2026, which has prevented vendors from arriving in Israel to install the equipment, which may impact the timely execution of the $920 million SiPho and SiGE capital expenditure plan described above. Such delays may adversely impact our capacity increase plans and/or utilization and qualification and may cause delays or a halt in operations.  In addition, our processes use many raw materials, including silicon wafers, chemicals, gases, and various metals, as well as other supplies, and require large amounts of fresh water and electricity. Shortages of equipment, raw materials, and other supplies could occur for various reasons, including an interruption of supply due to an epidemic, pandemic, geopolitical, war or security situation, increased industry demand, or a dispute with a supplier. Any such shortage or delay in delivery could result in operational delays that may lead to the loss of existing and/or potential new customers and/or a halt of operations, which may have a material adverse effect on our business and financial results.

In addition, although most of the raw materials used in our processes are available from multiple suppliers, certain materials are purchased through sole-sourced vendors under pre-committed volume contracts for specified pre-defined quantities that must be purchased on a monthly, quarterly or annual basis. If such predefined quantities are not required for our operations at any given time, this may result in excess payment and/or expenses write-off in the financial statements which may adversely impact our financial results.

Our customers use our wafers in a wide variety of applications, in markets which are typically cyclical, e.g., artificial intelligence, communications market, consumer devices and applications, personal computers, handsets, smartphones and other types of devices. Any significant decrease in the demand for these applications, devices or products may significantly decrease our revenue and margins due to lower demand for our wafers and/or lower selling prices per wafer. As demonstrated in the past by downturns in demand in high technology markets, market conditions can change rapidly, without warning or advance notice. In such instances, our customers may experience inventory buildup and/or difficulties in selling their products and, in turn, may reduce or cancel orders for wafers from us and/or ask for a reduced selling price, which may harm our revenue, business and profitability. The timing, severity and recovery of these downturns cannot be predicted.

During the last two years, we have initiated plans to invest an aggregate of $920 million in capital expenditures (mainly machinery and facilities), to expand our SiPho, SiGe, power, next generation and other capacity, primarily in the SiPho and SiGe processes used across a wide range of our customers’ products, including devices for artificial intelligence (AI) applications. However, as with many emerging applications, the selling price per wafer and demand for semiconductors used in AI may be volatile and difficult to forecast. In a downturn in high-technology markets, the selling price per wafer and demand for our SiPho and SiGe processes may decline, and we may experience oversupply and price pressure. If the selling price per wafer and demand for AI-related products decline, or if demand shifts to process technologies we do not manufacture, our revenues and margins could be adversely affected and may not be sufficient to cover our costs, and we may incur impairment or underutilization charges, which may adversely affect our financial results and financial position.

Our fabs in Israel, Southern California and Japan are located in areas which are generally susceptible to seismic activity. Due to the complex and delicate nature of our technological processes, our facilities are particularly sensitive to the effects of vibrations associated with even minor earthquakes. We cannot be certain that precautions that any of our fabs have taken to seismically upgrade the fabs will be adequate to protect our facilities in the event of an earthquake. Earthquakes may lead to fire in the fabs or other material damage. Also, we use highly flammable materials such as silane and hydrogen in our technological processes and are therefore subject to risk arising from fire, which cannot be completely eliminated. We are also subject to risk of floods, mostly in our Japan facilities.

Any damage resulting from earthquakes, floods, fires and other natural disasters could seriously disrupt our continued operations, cause a loss of wafers, deterioration of our fab yield and substantial downtime to reset equipment before resuming operations, which could cause a material adverse effect on our business, revenue and profits.

In addition, a power outage, even of very limited duration, and/or water leaks, chemical leaks, shortages of parts or other materials which are required for our supply chain, or other issues, may result in a loss of wafers, deterioration of our fab yield, cycle time and substantial downtime to reset equipment before resuming operations, thereby potentially causing an immediate loss of revenue and profitability in a particular period, which may cause our profitability and financial position to be adversely affected. Affected customers may elect to transfer their purchase orders to other foundries. While we try to mitigate any potential damage caused by such events and maintain insurance policies for coverage of any potential losses, including business interruption insurance, which may compensate us partially or fully against certain types of damages, we cannot ensure that our insurance coverage will compensate us fully for all of the losses we may incur and that such events will not have a negative effect on the Company’s business and financial situation.

Wafers we deliver to our customers may be returned within specified periods if they are defective or otherwise fail to meet prior agreed upon specifications. Future customer returns may have an adverse effect on our business and financial results.

We generate revenues from customers located in the United States, Europe and Asia-Pacific. Because of our international operations, we are vulnerable to the following risks:

The geographical distance between Israel, the United States, Japan, and the rest of Asia and Europe also creates certain logistical and communication challenges. In addition, there has recently been a significant increase, and subsequent uncertainty, in the number of tariffs and other trade restrictions globally.  Uncertainty surrounding the duration, severity, scope, and timing of these trade actions may disrupt international trade and may increase the inability or unwillingness of customers to purchase our products. The escalation or broadening of these trade actions could also significantly increase our costs or impede our ability to sell our products, which could materially and adversely affect our business.  We cannot assure you that we will be able to sufficiently mitigate all risks related to our international operations.

As of December 31, 2025, we had approximately $161 million in consolidated principal amount of outstanding debt, comprised as follows: (1) a TPSCo loan in a principal amount of approximately $92 million, which carries a fixed interest rate of 2% per annum, with principal scheduled to be repaid between 2027 and 2030; (2) Tower’s subsidiaries’ capital lease agreements for machinery and equipment with JA Mitsui Leasing, with aggregate outstanding lease liabilities of approximately $29 million, carrying a fixed interest rate of approximately 2% per annum, payable between 2026 and 2029; and (3) Tower and its subsidiaries’ other capital and operating leases, with aggregate outstanding lease liabilities of approximately $40 million, payable between 2026 and 2032. Debt may have negative consequences on our business, including:

In order to service our debt, the applicable interest it carries and other liabilities and obligations and/or to improve its terms and conditions and/or to invest in strategic opportunities for growth and/or business development activities (including the $920 million SiPho and SiGe capital expenditure plan and the abovementioned 300mm potential new fab shell build-out and capacity expansion in Uozu, Japan), we may decide to obtain funds to finance such activities, in part or in whole, from sources including debt vehicles and/or refinancing, the sale of new securities, the sale of intellectual property and/or intellectual property licensing, as well as additional financing alternatives. However, there is no assurance that we will be able to obtain sufficient funding, if at all, from the financing sources detailed above or other sources in a timely manner (or on commercially reasonable terms) to allow us to fund our growth plans and/or cover, in a timely manner, all our costs, capital expenditure investments, and all of our scheduled debt detailed above, liabilities, and obligations, which may adversely affect our financial position and operations.

Our working capital requirements and cash flows are subject to quarterly and yearly fluctuations, depending on a number of factors. If we are unable to manage fluctuations in cash flow, our business, operating results and financial condition may be materially adversely affected. Factors which may lead us to suffer cash flow fluctuations include:

A number of factors can impact our future effective tax rate or tax payments, which could cause fluctuation in our net margins and our financial results, including:

We depend on the continued services of our senior executive officers, senior managers and skilled technical and other personnel, and there is intense competition for the services of these personnel in the semiconductor industry. Our business could suffer if we lose the services of some of these senior executives and key personnel due to resignation, medical absence, illness or other reasons, and cannot find, hire and integrate adequate replacement senior executives and key personnel in a timely manner.

Our customers generally do not place purchase orders far in advance, partly due to the cyclical nature of the semiconductor industry. Since our expense levels are based in part on our expectations of future revenues, we may be unable to adjust costs in a timely manner to compensate for revenue shortfalls caused by cancellations, rescheduling of orders or lower actual orders than quantities forecasted. Rescheduling may relate to quantities or delivery dates, and, sometimes, to the specifications of the products we are shipping. Consequently, we cannot be certain that orders on backlog will be shipped when expected or at all.

We expect that, in the future, our revenues in any quarter will continue to be substantially dependent upon purchase orders received in the immediately preceding quarter or two. We cannot assure you that any of our customers will continue to place orders with us in the future at the same levels as in prior periods. For these reasons, our backlog at any given date may not be a reliable indicator of our future revenues and, as a result, revenue and margins’ forecasts, targets and guidance that we provide from time to time, may fall short of expectations.

While our business model is to start processing wafers in an amount matching each customer’s specific purchase order, on occasion, we may start processing wafers in excess of a customer’s orders based on forecasted customer demand, because we may forecast future excess demand or because of future capacity constraints. If such wafers will eventually not be covered by matching customer purchase orders, we may be left with excess inventory that may ultimately become obsolete and must be scrapped or sold at a significant discount. Significant amounts of obsolete inventory may have a negative impact on our financial results.

Our sales cycles, which we measure from first contact with a customer to first shipment of wafers ordered, vary substantially, and may last longer than two years, particularly for new technologies. In addition, even after we make initial shipments of prototypes, it may take several more months to reach the targeted maximum quantities. As a result of these long sales cycles, we may be required to invest substantial time and incur significant expenses and investments before receiving any purchase orders and related revenue. If orders ultimately received are significantly lower than our expectations, we will have excess capacity that we may not be able to fill within a short period of time, resulting in lower utilization of our facilities. In addition to the revenue loss, we may be unable to adjust our costs in a timely manner to align with the lower revenue, since a large portion of our cost is fixed cost, which remains constant irrespective of the number of wafers, which may adversely affect our operating results and financial condition.

From time to time, we may decide to cease operations at a certain facility or discontinue developing certain technology flows due to factors such as changes in company strategy, low margins, low utilization or low customer demand. This may result in unused equipment, inventory and/or other assets that are no longer required to support our customers’ needs, which may be sold to third-party buyers. We also have obsolete equipment or inventory from time to time that we sell in order to streamline our production processes and enhance our overall efficiency. If we are unable to successfully identify and negotiate with potential buyers and sell excess equipment in a timely manner for satisfactory consideration, we may incur losses and additional liabilities and contingencies, which may have a negative effect on our financial results.

We currently operate our fabs in four different regions: the United States, Japan, Israel and Italy. The functional currency of our entities in the United States, Israel and Italy is the USD. The functional currency of our operations in Japan is the JPY. Our expenses and costs are denominated mainly in USD, JPY and NIS. Our revenues are denominated mainly in USD and JPY. Our cash from operations, investing and financing activities are denominated mainly in USD, JPY and NIS. We are, therefore, exposed to the risk of currency exchange rate fluctuations in Japan, Israel and Italy, which may have a material effect on our costs and financial results due to the periodic evaluation or revaluation of assets, liabilities, costs and income in these currencies.

The majority of TPSCo’s revenues are denominated in JPY, and the majority of its expenses are denominated in JPY, which reduces the net exposure to fluctuations of the USD/JPY exchange rate on TPSCo’s gross, operating and net profits, as the impact on revenues is offset to a large extent by the impact on expenses. In order to mitigate a portion of the net exposure to the USD/JPY exchange rate on profit margins, we have entered into hedging transactions that partially hedge our exposure to currency fluctuations, to contain such fluctuations within a predefined fixed range.

The cost of our operations in Israel, when measured in USD, is influenced by changes in the USD-to-NIS exchange rate, particularly with respect to expenses and costs denominated in NIS. Appreciation of the NIS may increase the costs of the Israeli facility in USD, such as increases in the cost of utilities, taxes, and labor costs that are denominated in NIS, which may lead to the erosion of profit margins. We use foreign currency cylinder and forward transactions to hedge a portion of this currency exposure and maintain such exposure within a predefined fixed range.

We depend on intellectual property in order to provide certain foundry services and design support to our customers. We cannot assure you that patents will be issued for pending or future applications or that, if patents are issued, they will not be challenged, invalidated or circumvented or that the rights granted under the patents will provide us with meaningful protection or any commercial advantage. In addition, we cannot assure you that other countries in which we market our services and products will respect our intellectual property rights to the same extent as the United States. We cannot assure you that we will, at all times, be able to enforce our patents or other intellectual property rights, and it may be difficult for us to protect our intellectual property from misuse or infringement by other companies. Further, we cannot assure you that courts will uphold our intellectual property rights or enforce the contractual arrangements that we have entered into to protect our proprietary technology, which may reduce our opportunities to generate revenues. In the event that we are unable to enforce our intellectual property rights, our business may be harmed.

In March 2026, GlobalFoundries filed three lawsuits against the Company in the U.S. International Trade Commission and the U.S. District Court for the Western District of Texas, alleging infringement of certain of its patents. The Company disputes these claims.

We may in the future be party to other infringement claims. In the event any third-party asserts infringement claims against us or our customers, we may have to consider alternatives including, but not limited to:

If we determine it is necessary to adopt one or several of these alternatives, it may place substantial financial and other burdens on us and hinder our business. If we fail to obtain certain licenses, or if we are involved in litigation relating to alleged patent infringement or other intellectual property matters, it may halt our operations with regards to particular product technologies, which may adversely impact our business and revenues.

From time to time, we are a party to litigation incidental to the conduct of our ongoing business, including class actions, disputes with customers, suppliers, employees, landlords, or other third parties. Litigation requires a certain amount of management time and effort which may adversely affect our business by diverting management focus from business needs.

In addition, our ability to compete successfully depends in part on our ability to operate without infringing on the proprietary rights of others and defending our intellectual property rights. Because of the complexity of the technologies used and the multitude of overlapping patents, copyrights and other intellectual property rights, it is often difficult for semiconductor companies to determine infringement. As a result, the semiconductor industry is characterized by frequent litigation regarding patent, trade secret and other intellectual property rights. We have been subject to intellectual property claims from time to time, some of which have been resolved through license agreements, the terms of which have not had a material effect on our business. The Company is currently party to three infringement claims brought by GlobalFoundries in the U.S. International Trade Commission and the U.S. District Court for the Western District of Texas alleging infringement of certain of its patents. The Company disputes these claims.  Failure to prevail in such claims may negatively impact our business.

Our business is subject to a variety of laws and governmental regulations in Israel, the United States, Japan and Italy relating to the use, storage, discharge and disposal of toxic or otherwise hazardous materials used in our factories. If we fail to use, store, discharge or dispose of hazardous materials appropriately in accordance with applicable environmental laws or regulations, or if such laws change in the future, we may be subject to substantial liability or may be required to suspend or significantly modify our operations, which may adversely impact our business and revenues.

We operate as an independent semiconductor foundry focused primarily on specialty process technologies. Our business model assumes that demand for these processes within the semiconductor industry, both by fabless semiconductor companies and IDMs, will grow and follow the broader trend towards outsourcing foundry operations. If our assumption does not prove applicable, our business and financial results may be adversely impacted.

We have established relationships with design automation vendors and third-party design service companies to develop complete design kits that our customers can use to meet their design needs using our process technologies. Our ability to meet our customers’ design needs successfully, including their schedule and budget requirements, depends in part on the availability and quality of the relevant services, tools and intellectual property provided by these vendors and providers. Difficulties or delays in these areas may adversely affect our ability to meet our customers’ needs, thereby potentially harming our business. In addition, with respect to third-party intellectual property that is required for our technology development and operations, if problems or delays arise with respect to the timely development, quality and provision thereof to us, our customers’ products may be delayed, resulting in underutilization of our capacity. If any of our intellectual property vendors goes out of business, liquidates, merges with, or is acquired by, another company that discontinues the vendor’s previous line of business, or if we fail to maintain or acquire licenses to such intellectual property for any other reason, our business may be adversely affected.

The export of wafers from our foundries to the destinations requested by our customers may be subject to U.S., Israeli, Italian and/or Japanese export control and other regulations established by other countries. Compliance with existing or evolving U.S., Israeli, Italian, Japanese or other applicable governmental regulations or obtaining timely domestic or foreign regulatory approvals or certificates may materially disrupt our business such as by reducing our sales or requiring extensive modifications to processes that we use, which could require extensive modifications to our customers’ products and/or increase our operational costs. We may not export products using or incorporating controlled technology without obtaining an export license, which may not always be granted. Similarly, we may be required to obtain export licenses for equipment we may seek to sell, and such licenses may not be granted in a timely manner or at all. These restrictions may make foreign competitors who are subject to less stringent controls on the export of their products more competitive in the global market. In addition, within our compliance procedures and export control assessments, we use certain software tools to flag sanctioned entities and require our customers to complete certain forms to provide required information. If such software tools fail to identify sanctioned entities, or information provided by customers is inaccurate or insufficient, we may unknowingly violate applicable regulations, which could expose us to fines, penalties, or restrictions on our export activities.

If our wafers are defective, we may be subject to product liability claims, as well as possible recall requests, safety alerts or advisory notices, despite our customary terms and conditions stating that we have no such liability for any such failures that may be caused to the end users. We cannot assure you that our terms and conditions will not prevent end users or other customers from filing charges against us or seeking damages from us or that our insurance policies will compensate us fully for claims that may be made against us. In addition, we may be unable to obtain insurance in the future at satisfactory rates, with adequate coverage, or at all. Product liability claims or product recalls in the future, regardless of their ultimate outcome, may have a material adverse effect on our business, reputation, financial condition and our ability to attract and retain customers.

Significant portions of the employees at Fab 3 and at TPSCo’s fabs in Japan are represented by unions and covered by collective bargaining agreements. We cannot predict the effect that union representation or future organizational activities will have on our operational costs and business. We cannot assure you that our fabs will not experience a material work stoppage, strike or other collective action in the future, or incur increased costs in connection with the renewal of such bargaining agreements or other potential union activities, which may disrupt our fabs’ continued operations, their costs, operational performance metrics, and our operational and financial results. In addition, there have been attempts, including recently, by the General Federation of Labor in Israel (“Histadrut”) to organize and establish a representative labor union for our Israeli employees. Under Israeli law, establishing a representative labor union requires that at least one-third of the Israeli employees join the Histadrut, and in such a case, all employees would be liable to pay its membership fees.  While the Histadrut’s attempts have not succeeded to date, if a representative labor union were to be established in the future, we would need to conduct negotiations with the representative labor union and the Histadrut regarding the terms of employment and benefits of the employees, which could result in the incurrence of additional labor costs and/or work stoppages, which in turn could adversely affect our business and financial results.

There is significant concern regarding climate change and its potential dramatic effects on human activity if no aggressive remediation steps are taken. Legislative developments with respect to reductions in greenhouse gas emissions may result in increased energy, transportation and raw material costs. Scientific examination of, political attention to, and rules and regulations on, issues surrounding the existence and extent of climate change may result in increased operational costs due to increase in the prices of energy and introduction of energy or carbon tax. A variety of regulatory developments have been introduced that focus on restricting or managing emissions of carbon dioxide, methane, tetrafluoromethane (CF4), hexafluoroethane (C2F6), octafluororopane (C3F8), octafluorobutane (c-C4F8), suflur hexafluoride (SF6), nitrogen trifluoride (NF3), trifluoromethane (CHF3) and other greenhouse gases. Enterprises may need to purchase new equipment at higher costs or raw materials with lower carbon footprints. In addition, there are restrictions and limited quota imposed by the Israeli government that restrict the import of certain of such materials and we may be unable to obtain all material required for our operations.  These developments and further legislation that is likely to be enacted, such as changes in environmental regulations on the use of per fluorinated compounds, may increase our operational costs, which may adversely affect our results of operation and financial condition.

Our industry relies on raw materials that consist of, contain or incorporate certain minerals sourced from the Democratic Republic of Congo (“DRC”) or adjoining countries that are subject to regulation. These minerals are commonly referred to as conflict minerals. Conflict minerals that may be used by our suppliers include Columbite-tantalite (derivative of tantalum [Ta]), Cassiterite (derivative of tin [Sn]), gold [Au], Wolframite (derivative of tungsten [W]), and Cobalt [Co]. We are currently subject to the requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 that require due diligence and disclosure as to whether our products contain conflict minerals. Any regulatory changes concerning the use of conflict minerals could adversely affect the sourcing, availability and pricing of the materials used in the manufacturing process of our products. In addition, we will likely incur additional costs to comply with any new conflict minerals rules, including costs related to potential additional disclosure requirements and conducting additional diligence procedures to provide additional information with respect to the sources of conflict minerals that may be used in, or necessary to the production of, our products and, if applicable, potentially making changes to our products, processes or sources of supply as a consequence of such verification activities. It is also possible that we may face reputational harm and/or may lose customers if we determine that certain of our products, processes or sources of supply use conflict materials from countries directly or indirectly financing or benefitting armed groups, which would require us to ensure that such source responsibly sources minerals in conformance with applicable standards or change the source of supply and may adversely impact our revenue and business.

Any security breach, including those resulting from a cybersecurity attack or any unauthorized access, unauthorized usage, virus or similar breach or disruption could result in the loss of confidential information, damage to our fab operations, damage to our reputation, early termination of our contracts, litigation, regulatory investigations or other liabilities. If our security measures are breached as a result of third‑party action, employee error, malfeasance or otherwise and, as a result, someone obtains unauthorized access to our, our customers’, our employees’ or any other third-party’s confidential information, our reputation may be damaged, we may face potential disruption and loss, especially due to the possible substantial damage if operations cannot be quickly restored, our business may suffer, and we could incur significant liability.

The risk of a security breach or disruption, particularly through cyber-attacks or cyber-intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. Techniques used to obtain unauthorized access or to sabotage systems change frequently and may not be recognized until launched against a target. The rapid expansion in the availability and sophistication of AI and ML driven tools is significantly reshaping the cyber threat landscape.  These tools are increasingly being leveraged by malicious actors to automate, scale and refine cyberattacks, making them more targeted, convincing and difficult to detect. As a result, we may be unable to anticipate these techniques or to implement adequate preventative measures. Although we have invested in measures to reduce these risks, we cannot assure you that these measures will be successful in preventing compromise and/or disruption of our information technology systems and related data. If an actual or perceived material security breach occurs, the market’s perception of our security measures may be harmed and we could lose sales and customers as well as incur operational damage to our equipment and/or products.

There has been varying focus across industries on companies’ ESG and sustainability practices. Expectations regarding voluntary ESG initiatives and disclosures and consumer demand for alternative forms of energy, which are continuing to evolve, may result in increased costs (including but not limited to increased costs related to compliance, stakeholder engagement, contracting and insurance), changes in demand for certain products, enhanced compliance or disclosure obligations, or other adverse impact to our business, financial condition or results of operations.

While we engage in voluntary initiatives (such as disclosures, certifications, and improvement goals, among others) to increase our company’s contribution to society and our environment, such initiatives may be costly and may not generate the desired impact. Actions that we may take or statements that we may make based on expectations, assumptions, or third-party information that we currently believe to be reasonable, may subsequently be determined to be erroneous or subject to other interpretations. Our current actions may subsequently be determined to be insufficient by various stakeholders, and we may be requested to adjust or improve certain ESG initiatives and/or disclosures.

Certain market participants, including major institutional investors and capital providers, have used third-party benchmarks and scores to assess companies’ ESG profiles in making investment or voting decisions. Unfavorable ESG ratings could lead to negative investor sentiment towards us or our industry, which could negatively impact our share price as well as our access to and cost of capital. ESG-related regulation may also result in increased compliance costs or scrutiny. There can be no certainty that we will successfully navigate or manage ESG issues or that we will successfully meet investors or others’ expectations. Any failure, or perceived failure, by us in this regard could have a material adverse effect on our reputation with customers, employees, other third parties and the communities and industries in which we operate, as well as on our business, share price, financial condition, access to capital or results of operations.

AI and ML are increasingly being adopted across the semiconductor industry and the broader markets in which we and our customers operate, and the development, deployment and integration of AI and ML capabilities may become an increasingly important factor in our ability to compete effectively, improve operational efficiency, support our research and development efforts and meet evolving customer expectations. We are evaluating AI and ML tools across our products, services and internal business operations. If we are unable to successfully deploy AI and/ or ML across our products and services and our business operations and adequately anticipate and keep pace with developments in the AI and ML space, and if our peers are successful in doing so, we may suffer a competitive disadvantage, which could have a material adverse effect on our business, financial condition and results of operations.

In addition, the rapid growth of AI and ML tools expands both the scope and complexity of the risk environment, including cyber risks, and requires continuous governance and organizational awareness.  In the event that AI and/ or ML is not used responsibly in our products and services, it may result in reputational or financial harm and liability and may cause us to incur costs to resolve such issues. The use of AI and ML poses emerging legal, social, and ethical issues and presents risks and challenges that could affect its adoption, and therefore our business. Leveraging AI and ML capabilities to potentially improve our internal functions and operations may present further risks, costs, uncertainties and challenges.

The capital markets, in general, have experienced volatility that often has been unrelated to the operating performance of the traded companies. The share price of many companies in the semiconductor industry has experienced wide fluctuations, which has often been unrelated to the operating performance of such companies. These broad market and industry fluctuations may adversely affect the market price of our securities, regardless of our actual operating performance.

In addition, it is possible that our operating results may differ from the expectations of public market analysts and investors, which may adversely affect the price of our securities. Adverse impact to the market price of our securities may negatively impact our ability to raise new capital in order to finance our growth plans, obligations and liabilities and/or re-finance our debt, and/or may cause us to receive less favorable terms than expected to the extent we will decide to raise any capital.

We report under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as a foreign private issuer, which means we are exempt from certain provisions of the Exchange Act that are applicable to U.S. public companies, including the proxy rules and the rules requiring the filing with the U.S. Securities and Exchange Commission (“SEC”) of quarterly reports on Form 10-Q and current reports on Form 8-K. We furnish and intend to continue furnishing information regarding our quarterly financial results to the SEC on Form 6-K for so long as we are subject to the reporting requirements of Section 13(g) or 15(d) of the Exchange Act, although the information we furnish may not be the same as the information that is required in quarterly reports on Form 10-Q for U.S. domestic issuers. In addition, foreign private issuers are not required to file their annual report on Form 20-F until 120 days after the end of each fiscal year, while U.S. domestic issuers that are accelerated filers are required to file their annual report on Form 10-K within 75 days after the end of each fiscal year and U.S. domestic issuers that are large accelerated filers are required to file their annual report on Form 10-K within 60 days after the end of each fiscal year. Foreign private issuers are also exempt from Regulation FD (Fair Disclosure), aimed at preventing issuers from making selective disclosures of material information. In addition, our principal shareholders are not subject to Section 16(a) of the Exchange Act, which requires disclosure with respect to trading activity in the issuer’s securities, and our officers, directors and principal shareholders are exempt from the “short-swing” profit recovery provisions of Section 16(b) of the Exchange Act. As a foreign private issuer, we are permitted to follow certain home country corporate governance practices instead of those otherwise required under the Listing Rules of the Nasdaq Stock Market for domestic U.S. issuers, provided that we disclose the requirements we are not following and describe the home country practices we are following (see “Item 16G. Corporate Governance”). The public reporting and disclosure rules to which we are subject under the Exchange Act, and the corporate governance practices that we are permitted to follow, may provide less protection to our investors than is accorded to investors under rules applicable to domestic U.S. issuers.

We currently intend to use our future cash and earnings, along with our existing cash balance and deposits, to finance our growth and acquisition strategy, capacity expansion, ongoing operations, and other business and operational needs, including the $920 million capital expenditure plan in order to support our SiPho and SiGe capability and capacity growth at Fabs 2, 3, 7, and 9, the possible expansion of the 300mm capacity and capabilities build-out in a new shell in Uozu, Japan, adjacent to Fab 7 (subject to METI subsidies and other considerations), and the additional equipment for the Agrate facility.  Therefore, we do not anticipate paying dividends in the foreseeable future. We may, however, use our existing cash balance and/or future cash earnings to execute share repurchases. Our board of directors has sole discretion regarding whether to pay dividends or adopt a share repurchase program. If our board of directors decides in the future to pay dividends or adopt a share repurchase program, the form, timing, frequency and amount will depend on several factors, including our future growth and acquisition strategy, our capacity growth plans, future operations and earnings, capital requirements and surplus, general financial condition, contractual and legal restrictions, the trading price of our ordinary shares, and other factors that our directors may deem relevant. The Israeli Companies Law, 1999 (the “Companies Law”) and regulations thereunder impose conditions on our ability to declare and pay dividends and/or execute share repurchases.  Payment of dividends and share repurchases may also be subject to Israeli withholding taxes. See Exhibit 2.1 “Description of Securities—Dividend and Liquidation Rights” and “Item 10. Additional Information—E. Taxation—Israeli Taxation” for more information. If you are considering investing in our ordinary shares, you should not rely on future dividend income and/or share repurchases, and any gains from the investment will likely depend on the price performance of our traded ordinary shares, which may or may or may not be favorable.

Our Fab 2 facility, our design center and certain of our corporate and sales offices are located in Israel. In addition, most our officers and directors are residents of Israel. Accordingly, political, economic and military conditions in Israel and the surrounding region may directly affect our business. Since the establishment of the State of Israel in 1948, Israel has been subject to armed conflicts with neighboring countries, as well as terrorist activities, with varying levels of severity.

Since the October 7, 2023 attacks by Hamas terrorists on Israel’s citizens in areas in the south of Israel, which resulted in extensive deaths, injuries and kidnapping of civilians and soldiers, there have been ongoing hostilities between Israel and Hamas, Hezbollah, a terrorist organization based in Lebanon, and Iran, both directly and through Iranian proxies, such as the Houthi movement in Yemen.  Most recently, in February 2026, hostilities escalated across the region, involving Iran attacks on Israel, renewed conflicts between Israel and Hezbollah, and Iranian strikes against U.S. and other targets in the Gulf region. While temporary ceasefires between the United States, Israel, and Iran, and between Israel and Hezbollah, were reached in April 2026 and remain in effect as of the date hereof, there can be no assurance that the temporary ceasefire agreements will be upheld or that permanent ceasefires will be reached, and the situation in Israel and the region remains highly volatile. The intensity and duration of attacks by Hamas, Hezbollah, Iran, and other neighboring countries against Israel is difficult to predict, as are economic implications on our business and operations and on Israel’s economy, in general.

In connection with the ongoing war and hostilities, several hundred thousand Israeli military reservists were drafted to perform military service. While we have not been materially adversely impacted to date by any absences of our personnel, the absence of a significant number of our employees (including key employees) related to their, or their spouse’s, active military reserve duty, which may be for extended periods of time, could disrupt our operations and materially and adversely affect our Israeli operations, as well as our business and results of operations.

We have robust business continuity procedures in place, including multi-site qualification of certain process flows and information technology safeguards. However, with regard to our capacity expansion plans involving equipment installation by foreign vendors and others in Israel, and ongoing tool maintenance, there is no assurance that we will be able to complete the installation and qualification of all such equipment in a timely manner to satisfy customer demand, due to the inability of such vendors to travel to Israel and arrive to the fab to install and/or repair tools due to the abovementioned war. Further, there is no assurance that, by the time all such machinery is installed and qualified, customer demand will require full or high utilization of such machinery tools and there is no assurance that the renewal or continuation of the US/Iran/Israel/Hezbollah conflict will not negatively impact our ability to install the machinery in our Israeli fab located in the northern part of Israel, as a result of vendors’ inability to arrive to Israel, damage to the fab or otherwise. These events could lead to increased costs, loss of business opportunities, a slower-than-expected installation schedule, lower-than-expected margins, loss of customers, risks to employee safety, and challenges to business continuity, potentially resulting in business and financial losses.

Our property and business interruption insurance may not adequately compensate us for losses that we may incur, and any losses or damages incurred by us may have a material adverse effect on our business. Although the Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that this government coverage will be maintained or, if maintained, will be sufficient to compensate us fully for all damages incurred.

The continuation of the war also led to a deterioration in certain indicators of Israel’s economic standing, for instance, a downgrade in Israel’s credit rating by rating agencies such as Moody’s, S&P Global, and Fitch.

The global perception of Israel and Israeli companies is influenced by the actions of international judicial bodies, which may lead to increased sanctions and other negative measures against Israel and Israeli companies, including boycotts of Israeli goods and services or restrictions on doing business with Israel and Israeli companies. These restrictions may materially limit our ability to obtain raw materials from these countries or sell our products to companies in these countries. In addition, the political and security environment in Israel may result in parties with whom we have agreements claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions. Any hostilities involving Israel, or the interruption or curtailment of trade between Israel and its trading partners, may adversely affect our operations and make it more difficult for us to do business and raise capital, and may adversely affect the share price of publicly traded companies with operations in Israel, such as us.

In addition, political conditions within Israel may affect our operations. Prior to the October 2023 war and again recently, the Israeli government has pursued changes to Israel’s judicial system.  In response to these developments, certain individuals, organizations, and institutions, both within and outside of Israel, voiced concerns that such proposed changes, if adopted, may negatively impact the business environment in Israel. Such proposed changes may also lead to political instability and/or civil unrest. Actual or perceived political instability in Israel, or any negative changes in the political environment, may adversely affect the Israeli economy and, in turn, our business, financial condition, and results of operations.

We operate our Israeli factories seven days a week pursuant to an exemption (which we need to timely renew) from the law that requires businesses in Israel to be closed from sundown on Friday through sundown on Saturday. In addition, our business license certificate issued by municipality of Migdal Ha’emek, Israel is required to be renewed periodically. If such exemption or our business license are not renewed in the future, our financial results and business may be harmed.

Tower is incorporated in Israel and most of its executive officers and directors are not residents of the United States (excluding the employees of its U.S. subsidiaries), and a majority of its assets (excluding its U.S. subsidiaries and their assets) and the assets of its non-U.S. resident directors and officers are located outside the United States. Service of process upon us and/or our non-U.S. resident directors and/or officers may be difficult to obtain within the United States. Additionally, a judgment obtained in the United States against Tower and/or any of our non-U.S. executive officers and/or directors, including one based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the United States (except to the extent that it relates to Tower’s U.S. subsidiaries, its assets or employees). Additionally, Israeli courts might not enforce judgments obtained in the United States against us or our non-U.S. directors and executive officers, which may make it difficult to collect on judgments rendered against us or our non-U.S. officers and directors. In addition, it may be difficult to assert claims under U.S. securities laws or obtain a judgment based on civil liability provisions under U.S. federal securities laws claimed in original actions instituted in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws against us or our non-U.S. officers or directors on the grounds that Israel may not be the most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a time-consuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing the matters described above.

Provisions of Israeli law could have the effect of delaying or preventing a change in control and may make it more difficult for a third-party to acquire all or a significant portion of our shares or assets, even if doing so would be considered to be beneficial by some of our shareholders. Among other things, Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares of a public company above specified thresholds, requires special approvals for transactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to such types of transactions. Furthermore, Israeli tax considerations may make potential transactions unappealing to Tower or to its shareholders whose country of residence does not have a tax treaty with Israel exempting such shareholders from Israeli tax. For example, with respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfilment of numerous conditions, including a holding period of two years from the date of the transaction during which certain sales and dispositions of shares of the participating companies are restricted. Moreover, with respect to certain share swap transactions, the tax deferral is limited in time, and when such time expires, the tax becomes payable, even if no actual disposition of the shares has occurred.

The rights and responsibilities of the holders of our ordinary shares are governed by our articles of association and by Israeli law. These rights and responsibilities differ in some material respects from the rights and responsibilities of shareholders in typical U.S. registered corporations. In particular, a shareholder of an Israeli company has certain duties to act in good faith and in a customary manner in exercising his or her or its rights and fulfilling his or her or its obligations towards the company and other shareholders and to refrain from abusing its power in the company, including, among other things, in voting at the general meeting of shareholders on amendments to a company’s articles of association, increases in a company's authorized share capital, and mergers and certain transactions requiring shareholders’ approval under the Companies Law.  In addition, a controlling shareholder of an Israeli company or a shareholder who knows that it possesses the power to determine the outcome of a shareholder vote or who has the power to appoint or prevent the appointment of a director or officer of the company or has other powers toward the company has a duty of fairness toward the company. However, Israeli law does not define the substance of this duty of fairness. There is little case law available to assist in understanding the implications of these provisions that govern shareholder behavior. These provisions may be interpreted to impose additional obligations and liabilities on holders of our ordinary shares that are not typically imposed on shareholders of U.S. corporations.

We are a pure-play independent specialty foundry, and as such we are dedicated to providing high-value, high-quality, processed wafers to our customers for their end products and end users. Our foundry processes use chemical materials, chemical processes and other materials and equipment on silicon wafers, based on the design specifications of our customers. As a pure-play foundry, we do not offer products of our own.  We currently offer process technology geometries of 0.35, 0.18, 0.16 and 0.13 -micron on 200-mm wafers and 65 nanometer on 300-mm wafers. We also provide design support and complementary technical services. Our customers and/or our customers’ customers use our wafers in their end products, which are sold and/or used in diverse markets, including consumer applications, personal computers, communications, data centers, handsets and smartphones, automotive, industrial, aerospace and medical devices.

We are focused on establishing leading market share in high-growth specialized markets by providing our customers with high-value, high quality, wafer foundry services. We use standard analog CMOS process technology, as well as specialized specific technologies including CMOS image sensors, non-imaging sensors, micro-electromechanical systems (MEMS), wireless antenna switch Silicon-on-Insulator (SOI), mixed-signal, radio frequency CMOS (RFCMOS), bipolar CMOS (BiCMOS), silicon-germanium BiCMOS (SiGe BiCMOS or SiGe), silicon photonics (SiPho), including silicon and advanced low-loss silicon nitride waveguides, high voltage CMOS, and power management technologies. To better serve our customers, we have developed and are continuously expanding our technology offerings in these fields. Through our experience and expertise gained during more than thirty years of operation, we differentiate ourselves by creating a high level of value for our customers through innovative technological processes, design and engineering support, competitive operational indices, and dedicated customer service.

Tower Semiconductor Ltd., an Israeli company, was founded in 1993 with the acquisition of National Semiconductor’s 150-mm wafer fabrication facility located in Migdal Haemek, Israel, known as our Fab 1 facility, and commenced operations as an independent foundry.  During 2025, in response to anticipated changes in market dynamics and customer demand, we discontinued operations at Fab 1 and consolidated certain flows into Fab 2, also located in Migdal Haemek, Israel, in order to streamline our production processes and enhance our overall efficiency. We are currently commencing use of some of the Fab 1 facility for the expansion of certain Fab 2 activities.

In 2003, we commenced production at Fab 2, a wafer fabrication facility we established in Migdal Haemek, Israel. Fab 2 currently supports geometries of 0.18- and 0.13-micron, utilizing advanced CMOS technology, including SiGe, SiPho, CMOS image sensors, magnetic sensors, advanced analog, RF (radio frequency) - specifically RF switches on SOI - power ICs, power discrete, and mixed-signal technologies.

In 2008, we merged with Tower NPB, which holds 100% of NPB Co. and operates Fab 3, located in Newport Beach, California, U.S. Fab 3 specializes in specialty process technologies for silicon photonics and analog and mixed-signal semiconductor devices, and supports geometries ranging from 0.50- to 0.13-micron. NPB Co.’s specialty process technologies support applications requiring advanced analog, radio frequency, high voltage, bipolar, SOI, silicon germanium bipolar complementary metal oxide (BiCMOS), and silicon photonics processes.

In 2014, we acquired from Panasonic 51% of a newly established company, TPSCo, which became a foundry for the sale of wafers to Panasonic and other third-party customers, using three factories established by Panasonic in Hokuriku, Japan (Uozu E, Tonami CD and Arai E). Pursuant to the transaction, Panasonic transferred its capacity tools (8 inch and 12 inch) at these three fabs to TPSCo. TPSCo focuses on 65nm and 180nm geometries for RF, power management and CMOS image sensor wafers, products and applications. In July 2022, the operations in Japan were reorganized and restructured such that the Arai factory, which solely served NTCJ and did not serve Tower or TPSCo foundry customers, ceased operations, while the operations at the Uozu and Tonami facilities remained unchanged. In March 2026, we signed an agreement for a strategic restructuring of our Japan operations, under which Tower will take full ownership of the 300mm Fab 7 to be organized under a wholly owned Japanese subsidiary of Tower, while NTCJ will take full ownership of the 200mm Fab 5. As part of this restructuring, the companies will enter into mutual long-term supply agreements to ensure continued support for the existing customers of both companies. Accordingly, Tower customers currently served through Tonami Fab 5 (200mm) and Nuvoton customers currently served through Uozu Fab 7 (300mm) are not expected to experience any disruption to supply or operations. The transaction is targeted to close on April 1, 2027, subject to the satisfaction of customary closing conditions and receipt of applicable regulatory approvals.

In 2016, we acquired Fab 9, located in San Antonio, Texas, U.S., from Maxim. The assets and related business that we acquired from Maxim are held and conducted through one of our wholly owned U.S. subsidiaries, Tower SA. Fab 9 supports process geometries ranging from 0.80-micron to 0.18-micron using CMOS, power management and analog based technologies, SiGe and SiPho.

In 2021, we entered into an agreement with ST to share, under a collaborative arrangement, a 300mm facility being constructed by ST in Agrate, Italy, and following the entry into such agreement, TSIT, a wholly owned Italian subsidiary of Tower, was incorporated. Under this arrangement, the parties agreed to share the cleanroom space and facility infrastructure, with the Company installing certain of its own equipment inside the cleanroom in an area that comprises approximately one-third of the total cleanroom space for its foundry customers, which we refer to as “Fab 10”.  TSIT and ST invested in their respective process equipment and have been working to accelerate the transfer of process flows to the facility, product development, qualification, and subsequent ramp-up. The comprehensive qualification process was completed during 2024, followed by the commencement of volume production and operations, which were, and will continue to be, managed by ST.  Fab 10 supports process geometries of 65 nm using RF SOI analog-based technologies.  In September 2023, Tower and Intel signed an agreement under which Intel undertook to build a capacity corridor at Tower’s instruction, to enable Intel to manufacture wafers for Tower’s customers at Intel’s 300mm facility in New Mexico, U.S. Intel expressed its intention not to perform under the agreement, and the parties are presently in a mediation process.

During the last two years, we have initiated plans to invest an aggregate of $920 million in capital expenditures (mainly machinery and facilities), primarily to expand our SiPho and SiGe capacity at Fabs 2, 3, 7 and 9, as well as to enhance our power next generation and other capacity. Specifically with respect to SiPho, during 2026, we have engaged with certain customers for committed capacity reservation through 2028 in exchange for prepayment received and to be received, which would be credited to them against their future purchases.

Our executive offices and Israeli facility are located in the Ramat Gavriel Industrial Park, Shaul Amor Street, Post Office Box 619, Migdal Haemek, 2310502 Israel, and our telephone number is 972-4-650-6611. Our agent for service of process in the United States is Tower Semiconductor USA, Inc. located at 2570 North First Street, Suite 480 San Jose, CA 95131.

The SEC maintains an internet website that contains reports, proxy and information statements and other information about issuers, like us, that file electronically with the SEC.  Our filings with the SEC are available to the public through the SEC’s website (http://www.sec.gov).  For more information about us, go to http://www.towersemi.com.  Information on our website is not incorporated by reference in this annual report.

Semiconductor devices are critical components in a variety of applications, from computers and data centers, consumer applications, infrastructure, artificial intelligence and communications, to industrial, military, medical and automotive applications. Rapid changes in the semiconductor industry frequently make recently introduced devices and applications obsolete within a very short period of time. With the increase in their performance and decrease in their size and resulting decrease in cost, the use of semiconductors and the number of their applications have increased significantly.

Historically, the semiconductor industry was composed primarily of companies that designed and manufactured integrated circuits (“ICs”) in their own fabrication facilities, which are known as integrated device manufacturers (“IDM”). In the mid-1980s, fabless companies, which focused on design and used external manufacturing capacity, began to emerge. Fabless companies initially outsourced production to IDMs, which filled this need through their excess capacity. As the semiconductor industry continued to grow, increasing competition forced fabless companies and IDMs to seek reliable and dedicated sources of wafer foundry services. Use of external manufacturing capacity allowed IDMs to reduce their investment in their existing and next-generation facilities and process technologies. This need for external capacity led to the development of independent companies, known as foundries, which focus primarily on providing wafer manufacturing services to semiconductor suppliers.  Foundries may also offer customers competitive complementary services through design, testing, and other technical services.  Foundry services are used by nearly all major semiconductor companies in the world, including IDMs, as part of a dual-source, risk-diversification and cost effectiveness strategy.

Semiconductor suppliers face increasing demand for new products that provide higher performance, greater functionality and smaller form factors at lower prices – all features that require increasingly complex ICs. The industry has experienced a dramatic increase in the number of applications that incorporate semiconductors. To compete successfully, semiconductor suppliers must minimize the time it takes to bring a product to market. As a result, fabless companies and IDMs have focused more on their core competencies, design and intellectual property development, and tend to outsource manufacturing to foundries.

For many years, the two basic functional technologies for semiconductor products have been digital and analog. Digital semiconductors provide critical processing power and have helped enable many of the computing and communication advances of recent years. Analog semiconductors monitor and manipulate real world signals such as sound, light, pressure, motion, temperature, electrical current and radio waves, for use in a wide variety of end products such as digital still cameras, x-ray medical applications, flat panel displays, personal computers, cellular handsets, smartphone, telecommunications equipment, data center wired communications, consumer applications, automotive and industrial products. Analog-digital, or mixed-signal, semiconductors combine analog and digital devices which can process both analog and digital signals.

Integrating analog and digital components on a single, mixed-signal semiconductor enables the development of smaller, more highly integrated, power-efficient, feature-rich and cost-effective semiconductor devices but presents significant design and manufacturing challenges. For example, combining high-speed digital circuits with sensitive analog circuits on a single, mixed-signal semiconductor can increase electromagnetic interference and power consumption, both of which cause a higher amount of heat to be dissipated and decrease the overall performance of the semiconductor. Challenges associated with the design and manufacture of mixed-signal semiconductors increase as the industry moves toward more advanced process geometries. Numerous emerging applications require 3D integration, in particular, high precision wafer bonding. Challenges related to enhanced reliability, e.g., automotive products, dictate more stringent demands to the fabrication processes. As a result, analog and mixed-signal semiconductors can be complex to manufacture and typically require sophisticated design expertise, strong application specific experience and a comprehensive intellectual property portfolio. In addition, today’s analog market is driven strongly by growing sensitivity to environmental requirements, such as the conservation of energy and human well-being.

increasing demand for complex products, have created an expanding market for outsourced foundry process manufacturing services. Foundries can cost-effectively supply advanced process technology services to even the smallest fabless companies by creating economies of scale through pooling the demand of numerous customers. In addition, customers whose IC designs require process technologies other than standard digital CMOS have created a market for independent foundries that focus on providing specialized process technologies. Specialty process technologies enable greater analog content and can reduce the die size of an analog or mixed-signal semiconductor, thereby increasing the number of dice on each wafer and reducing final die cost. In addition, specialty process technologies can enable increased performance, superior noise reduction and improved power efficiency of analog and mixed-signal semiconductors compared to traditional standard CMOS processes. These specialty process technologies include advanced silicon photonics technologies, analog CMOS, specialized RF devices on SOI, radio frequency CMOS (“RF CMOS”), CMOS image sensors (“CIS”), non- imaging sensors, high voltage CMOS, bipolar CMOS (“BiCMOS”), silicon germanium BiCMOS (“SiGe BiCMOS”), bipolar CMOS double-diffused metal oxide semiconductor (“BCD”), NVM technologies and special devices for AI technologies. Due to our extensive and diversified work in specialized process technologies, we have the required skills to provide quality and flexibility in this technology intensive environment which is rapidly changing. We work closely with our customers to provide them with unique and specialized solutions needed for their business success.

We use silicon wafers based on customers’ proprietary designs to perform an intricate process that consists of constructing layers of conducting and insulating materials on raw wafers in intricate patterns which requires hundreds of interrelated steps performed on different types of equipment, and each step must be completed with extreme accuracy to achieve good device performance metrics. In some cases, we provide our customers with our own proprietary or third-party design elements. We perform a series of processes, in which photosensitive material is deposited on the wafer and exposed to light through a mask, and hundreds of steps (moves) per wafer, including photolithography, oxidation, etching and stripping of different layers and materials, ion implantation, deposition of thin film layers, chemical mechanical polishing and thermal processing. The final step is wafer probing, which involves inspection of each unit in order to identify those that are operable for assembly. Customers often use third-party service providers for the performance of wafer probing. In most cases, our customer assumes responsibility for dicing, assembly, packaging and testing.

Our customers are semiconductor fabless companies, semiconductor IDMs, and module integrators for AI and data centers, for whom we serve as either a sole source or second source. We facilitate the seamless integration of their semiconductor designs into wafer processing, enabling them to rapidly and cost-effectively bring high-performance, highly integrated end products to market. We believe that our technological strengths and commitment to customer service have allowed us to establish a unique position in large, high-growth specialized markets. These markets include silicon photonics for AI and data center communications, RF for smartphones, IoT, infrastructure communications, power management and CMOS image sensors for industrial, automotive, medical, and consumer end markets.

Our manufacturing process uses specialty process technologies, mostly based on CMOS process platforms with added features to enable special and unique functionality, decreased footprint of products, competitive performance and cost advantages for analog and mixed-signal semiconductors. Products made with our specialty process technologies are typically more complex than products made using standard process technologies employing similar technology nodes. Generally, customers that use our specialty process technologies cannot easily transfer designs to another foundry because the analog characteristics of the design are dependent upon the specific process technology used. The specialty process design infrastructure is complex and includes design kits and device models that are specific to the foundry in which the process is implemented and to the process technology itself. In addition, the relatively small engineering community with specialty process expertise and the significant investment required for development or transfer and maintenance of specialty process technologies has limited the number of foundries capable of offering specialty process technologies. We believe that our specialized process technologies combined with dedicated design enablement capabilities distinguish our services and attract industry-leading customers.

With our world-class engineering team, well established foundry process methodologies and vast experience, we offer state of the art factories for core bulk CMOS and specialized technologies such as RF SOI, SiPho, SiGe, BCD, Image sensors and MEMS, among others.

We are a trusted, customer-oriented service provider that has built a solid reputation in the foundry industry over more than thirty years. We have built strong relationships with customers. Our consistent focus on providing high-quality, value-add services, including engineering and design support, has allowed us to attract customers that seek to work with a proven provider of foundry solutions. Our emphasis on working closely with customers and accelerating the time-to-market and performance of their next-generation products has enabled us to maintain a high customer retention rate, while increasing the number of new customers and new products.

We continuously aim to expand our capacity and capacity flexibility across our different technologies.  To accomplish this, we invest in expanding our facilities’ capacity and acquire external capacity, through establishment of new fabs or fab acquisitions, as we have done in the past, independently or through third-party collaboration and/or funding (including cash, equity, or in-kind investment). We also offer, from time to time, a wide range of support services for the establishment of new semiconductor fabrication facilities or the ramp-up of existing facilities owned by third parties, using our technological, operational, and integration expertise, for which we receive payments based on the achievement of pre-defined milestones and may also be entitled to certain capacity allocation and other rights, all subject to the definitive agreements underlying such projects.

We derived a significant amount of our revenues for the year ended December 31, 2025 from our target specialized technologies: RF CMOS, including RF SOI (RF CMOS on silicon-on-insulator), SiGe BiCMOS, SiPho, power ICs, discrete devices and CMOS image sensors. We are highly experienced in these technologies, having been an early entrant and having developed unique proprietary technologies, including through licensing and joint development efforts with our customers and other technology companies.

In recent years, silicon has also been used to control optical signals in SiPho technology. This technology reduces the cost of assembling optical transceivers, which convert optical signals to electrical signals and vice versa, by providing a platform that integrates multiple functions on a single silicon chip instead of requiring multiple discrete components. The platform enables the integration of photodetectors, optical modulators, and other optical components, which were previously assembled as discrete compound semiconductor components in optical transceivers modules that can now be integrated into a single die, potentially lowering cost, reducing footprint, and improving the performance of advanced optical transceivers. Such technology utilizes much of the same semiconductor equipment used to manufacture CMOS, benefiting from the extensive installed base and manufacturing efficiency, and enables a high level of scalability in response to market growth. SiPho chips fabricated in our fabs are used in optical transceivers, mainly for pluggable connections, and include waveguides, beam splitters, optical modulators and photodiodes, used for laser light monitoring. Tower also provides a platform that embeds InP lasers in the SiPho chip.

Our industry-leading silicon photonics platform targets AI, data center communications and other optical applications, such as CWFM LiDARs, among others. The SiPho process complements our SiGe BiCMOS processes by offering a companion solution that integrates optical components in the expanding data communications market. We currently have in high-volume production, a 200mm platform (PH18) and a 300mm platform (PH45) that have benefited from AI-driven growth in optical interconnects, making them leading SiPho platforms in the 400Gb/s to 1.6Tb/s market. We are ramping our latest 1.6Tb/s platform into high-volume production and are developing and prototyping various advanced technologies aimed at a next-generation 3.2Tb/s platform, as well as co-packaged optics (“CPO”) for the future. These technologies include wafer-to-wafer bonding, lasers (including DWDM lasers), III-V modulators and TSVs, all embedded in the SiPho chip.

Our SiGe BiCMOS process technologies offer more features than RF CMOS or standard BiCMOS processes and are well suited for advanced RF and high-performance analog semiconductors, such as high-speed, low-noise front-end wireless components, optical and copper-wired networking components, automotive radar components, hard-disk drive pre-amplifiers, power amplifiers, and low-noise amplifiers. These technologies generally incorporate silicon germanium bipolar transistors, which are formed by depositing a thin layer of silicon germanium within a CMOS process, to achieve higher speed, lower noise, and more efficient power performance than regular CMOS process technology. SiGe BiCMOS can achieve speeds equivalent to those demonstrated in standard RF CMOS processes that are two process generations smaller in line width. For example, a 0.18 micron SiGe BiCMOS process can achieve speeds comparable to a 90 nanometer RF CMOS process. This allows for the creation of analog products using larger geometry process technology at a lower cost while achieving similar or superior performance to that achieved using a smaller geometry standard RF CMOS process technology. In addition, our SiGe technology supports high voltages not available in very advanced CMOS technology nodes. We have developed enhanced tool capabilities in collaboration with large semiconductor tool suppliers to achieve high-yield SiGe volumes. We believe this equipment and related process expertise position us as one of the few companies with demonstrated ability to deliver SiGe BiCMOS products. We currently have 0.35 micron, 0.18 micron and 0.13 micron SiGe BiCMOS technologies available in mass production and recently added a 65nm SiGe BiCMOS platform for our customers’ most advanced next-generation products.

Many RF products today are built using RF CMOS technology on silicon-on-insulator (“SOI”) substrates (RFSOI). These RFSOI process technologies include devices optimized to deliver higher performance and improved isolation compared to those in bulk RFCMOS processes. We currently utilize RFSOI process technologies at 0.18 micron, 0.13 micron and 65 nanometer lithography nodes to fabricate various devices, including antenna switches with record figures of merit (“FOM”) and front-end modules, which are integral to state-of-the-art products, such as modern smartphones.

Our power technologies are divided into low-voltage BCD offerings and high-voltage offerings, including 140V Resurf, 200V SOI, and 700V ultra-high voltage technologies. Our low-voltage BCD process technologies offer more features than advanced analog CMOS processes and are well-suited for power and driver semiconductors, such as voltage regulators, battery chargers, power management products, envelope trackers and power controllers in handset RF front-end-modules and audio amplifiers. These technologies generally incorporate higher voltage CMOS devices than advanced analog CMOS processes, such as 5V, 8V, 12V, 40V, and 60V (Breakdown Voltage) LDMOS devices, and in the case of BCD, bipolar devices integrated into an advanced analog CMOS process. We currently offer BCD technologies at 0.18 micron on 200mm wafers and 65 nanometer on 300mm wafers.

Our higher voltage technologies on 200mm wafers, which include 140V Resurf, 200V SOI, and 700V ultra-high voltage platforms, support applications such as gate drivers for discrete high-power transistors and the automotive, industrial, AC adapter, and lighting markets.

In addition, we have developed a unique NVM solution (Y-Flash) specifically for power and power management applications on our 0.18 micron and 65nm platforms. We have developed a series of Y-Flash-based modules of up to 16kbit, which have been integrated into various power management products for our customers. We have also introduced high-density single Poly silicon memory arrays from other intellectual property vendors into our CMOS process flows.

On our 300mm 65nm node, we offer two major BCD platforms based on 5V and 3.3V gate operating voltages, both supporting high voltage LDMOS devices, with up to 28V breakdown voltage.

CMOS image sensors are ICs used to capture an image in a wide variety of consumer, medical, automotive and industrial market applications, including camera-equipped cell phones, digital still, video, security and surveillance cameras, industrial and inspection cameras, medical X-ray and automotive cameras and LiDARs. Tower provides silicon proven pixels as IP to its customers to facilitate fast time to market and first-time success of their sensor designs. This pixel library includes rolling shutter and global shutter pixels as well as time-of-flight pixels, ranging from 1.25um to 150um, for a variety of applications. We support stitching technology for large sensors as well as state of the art backside illumination (BSI) and stacking technology, including deep trench isolation (DTI) for low cross talk.

In the MEMS area, we utilize MEMS switch technology for rapid RF antenna switching and accelerometers for various applications. The rapid growth of the VR headset and AR glasses markets has generated significant demand for high-resolution OLED small displays, which can only be manufactured on a silicon backplane. We have developed a highly competitive silicon backplane technology for the OLEDoS (OLED on Silicon) market, primarily targeting the VR and AR sectors. Our offering encompasses a 5V-based platform featuring extended 8V native LDMOS ultra-low-leakage transistors and high-density capacitors. Due to the large size of these displays compared to standard CMOS dies, we anticipate considerable growth in this market.

We continue to strategically invest in technology designed to enhance performance and integration levels while simultaneously reducing the cost of analog and mixed-signal products. This initiative includes improving the density of passive elements, such as capacitors and inductors; developing novel passive elements; enhancing the analog performance and voltage-handling capabilities of active devices; and integrating additional advanced features and devices into our specialized CMOS processes.

Our marketing and sales strategy aims to further solidify our position as the leading foundry for high-value analog semiconductor solutions, by increasing our market share with existing customers and expanding our global customer base. We have marketing, sales, design support engineers, field application engineers, and customer support personnel located in many countries worldwide. These individuals are selected for their industry experience, customer relationships, and understanding of the semiconductor marketplace.

Our sales cycle generally ranges from 9 to 24 months or longer for new customers and can be as short as 6 to 12 months for existing customers. The typical stages in the sales cycle process, from initial contact until production, are:

The primary customers of our foundry and design services are fabless semiconductor companies and IDMs (including module integrators). Our customer base includes leaders in the analog and mixed-signal industry, serving a variety of end market segments. For the year ended December 31, 2025, 11% of our revenues were generated from NTCJ, 39% of our revenues were derived from an additional seven customers, each of which generated between 4% and 7% of our revenues, and the remaining 50% of our revenues were derived from many other smaller customers. For the year ended December 31, 2024, 13% of our revenues were derived from NTCJ, 27% of our revenues were derived from an additional four customers, each of which generated between 3% and 11% of our revenues, and the remaining 60% of our revenues were derived from many other smaller customers. For the year ended December 31, 2023, 14% of our revenues were generated from NTCJ, 30% of our revenues were derived from an additional four customers, each of which generated between 3% and 9% of our revenues, and the remaining 56% of our revenues were derived from many other smaller customers.

The following table sets forth the geographical distribution, by percentage, of our net revenues for the periods indicated:

The semiconductor industry is historically characterized as highly cyclical, both seasonally and over the long term. The market fluctuates over time, cycling through periods of weak demand, excess capacity, excess inventory, and price pressure, as well as periods of strong demand, full capacity utilization, and wafer shortages, which command higher selling prices.

We price our products on a per-wafer basis, taking into account the unique value of our technology, its ability to enable customers to differentiate their products, the complexity of the technology, prevailing market conditions, volume forecasts, the strength and history of our relationships with the customer and our current capacity utilization. Most customers typically place purchase orders two to six months before shipment.

To promote our products, technology offerings, and services, we publish press releases, articles in technology journals, and white papers. We present and participate in panel sessions at industry conferences, host a variety of regional and international technology seminars, and exhibit at various industry trade shows. We regularly discuss advances in our process technology portfolio and progress on specific relevant programs with our prospective and existing customers. In addition, we hold annual conferences called TGS (Technology Global Symposium) in various geographic regions and regularly engage with industry and research analysts.

Our customers use our processes to design and market a broad range of analog and mixed-signal semiconductors for diverse end markets, including wired and wireless high-speed optical and electrical communications, consumer, automotive, medical, security, and industrial applications. We sell wafers for a wide range of applications, including silicon photonics ICs (PICs) and SiGe (EICs) for fiber optic transceivers; high-performance antenna switches, transceivers, and power management circuits for cellular phones; transceivers and power amplifiers for wireless local area networking products; power management, audio amplifiers, and drivers for consumer applications; terrestrial satellite communication; high-end video cameras, dental and medical x-ray vision, industrial cameras, and focal plane arrays for imaging applications; controllers for power amplifiers and switching chips in cellular phones; and wireline interfaces for switches, routers, and magnetic field sensors.

The competitive dynamics within the global semiconductor foundry industry are subject to change as companies expand their technology portfolios, enter new markets, or adjust their strategic focus. This industry is technology-driven, with constant advancements in capacity, equipment, process technologies, materials, and design methodologies. We compete most directly in the specialty segment with foundries such as GlobalFoundries (mainly in the RF space), Vanguard Semiconductor, DongBu, X-Fab, and Hua Hong Semiconductor. We also compete in certain areas with pure-play, advanced technology node-driven foundry service providers that also provide specialty technologies, such as Taiwan Semiconductor Manufacturing Corporation (TSMC), United Microelectronics Corporation (UMC), and Semiconductor Manufacturing International Corp. (SMIC). Although these three pure-play semiconductor foundries primarily compete against one another and focus on 12-inch deep-submicron CMOS processing, each also offers specialty process technology and capacity.

The rest of the foundry industry, including existing Chinese, Korean, and Malaysian foundries, generally targets either industry-standard 8-inch and 12-inch CMOS processing or specialty process technologies. Most competitors, particularly those based in the Asia-Pacific region, benefit from their proximity to key markets and, in some cases, from local government incentives and the integrated design and manufacturing ecosystems prevalent in these areas. However, global efforts to diversify semiconductor manufacturing bases are beginning to challenge this dynamic, signaling a shift toward a more geographically dispersed competitive landscape.

Geopolitical factors and trade policies can significantly impact the semiconductor industry. Restrictions, trade tensions, tariffs, and policies promoting domestic employment and wafer manufacturing can influence foundries’ financials, business operations and competitive positioning.

The principal elements of competition in the wafer foundry market are:

Some of our competitors, particularly the advanced pure-play technology node-driven foundry service providers, have greater capacity, may have greater scope and/or greater research and development resources, a better cost structure, and greater financial, marketing and other resources. As a result, these companies may be able to compete more aggressively and over a longer period than us.

We aim to compete primarily on the basis of advanced specialty analog/mixed-signal technology, research and development, breadth of process offerings, production quality, technical support, and our design and engineering services. Our highly differentiated specialty offering and proven track record in analog/mixed-signal markets, as well as in the Silicon Photonics market, enable us to effectively compete with larger foundry service providers.

Some semiconductor companies have advanced their CMOS designs, including mixed-signal, down to 28 nanometers and below. These smaller geometries may offer customers performance and integration features that are comparable to or exceed those offered by our specialty process technologies, and they may be more cost-effective at higher production volumes for certain applications, such as when a large amount of digital content is required in a mixed-signal semiconductor and less analog content is required. Our specialty process technologies will therefore compete with these advanced CMOS processes, and some of our potential and existing customers could elect to design these advanced CMOS processes into their next-generation products. We are not currently capable, nor do our current plans include, any technology or operations using CMOS processes at such smaller geometries.

The wafer foundry service mode of work is an intricate process that consists of constructing layers of conducting and insulating materials on raw wafers in intricate patterns. This requires hundreds of interrelated steps performed on different types of equipment, and each step must be completed with extreme accuracy to achieve the required device performance metrics. The process can be summarized as follows:

Our processes utilize various raw materials, including silicon wafers, chemicals, gases, and different types of metal targets. Although most of our raw materials are available from multiple suppliers, certain materials are purchased from sole-sourced vendors. Our raw material procurement policy is to select only those vendors who have demonstrated quality control and reliable delivery times, and to maintain multiple sources for each raw material whenever feasible so that a quality or delivery issue with any one vendor will not adversely affect our operations. We may establish long-term supply agreements with our vendors where necessary or beneficial to Tower.

Our general inventory policy is to maintain sufficient stock of each principal raw material to meet operational needs and rolling forecasts of near-term customer requirements. In addition, we have agreements with some material suppliers under which they reserve certain levels of inventory in their warehouses for our use. We typically work with our vendors to plan our raw material requirements on a monthly basis, with pricing generally set on an annual basis. The actual purchase price is generally determined based on prevailing market conditions. Although we have not experienced any material effect on our operations due to a shortage of raw materials, and current supplies of the raw materials we use are adequate, shortages could occur in various critical materials due to supply interruptions or increased industry demand.

The most important raw material we use is the silicon wafer, which is our primary raw material. We have historically obtained, and believe that we will continue to obtain, a sufficient supply of silicon wafers. We believe that we have close working relationships with our wafer suppliers, and based on these long-term relationships, we believe that these major suppliers will make their best efforts to meet our demand. Certain materials are currently being leveraged in geopolitical discussions, which could adversely affect the supply and cost of some materials used in a small portion of our products.  We are actively working to minimize our exposure to such materials and/or sources of supply.

In addition, certain materials are purchased from sole-sourced vendors under pre-committed volume contracts for specified, pre-defined quantities that must be purchased on a monthly, quarterly, or annual basis. If such pre-defined quantities are not required for production when purchased, it may result in excess payments and/or expense write-offs in our financial statements, which may adversely impact our financial results. See “Item 3. Key Information-D. Risk Factors-Risks Affecting Our Business- If we are unable to purchase equipment and/or raw materials and other supplies, or there are delays in the delivery thereof, we may face delays or a temporary halt in operations or other problems. If we must purchase raw materials beyond our needs as required under committed vendor contracts, we may need to amortize or write such purchases off, which may adversely impact our financial results.”

Our future success depends, to a large degree, on our ability to continue to successfully develop and introduce into production advanced process technologies that meet our customers’ needs. Our process development strategy relies on CMOS process platforms that we either develop ourselves or license and transfer from third parties.

From time to time, at a customer’s request, we develop a specialty process module, which, in accordance with the applicable agreement, may be used exclusively for that customer or added to our process offerings. Such developments are common across all of our specialty process technologies noted above.

Our research and development activities have related primarily to our process, device and design development efforts in all specialty areas that were mentioned above, and have been sponsored and funded by us and in certain cases fully or partially funded by our customers. In addition, an immaterial portion of our research and development activities have been funded by the Government of the State of Israel through the Israel Innovation Authority (the “IIA”) (formerly, the Israeli Office of the Chief Scientist), pursuant to the Encouragement of Research, Development and Technological Innovation in the Industry Law 5744-1984 (formerly known as the Encouragement of Industrial Research and Development Law 5744-1984) (the “Innovation Law”).  The Innovation Law and related regulations restrict transfers of manufacturing of IIA-funded products and services and transfers or licenses of IIA-funded technologies outside Israel. Such transfers generally require IIA approval and increased royalty payments of up to three times the grant amount plus interest (for manufacturing transfers) or a redemption fee of up to six times the grant amount (less paid royalties and depreciation, but no less than total grants received) plus interest (for technology transfers).

We are required to comply with Israeli, U.S. and other applicable foreign export regulations, and we may be required to obtain export licenses before exporting certain technology or products to third parties.  For information regarding risks related to export regulations, see “Item 3. Key Information—D. Risk Factors—Risks Affecting Our Business— Compliance with existing or future governmental export regulations may reduce our sales or increase our operational costs.”

Our research and development activities seek to upgrade and improve our technologies and processes. A substantial portion of our research and development activities are conducted in collaboration with our customers and equipment vendors. Due to the rapid technological changes in the semiconductor industry, effective research and development is essential to our success. We plan to continue to invest significantly in research and development activities in order to develop advanced process technologies for new applications. For information regarding risks relating to the development of technology processes and services, see “Item 3. Key Information—D. Risk Factors—Risks Affecting Our Business—If we do not maintain and develop our technology processes and services, we may lose customers and may be unable to attract new ones.”

Research and development expenses for the years ended December 31, 2025, 2024 and 2023 were $86.5 million, $79.4 million and $79.8 million, respectively, net of government participation of $1.0 million, $0.3 million and $0.5 million, respectively. As of December 31, 2025, we employed 430 professionals in our research and development departments, 59 of whom have PhDs. In addition to our research and development departments located at our facilities in Migdal Haemek, Israel, Newport Beach, California, San Antonio, Texas and Hokuriku, Japan, we also maintain a design center in Netanya, Israel.

Our success depends, in part, on our ability to obtain patents, licenses and other intellectual property rights related to our production processes. To that end, we have obtained certain patents, acquired patent licenses and intend to continue to seek patents for our intellectual property.

As of December 31, 2025, we held 281 patents in force. We have entered into various patent and other technology license agreements with technology companies, including Synopsys, ARM, Cadence, Siemens and others, under which we have obtained rights to additional technologies and intellectual property.

We constantly seek to strengthen our technological expertise through relationships with technology companies. We seek to expand our core strengths in SiPho, SiGe, RF, CMOS image sensors, power platforms, mixed-signal, MEMS and non-imaging sensors technologies through continuous development in these areas and, wherever possible, to patent our new developments on an ongoing basis.

Our ability to compete depends on our ability to operate without infringing upon the proprietary rights of others. The semiconductor industry is generally characterized by frequent litigation over patents and other intellectual property rights. Like many companies in the semiconductor industry, we have from time to time received communications from third parties asserting that their patents cover certain of our technologies or alleging infringement of intellectual property rights. We expect that we will receive similar communications in the future. Irrespective of the validity or successful assertion of such claims, we could incur significant costs and devote substantial management resources to defend against such claims. In March 2026, GlobalFoundries filed three lawsuits against the Company in the U.S. International Trade Commission (ITC) and the United States District Court for the Western District of Texas, alleging infringement of certain of its patents. The Company disputes these claims.

To partially mitigate the risk of patent litigation, we entered into License on Transfer (“LOT”) agreements with three leading companies in the semiconductor industry. These agreements provide protection against patent infringement claims from non-practicing entities (“NPEs”), ensuring that any patents transferred by these industry leaders to such entities cannot be asserted against us.

We work closely with customers throughout their product development and prototyping cycles to support the creation of high‑performance semiconductor integrated circuits (“ICs”) and to help reduce final die cost through die‑size optimization and integration. Our engineering services and operational process provide support to accelerate customers’ design and qualification activities, enabling faster time‑to‑market.

To support these activities, we collaborate with leading design automation providers - including Cadence Design Systems, Synopsys, Siemens EDA, and Keysight Technologies - and license standard cells, I/O, and memory IP from Synopsys, eMemory, and other top suppliers of physical IP. These pre-validated components can be integrated into specific parts of our customers’ chip designs, enabling accurate simulation of design behavior in our processes using industry-standard tools.

Applications that rely on our specialty process technologies often require advanced simulation models and verification tools. We deliver these models through our design‑enablement platform, centered on our proprietary Process Design Kits (“PDKs”). During the initial design phase, customers use our PDKs to develop products optimized both for end‑product specifications and for our specialty processes. The PDKs enable accurate performance prediction and efficient design refinement. Our engineering teams—experienced in analog and mixed‑signal design and semiconductor operations—work closely with customers to provide design guidance and optimize for performance and manufacturability. In addition, our design‑support engineers accelerate the design‑to‑silicon cycle by responding to technical and logistical inquiries through email, conference calls, our help‑ticket system, and on‑site visits when needed.

After the initial design stage, customers may choose either dedicated fabrication or our Multi-Project Wafer (“MPW”) service to produce prototypes on our specialty processes. The MPW program aggregates multiple customers’ designs onto shared mask sets, significantly reducing prototyping costs. Our design enablement team further accelerates the design-to-silicon cycle and supports first-silicon success by providing accurate device models, comprehensive PDKs, silicon-proven ESD protection and I/O structures, application-specific design rules, and ongoing technical support. We offer assistance to customers at every point in the design flow.

Our deep knowledge of fabrication and process technologies provides a meaningful competitive advantage - particularly in time-critical applications where minimizing design iterations is essential or where designs push technology limits. In addition, our IP portfolio and design services help customers address specialized challenges, delivering the expertise needed for rapid and successful implementation in our fabs.

We believe that our circuit-design expertise, combined with our ability to shorten customers’ design cycles and reduce design costs, represents a significant competitive strength.

For purposes of our U.S. aerospace and defense business, Tower and Tower NPB have worked with the Defense Counterintelligence and Security Agency of the United States Department of Defense (“DCSA”) to mitigate concerns about foreign ownership, control or influence over operations in Fab 3. To protect against potential unauthorized access to trusted and classified materials and information, Jazz Semiconductor Trusted Foundry (“JSTF”) was established as a subsidiary of Newport Fab LLC, which is directly held by NPB Co., and possession of trusted and classified information is strictly kept within JSTF. JSTF maintains facility security clearance  and Trusted Foundry accreditation status. 

Tower directly operates our Fab 2 facility in Israel.

Tower’s wholly-owned subsidiary, Tower US Holdings Inc., owns all of the shares of Tower Semiconductor NPB Holdings, Inc., which owns all of the shares of Tower Semiconductor Newport Beach, Inc. (all three companies are incorporated in Delaware), which operates our Fab 3 facility located in Newport Beach, California.

Tower holds a 51% equity stake in Tower Partners Semiconductor Co., Ltd., incorporated in Japan (Nuvoton Technology Corporation Japan holds the remaining 49% stake), which operates the Uozu E and Tonami CD fabs located in Japan.

Tower’s wholly-owned subsidiary, Tower US Holdings Inc., also owns all of the shares of Tower Semiconductor San Antonio, Inc., incorporated in Delaware, which operates our Fab 9 facility located in San Antonio, Texas, US.

Tower’s wholly-owned subsidiary, Tower Semiconductor Italy S.r.l., incorporated in Italy, shares capacity with ST in a 300mm facility owned by ST and located in Agrate, Italy.

We process semiconductor wafers at six facilities: Fab 2 in Israel, Fab 3 in Newport Beach, California in the U.S., TPSCo’s two fabs (Uozo E and Tonami CD) in Japan, Fab 9 in San Antonio, Texas, USA, and TSIT’s Fab 10 in Agrate, Italy, in which we share capacity with ST in a 300mm fabrication facility established by ST.

The capacity in each of our facilities at any particular time varies based on the combination of the processes being used and the wafer mix being processed at such time. Therefore, capacity may be significantly lower at certain times as a result of certain combinations that may require more processing steps than others. We have the ability to rapidly change the mix of processes in use in order to respond to changing customer needs and to maximize utilization of the fab. In general, capacity increases have been achieved through the addition of equipment, improvements in equipment utilization, and the reconfiguration and expansion of existing cleanroom areas.

Capital expenditures in 2025 and 2024 were $436 million and $432 million, respectively, net of proceeds from the sale of equipment and fixed assets of $8 million and $5 million, respectively.

We acquired our Fab 1 facility in Migdal Haemek, Israel, from National Semiconductor in 1993, which had operated the facility since 1986. We occupy the facility under a long-term lease from the Israel Lands Authority, which expires in 2032. During the first quarter of 2025, in response to anticipated changes in market dynamics and customer demand, we discontinued the lower-margin legacy 150mm process flows, ceased operations in Fab 1, and consolidated certain  flows into Fab 2, also located in Israel, in order to streamline our production processes and enhance our overall efficiency. The Fab 1 facility includes an approximately 51,900 square foot area and we are using it to support Fab 2 production needs and other corporate needs.

In 2003, we commenced operations in Fab 2, also located in Migdal Haemek, Israel. Fab 2 supports geometries ranging from 0.35 to 0.13-micron, using advanced CMOS technology, including Sipho, SiGe, RF SOI, CMOS image sensors, power platforms, mixed-signal technologies and other advanced analog. The overall cleanroom area in Fab 2 is approximately 100,000 square feet. We have invested significantly in the purchase of fixed assets, primarily in connection with the construction of Fab 2, technological advancement, and capacity expansion. We are presently implementing a $920 million capital investment in equipment to expand SiGe and SiPho manufacturing capacity and develop next-generation capabilities. The land on which Fab 2 is located is subject to a long-term lease from the Israel Lands Authority that expires in 2049.  Additionally, as indicated above, we are using part of the Fab 1 area to support the further expansion of Fab 2.

NPB Co.’s facility, Fab 3, is located in Newport Beach, California. Fab 3 supports geometries ranging from 0.80 to 0.13-micron using advanced CMOS technology, including SiPho, SiGe, RF SOI, and MEMS. The facility comprises 320,000 square feet, including 120,000 square feet of total cleanroom area.

NPB Co. leases its facility under an operating lease agreement that was extended in 2025 through 2030. The landlord is party to an option agreement pertaining to the Newport Beach site with a third party, under which such third-party believes he has certain collateral or other rights with respect to the site and has stated that he is considering filing claims against the landlord and/or NPB Co.  The landlord and NPB Co. dispute the third party’s claims. In prior amendments to its lease, (i) NPB Co. secured various contractual safeguards designed to limit and mitigate any adverse impact of construction activities on its operations; and (ii) certain obligations of NPB Co. and the landlord are specified, including certain noise abatement actions at the facility. The landlord has asserted claims that NPB Co.’s noise abatement efforts are not adequate under the terms of the amended lease and has requested a judicial declaration that NPB Co. has committed a material, non-curable breach of the lease. NPB Co. does not agree and is disputing these claims. See “Item 3. Key Information—D. Risk Factors—Risks Affecting Our Business— Risks relating to the Fab 3 lease could harm our business, operations and financial results” for additional information.

In 2014, we acquired a 51% equity stake in TPSCo, a company initially formed by Panasonic to provide foundry wafer services to Panasonic and other third-party customers, using three factories (Uozu E, Tonami CD, and Arai E) located in Hokuriku, Japan, established by Panasonic. Pursuant to the transaction, Panasonic transferred its capacity tools (8-inch and 12-inch) at these three fabs to TPSCo. These fabs support geometries down to 65 nanometers. The fabs’ land and buildings are leased by PSCS (now named NTCJ) to TPSCo under a long-term capital lease, with a term through March 2032. As part of the TPSCo agreements, at the request of Panasonic (through PSCS; since 2020, named NTCJ), operations in Japan were reorganized and restructured such that the Arai factory, which solely supported NTCJ and did not serve Tower or TPSCo’s foundry customers, ceased operations effective July 2022. The Uozu and Tonami facilities remained unchanged. In March 2026, we signed an agreement for a strategic restructuring of our Japan operations, under which Tower will take full ownership of the 300mm Fab 7, to be organized under a wholly owned Japanese subsidiary of Tower, while NTCJ will take full ownership of the 200mm Fab 5. As part of this strategic restructuring, the companies will enter into mutual long-term supply agreements, ensuring continued support for existing customers of both companies. Accordingly, Tower customers currently served through Tonami Fab 5 (200mm) and Nuvoton customers served through Uozu Fab 7 (300mm) are not expected to experience disruption to supply or operations.  The transaction is targeted to close on April 1, 2027, subject to the satisfaction of customary closing conditions and receipt of applicable regulatory approvals.

In addition, contingent upon subsidy approval from METI following the formal application,  and subject to other considerations such as funding, permits and the engagement of contractors and equipment vendors, Tower’s Japanese affiliate may purchase the land adjacent to Fab 7 Uozu E on pre-agreed terms between Tower and NTCJ, which would be used for a potential new fab shell build-out, in order to significantly expand its 300mm capacity and capabilities, through the purchase of machinery and cleanroom facilities, and related investments.

During 2016, we acquired Fab 9, located in San Antonio, Texas, U.S., from Maxim. The assets and related business that we acquired from Maxim are held and conducted through a wholly-owned U.S. subsidiary, Tower SA. Fab 9 supports process geometries ranging from 0.8 to 0.18 micron for the processing of products using CMOS- and analog-based technologies, including RF SOI, SiGe and SiPho. Under the terms of the acquisition agreement, until the termination or expiration of the supply agreement entered into between Maxim and Tower SA, Maxim has a right of first offer to re-purchase Fab 9 in the event that Tower or any of its subsidiaries sells, transfers, disposes of, ceases operations at, closes, transfers, or relocates Fab 9, or if Tower or its operations at Fab 9 become subject to a petition for bankruptcy or liquidation.

In June 2021, we entered into an agreement with ST to share, under a collaborative arrangement, a 300mm facility being constructed by ST in Agrate, Italy, following which TSIT, a wholly-owned Italian subsidiary of Tower, was incorporated. TSIT and ST share the cleanroom space and facility infrastructure, and TSIT has the right to use one-third of the installed capacity for its foundry customers, which we refer to as “Fab 10.”  As part of the qualification and ramp-up process, TSIT acquired and installed certain of its own equipment in the Agrate facility and developed certain processes and technologies. The comprehensive qualification process was completed during 2024, following which volume production and operations, managed by ST, commenced.

We prioritize achieving and maintaining high-quality standards. All our facilities are ISO 9001 certified, an international quality standard that provides guidance for achieving an effective quality management system. In addition, all our facilities are IATF 16949 certified, a stringent automotive quality standard.

Our operations are subject to a variety of laws and governmental regulations relating to the use, storage, discharge, and disposal of toxic or otherwise hazardous materials used in our processes. Failure to comply with these laws and regulations could subject us to material costs and liabilities, including costs to clean up contamination caused by our operations. All of our facilities are ISO 14001 certified, an international standard that provides management guidance on how to achieve an effective environmental management system. Risks have been evaluated, and mitigation plans are in place to prevent and control accidental spills and discharges. Procedures are in place at all our locations to ensure that any such potential situations are properly addressed. Our environmental management system assists in evaluating compliance with applicable environmental laws and regulations and establishes loss prevention and control measures. In addition, our facilities are subject to periodic monitoring by governmental agencies.

For safety, all of our facilities are OHSAS/ISO 45001 certified, an international occupational health and safety standard that provides guidance for achieving an effective health and safety management system. Our health and safety management system assists in evaluating compliance with applicable health and safety laws and regulations and establishes preventive and control measures.

Our goal in implementing OHSAS 45001, ISO 14001, ISO 9001, and IATF 16949 systems is to continually improve our environmental, health, safety, and quality management systems.

In addition, we are committed to an ESG program focused on social contribution and sustainability through various initiatives and activities. We have issued a dedicated report on our ESG policies, including our strategy and long-term plan.  We engage in voluntary initiatives (such as disclosures, certifications, and improvement goals, among others) to increase our company’s contribution to society and the environment.

Not applicable.

The information contained in this section should be read in conjunction with our audited consolidated financial statements and the related notes thereto contained in this annual report. Our financial statements have been prepared in accordance with U.S. GAAP. The following discussion and analysis may contain forward-looking statements that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Item 3. Key Information—D. Risk Factors” and elsewhere in this annual report.

We are a pure-play independent specialty foundry dedicated to providing wafers and engineering services based on the design specifications of our customers. As a pure-play foundry, we do not offer products of our own. We currently offer process technology geometries mainly consisting of 0.35, 0.18, and 0.13-micron on 200-mm wafers and 65 nanometer on 300-mm wafers. We also provide design support and complementary technical services. Our customers and/or our customers’ customers use our wafers in their end products, which are sold to and/or used in diverse markets, including consumer applications, personal computers, wireless and wired communication (including data centers), imaging, automotive, industrial, aerospace and medical devices. The technology platforms we offer are focused on the mega trends of seamless connectivity, green initiatives and interactive smart systems.

For the year ended December 31, 2025, our revenues were derived from customers located around the globe, of which 42% were located in the United States, 13% in Japan, 39% in Asia (excluding Japan) and 6% in Europe, as compared to 42%, 16%, 33% and 9%, respectively, for the year ended December 31, 2024.

For the year ended December 31, 2025, 11% of our revenues were derived from NTCJ, 39% of our revenues were derived from an additional seven customers, each comprising between 4% to 7% of our revenues, and the remaining 50% of our revenues were derived from many other smaller customers, as compared to 13% derived from NTCJ, 27% derived from an additional four customers, each comprising between 3% to 11% of our revenues, and the remaining 60% derived from many other smaller customers for the year ended December 31, 2024.

In order to attract and retain our customers, in 2025 and 2024, we made gross investments of $444 million and $436 million, respectively, in property and equipment across the fabs in Israel, Italy, the United States and Japan.

The following are key factors that impact our results of operations:

We are a trusted, customer-oriented service provider that has built a solid reputation in the foundry industry for over thirty years. We have built strong relationships with our customers. Our consistent focus on providing high-quality, value-add services, including engineering and design support, has allowed us to attract customers seeking to work with a proven provider of foundry solutions. Our emphasis on close collaboration with customers, and on accelerating time-to-market and the performance of their next-generation products, has enabled us to maintain a high customer retention rate while increasing the number of new customers and products.

We continuously aim to expand our capacity footprint and business by addressing the future needs of our existing customers and attracting new customers that will utilize our existing facilities, some of which have recently undergone additional capacity expansion projects. We seek to acquire external capacity through acquisitions of existing fabs or by establishing new fabs, as we have done in the past, independently or through third-party collaborations, utilizing existing resources or additional funding (which may include cash, equity or in-kind investment). We also offer a wide range of support services for the establishment of new facilities or the ramp-up of existing facilities owned by third parties, using our technological, operational and integration expertise. For these services, we receive payments based on the achievement of pre-defined milestones and may also be entitled to certain capacity allocation and other rights.

We work with our customers and potential customers to understand their product roadmaps and strategies. We consider design wins to be critical to our future success. We define a design win as the successful completion of the evaluation stage, where a customer has verified that our platform process meets its requirements and has qualified our libraries and IP for its products. The revenue generated from each design win can vary significantly. Our long-term sales expectations are based on forecasts from customers and internal estimates of customer demand, factoring in expected time to market for end-customer products incorporating our products and associated revenue potential, as well as internal estimates of overall demand based on historical trends.

Our gross and operating margin is influenced by various factors, including market demand for semiconductor wafers, pricing changes, shipment volumes, new product introductions, changes in product mix, changes in the purchase price of raw materials (including silicon starting material wafers), and yields. In general, newly introduced products and products with higher performance and more features tend to be priced higher than older, more mature products. Average selling prices in the semiconductor industry typically decline as products mature. Consistent with this historical trend, we expect that the average selling prices of our products will decline as they mature. In the normal course of business, we will seek to offset the effect of declining average selling prices on existing products by reducing operating costs and introducing new and higher value-add products. Newly introduced fabs increase our operating costs, while selling prices and manufacturing volumes may not be sufficient to cover them entirely.  If we are unable to maintain overall average selling prices or offset any declines in average selling prices with realized savings in our operating costs, our gross margin will decline.

We have invested, and intend to continue to invest, in expanding our capacity, developing products to support our growth, and expanding our infrastructure. Such investment includes the following: (i) in 2021, we entered into an agreement with ST to share 300mm cleanroom space in Italy, for which we purchased, and are committed to purchase, a significant amount of equipment and tools; (ii) during the last two years, we have initiated plans to invest an aggregate of $920 million in capital expenditures (mainly machinery and facilities), primarily to expand our SiPho and SiGe capacity at Fabs 2, 3, 7 and 9, as well as to enhance our power next-generation and other capacity; and (iii) contingent upon subsidy approval from METI following the formal application, and subject to other considerations such as funding, permits and the engagement of contractors and equipment vendors, Tower’s Japanese affiliate may purchase the land adjacent to Fab 7 Uozu E on pre-agreed terms between Tower and NTCJ and invest in a new fab shell build-out in order to significantly expand its 300mm capacity and capabilities, through the purchase of machinery and cleanroom facilities and related investments, with the necessary capital to be partially funded by us, METI and other cash sources, which may be equity investments and/or debt vehicles, or a combination thereof. We continue to explore additional capacity opportunities and investments, which may require us to use a significant portion of our cash. We may want and/or need to raise additional funds for these investments by way of debt and/or equity offerings, which funds may not be available on reasonable terms due to unfavorable capital market conditions, if at all, and may require consents that we may not be able to obtain. We plan to continue investing in our capacity expansion initiatives and existing and new operational capabilities throughout the world through significant capital expenditures. However, the return on these investments may be lower than we expect, and these investments may significantly reduce our net profit and cash balance and require us to raise additional funds by way of debt or equity offerings. In addition, as we invest in expanding our operations into new areas globally, our business and results will become further subject to the risks and challenges of operating in those locations, including potentially higher fixed costs and operating expenses, the potential impact of legal and regulatory developments, and high depreciation of fixed assets, all of which may reduce our profitability.

For recently adopted and issued accounting pronouncements, see Note 2W and Note 2X to our annual financial statements included herein.

For a discussion of our results of operations for the year ended December 31, 2023, including a year-to-year comparison between 2024 and 2023, refer to Item 5. “Operating and Financial Review and Prospects” in our Annual Report on Form 20-F for the fiscal year ended December 31, 2024, filed with the SEC on April 30, 2025.

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the financial statements and the related notes thereto included in this annual report. The following table sets forth certain statement of operations data as a percentage of total revenues for the years indicated.

Revenue for the year ended December 31, 2025 amounted to $1,566.1 million, as compared to $1,436.1 million for the year ended December 31, 2024, reflecting a $130.0 million, or 9%, year-over-year revenue increase. The increase was primarily due to higher wafer shipments, including revenue and shipments from the 300mm facility in Agrate, Italy, which commenced volume production and operations in the fourth quarter of 2024, and therefore its revenue was included in our statement of operations for the entire 2025 calendar year, as compared to only a limited portion of 2024.

Cost of revenue for the year ended December 31, 2025 amounted to $1,202.3 million, as compared to $1,096.7 million for the year ended December 31, 2024. The $105.6 million increase in cost of revenue was mainly due to higher depreciation and other manufacturing costs associated with the increased number of wafers shipped in the year ended December 31, 2025, including higher depreciation and other manufacturing costs associated with the 300mm facility in Agrate, Italy, which commenced volume production and operations in the fourth quarter of 2024, and therefore its costs were included in our statement of operations for the entire 2025 calendar year, as compared to only a limited portion of 2024.

Gross profit for the year ended December 31, 2025 amounted to $363.9 million, as compared to $339.4 million for the year ended December 31, 2024. The $24.5 million increase in gross profit resulted from the $130.0 million, or 9.6%, increase in revenue, net of the $105.6 million increase in cost of revenue, as described above.

Research and development expenses for the year ended December 31, 2025 amounted to $86.5 million, representing 5.5% of revenue, as compared to $79.4 million for the year ended December 31, 2024, also representing 5.5% of revenue.

Marketing, general and administrative expenses for the year ended December 31, 2025 amounted to $83.2 million, representing 5.3% of revenue, as compared to $75.0 million for the year ended December 31, 2024, representing a similar percentage of 5.2% of revenue.

Restructuring income, net, for the year ended December 31, 2024 amounted to $6.3 million, resulting from the reorganization and restructuring of our Japan operations executed during 2022 and recorded in 2024 in accordance with U.S. GAAP, as described in Note 12B(ii) to our financial statements for the year ended December 31, 2025.

Operating profit for the year ended December 31, 2025 amounted to $194.2 million, as compared to $191.3 million for the year ended December 31, 2024. The $2.9 million increase in operating profit resulted mainly from the $24.5 million increase in gross profit, as described above, offset by the $7.1 million increase in research and development expenses, the $8.2 million increase in marketing, general and administrative expenses for the year ended December 31, 2025, and the $6.3 million restructuring income in 2024, as described above.

Financing income, net, for the year ended December 31, 2025 amounted to $56.7 million, as compared to $50.8 million for the year ended December 31, 2024. The $5.9 million increase in financing income, net, was mainly due to hedging transaction gains recorded in the year ended December 31, 2025.

Other expense, net, for the year ended December 31, 2025 amounted to $10.5 million, as compared to $24.7 million for the year ended December 31, 2024. Other expense, net included mainly non-recurring, non-operational items.

Income tax expense, net, for the year ended December 31, 2025 amounted to $21.6 million, as compared to $10.2 million for the year ended December 31, 2024.  The $21.6 million tax expense for the year ended December 31, 2025 reflects 9% of income before tax, mostly due to the 7.5% preferred income tax rate applied to eligible income from Israeli operations through December 31, 2025, with other jurisdictions subject to higher tax rates. See also Note 17 to the financial statements included herein.

Net profit for the year ended December 31, 2025 amounted to $218.8 million, as compared to $207.2 million for the year ended December 31, 2024. The $11.6 million increase in net profit was mainly due to the increase in operating profit and financing income, net, and the decrease in other expense, net, as described above, offset by the increase in income tax expense, net, described above.

Net loss attributable to non-controlling interest for the year ended December 31, 2025 amounted to $1.7 million, as compared to $0.6 million for the year ended December 31, 2024. The $1.1 million increase resulted from the $2.2 million increase in the net loss of TPSCo, the Company’s 51% owned subsidiary.

Net profit attributable to the Company for the year ended December 31, 2025 amounted to $220.5 million, as compared to $207.9 million for the year ended December 31, 2024. The $12.6 million increase in net profit attributable to the Company was mainly due to the $11.6 million increase in net profit, as described above, and the $1.1 million increase in net loss attributable to non-controlling interest, as described above.

We currently operate in four different regions: the United States, Japan, Israel and Italy. The functional currency of our entities in the United States, Israel and Italy is the U.S. dollar (“USD”). The functional currency of our operations in Japan is the Japanese Yen (“JPY”). Our expenses and costs are denominated mainly in USD, JPY and New Israeli Shekels (“NIS”) and Euro; revenue is denominated mainly in USD and JPY; and cash from operating, investing and financing activities is denominated mainly in USD, JPY and NIS. Since our exposure to costs denominated in Euros in Italy (or elsewhere) is relatively small, we are mainly exposed to the risk of currency exchange rate fluctuations of the JPY to USD and NIS to USD.

The majority of TPSCo’s revenue is denominated in JPY, and the majority of TPSCo’s expenses and costs are denominated in JPY, which limits exposure to fluctuations in the USD-to-JPY exchange rate on TPSCo’s results of operations. In order to mitigate a portion of the net exposure to the USD-to-JPY exchange rate, we have engaged in cylinder hedging transactions to contain the currency’s fluctuation within a pre-defined fixed range.

During the year ended December 31, 2025, the USD appreciated against the JPY by 0.01%, as compared to 10.7% appreciation during the year ended December 31, 2024. The net effect of USD appreciation against the JPY on TPSCo’s assets and liabilities denominated in JPY is presented in the Cumulative Translation Adjustment as part of Other Comprehensive Income on the balance sheet.

The USD cost of our operations in Israel is influenced by changes in the USD-to-NIS exchange rate with respect to expenses and costs that are denominated in NIS. During the year ended December 31, 2025, the USD depreciated against the NIS by 12.5%, as compared to 0.6% appreciation during the year ended December 31, 2024.

Fluctuations in the USD against the NIS may affect our results of operations as they relate to the entity in Israel. Appreciation of the NIS may increase costs, in USD terms, of the Israeli facility, such as utilities, taxes and labor costs that are denominated in NIS, which may lead to erosion of profit margins. We use foreign currency cylinder and forward transactions to hedge a portion of this currency exposure, to be contained within a pre-defined fixed range.

The USD cost of our operations in Italy is influenced to a relatively small degree by changes in the USD-to-Euro exchange rate with respect to expenses and costs that are denominated in Euro; however, the amount of costs denominated in Euro is immaterial, and therefore our exposure to Euro fluctuations is limited. During the year ended December 31, 2025, the USD appreciated against the Euro by 12.8%, compared to a 5.9% depreciation during the year ended December 31, 2024.

As of December 31, 2025, we had an aggregate of $235.4 million in cash and cash equivalents, as compared to $271.9 million as of December 31, 2024. The principal cash flow items for the year ended December 31, 2025 were as follows: $395.5 million of net cash provided by operating activities; $436.5 million invested in property and equipment, net; comprised of $444.4 million total investments and $7.9 million of proceeds related to sale and disposal of property and equipment $38.5 million received from sales of short-term deposits, net; and $33.4 million of net cash used in financing activities.

Short-term and long-term debt, as presented in the balance sheet as of December 31, 2025 amounted to $28.1 million and $133.4 million, respectively, and included loans, operating leases and capital leases.

Based on our current operations and expected short-term growth, cash generated from operations, and our existing balance of cash and deposits, we believe we have sufficient resources to meet our cash needs for operating activities and capital expenditures, including for payments expected under the $920 million SiGe and SiPho capital expenditures plan described above, equipping the facility in Agrate, Italy, and the repayment of our debt in the short term and long term.

Contingent upon subsidy approval from METI following the formal application, and subject to other considerations such as funding, permits and the engagement of contractors and equipment vendors, Tower’s Japanese affiliate may purchase the adjacent land on pre-agreed terms between Tower and NTCJ, which would be used for a new fab shell build-out to significantly expand its 300mm capacity and capabilities, through the purchase of machinery and cleanroom facilities, and related investments. The necessary capital shall be funded in part by us, by METI and other cash sources, which may include equity investments and/ or debt vehicles or a combination thereof. To execute this Japan build-out plan, and if we pursue any additional acquisition transaction(s), joint partnership, or other large transaction to expand our capacity (including acquiring leased assets and/or acquiring or establishing additional fabs or capacity through other capacity acquisition-related transactions), we may utilize all of our current cash balance and deposits and/or may be required to secure additional financing, including through public or private offerings of equity and/or debt and/or refinancing or other financing alternatives. The timing, terms, size, and pricing of any future fundraising, if any, would be subject to the then-prevailing capital market conditions and our business and financial situation, as well as the need to obtain certain regulatory and other consents. There is no assurance that we would be able to obtain the necessary consents and/or funding in a timely manner, in sufficient amount, or on favorable terms. See “Item 3. Key Information—D. Risk Factors—Risks Affecting Our Business—“Reliance on acquisitions, establishing new fabs and/or gaining additional capacity for growth involves risks and uncertainties that may adversely affect our future revenues, business and operating results and may require raising funds in such amounts that we cannot assure you we will be able to obtain, or may be on unfavorable terms as far as dilution and/or other financing cost or covenants, which could adversely affect our financial position business and operations”

Certain of our subsidiaries enter into capital lease agreements, from time to time, for machinery and equipment, usually for a period of four years, with an option to buy the machinery and equipment after a period of three to four years from the start of the lease term. These lease agreements are denominated in JPY and contain annual interest rates of approximately 2%, and the assets under the lease agreements are pledged to the lender until the respective subsidiary acquires the assets. The obligations under the capital lease agreements are guaranteed by Tower, except for TPSCo’s obligations under its capital lease agreements.

In addition, TPSCo leases its facility’s buildings in Japan from NTCJ under a long-term capital lease, with a term through March 2032, and we hold an option to extend the Uozu E building and land lease up to 2057 or acquire it at a pre-agreed cost.

As of December 31, 2025 and 2024, the total outstanding capital lease liabilities for fixed assets were $52.9 million and $73.5 million, respectively, of which $25.0 million and $24.8 million, respectively, were included under current maturities of long-term debt. There was no available lease line as of December 31, 2025. The available lease line as of December 31, 2024 was approximately $10 million.

In December 2021, TPSCo refinanced its then-existing loan with an 11 billion JPY (approximately $70 million as of December 31, 2025) asset-based loan with a consortium of financial institutions consisting of (i) JA Mitsui Leasing, Ltd., (ii) Mitsubishi HC Capital Inc., (iii) Taishin International Bank Co., Ltd. Tokyo Branch, and (iv) BOT Lease Co. Ltd. (“2021 JPY Loan”). The 2021 JPY Loan carried a fixed interest rate of 1.95% per annum, with principal payable in seven semiannual payments from December 2024 until December 2027. The 2021 JPY Loan was secured mainly by a lien over the machinery and equipment of TPSCo located in the Uozu and Tonami facilities.

In September 2023, TPSCo entered into a term loan agreement with JA Mitsui Leasing Ltd. for an additional 3.5 billion JPY (approximately $22 million as of December 31, 2025) term loan (“2023 JPY Loan”). The 2023 JPY Loan carried a fixed interest rate of approximately 2% per annum, with principal payable in seven semiannual payments from September 2024 until September 2027. The 2023 JPY Loan was secured by a second lien over the machinery and equipment of TPSCo located in the Uozu and Tonami facilities.

In December 2024, TPSCo signed an agreement with its lenders to refinance its 2021 JPY Loan and 2023 JPY Loan with a new 14.5 billion JPY (approximately $92 million as of December 31, 2025) asset-based loan (“2024 JPY Loan”). 12.5 billion JPY was drawn in 2024 and used to repay 11.5 billion JPY of the 2021 JPY Loan and 2023 JPY Loan, resulting in outstanding JPY Loans of 15.5 billion JPY (approximately $100 million) as of December 31, 2024.

In accordance with the 2024 JPY Loan agreement, during the first half of 2025, 3 billion JPY was used to repay the remaining 2021 JPY Loan and 2023 JPY Loan, and an additional 2 billion JPY was withdrawn, resulting in 14.5 billion JPY (approximately $92 million) outstanding under the 2024 JPY Loan as of December 31, 2025.

The lenders under the 2024 JPY Loan are a consortium of financial institutions consisting of (i) JA Mitsui Leasing, Ltd., (ii) Mitsubishi HC Capital Inc., and (iii) BOT Lease Co. Ltd. The 2024 JPY Loan carries a fixed interest rate of 2% per annum, with principal payable in seven semiannual payments from December 2027 to December 2030. The 2024 JPY Loan is secured mainly by a lien over the machinery and equipment of TPSCo located in the Uozu and Tonami facilities.

The 2024 JPY Loan contains certain financial ratios and covenants, as well as customary definitions of events of default and acceleration of the repayment schedule. TPSCo’s obligations pursuant to the 2024 JPY Loan are not guaranteed by Tower, NTCJ, or any of their affiliates. As of December 31, 2025, TPSCo was in compliance with the financial covenants under the 2024 JPY Loan.

Our research and development activities relate primarily to improvements, upgrades, and development of our foundry processes. These activities have been sponsored and funded by us, with some participation by the Israeli government through the Israel Innovation Authority (“IIA”) pursuant to the Israeli Encouragement of Research, Development and Technological Innovation in the Industry Law 5744-1984 (formerly known as the Encouragement of Industrial Research and Development Law 5744-1984) and related regulations and guidelines. Our research and development expenses for the years ended December 31, 2025, 2024 and 2023 were $86.5 million, $79.4 million and $79.8 million, respectively, net of government participation of $1.0 million, $0.3 million and $0.5 million, respectively.

For a description of our research and development policies and our patents and licenses, see “Item 4. Information on the Company– B. Business Overview.”

We operate as a specialty foundry in the semiconductor industry. The semiconductor industry has historically been characterized as highly cyclical, both seasonally and over the long term. Over time, the market fluctuates, cycling through periods of weak demand, excess capacity, excess inventory, and price pressure, and periods of strong demand, full capacity utilization, and product shortages that command higher selling prices.

There is a trend within the semiconductor industry toward ever-smaller features and growing wafer sizes. State-of-the-art digital fabs currently support process geometries down to 2 nanometers on 300mm wafers. As demand for smaller geometries increases, there is downward pressure on the pricing of larger-geometry products and potential underutilization of fabs that are limited to these larger-geometry products, which may result in reduced profitability for those associated fabs. However, our strategy to focus on differentiated specialty analog technologies, especially SiPho, along with our deep applications knowledge, design enablement tools, and customer technical support, enables a portion of our wafers to be sold at higher wafer selling prices as compared to “commoditized” standard CMOS products. We currently offer process geometries of (i) 0.18, 0.16, and 0.13-micron on 200-mm wafers; and (ii) 65 and 45 nanometer on 300-mm wafers. The optical components in SiPho (waveguides, modulators) do not need to scale down to more advanced lithography  nodes, and our 0.18um geometry design rules on 200mm wafers and 65nm to 45nm geometry design rules on 300mm wafers match SiPho needs.  We continue to invest in our portfolio of specialty process technologies and intellectual property (IP) to address the key product and system requirements of our customers, enabling them to compete in their respective markets.

Another key element of our strategy is to target multiple large, growing, and diversified end markets. We target end markets characterized by high growth and high performance, for which we believe our specialty process technologies and design services offer a strong, compelling value proposition to our customers. Our target markets include data centers, artificial intelligence systems, communications, the Internet of Things (IoT), machine-to-machine communication devices, ultra-low power mobile applications, wireless and high-speed wireline communications (including 5G and 6G), consumer applications, automotive, medical and industrial markets. For example, we believe our SiGe and silicon photonic technology can provide speed, power, and cost advantages over alternative technologies for high-speed optical transceivers used for data communication in data centers, artificial intelligence clusters, and network infrastructure.  We also believe that RF-SOI and SiGe process technologies can provide performance and cost advantages over GaAs solutions in the realization of switches, low-noise amplifiers, and power amplifiers for wireless handsets and smartphones. Our power management platforms enable the industry’s analog IC suppliers to differentiate their product offerings in the markets we serve. Our specialized CMOS image sensor platforms allow customers to fabricate ultra-high sensitivity/low-noise CIS products for operation in visible, near infrared, ultraviolet, and X-ray spectral ranges, and to develop both ultra-small cameras and large imagers occupying the whole surface of a 200mm or even a 300mm wafer.. In addition, we target the display markets utilizing micro OLED on silicon, using our well-established processes to create displays for the growing AR/VR market.

Our specialty products and target market strategy allow us to grow and diversify our business by attracting new customers, expanding our customer base, and broadening our business with existing customers.

In recent years, we have accelerated our plans to expand our capacity and capabilities, and we are focused on increasing the utilization of our fabs, by attracting new customers and opportunities. During the last two years, we have initiated plans to invest an aggregate of $920 million in capital- expenditure (mainly machinery and facilities), primarily to expand our capacity mainly in SiPho and SiGe at Fabs 2, 3, 7 and 9 next-generation and other capacity. Specifically with respect to SiPho, during 2026, we have engaged with certain customers for committed capacity reservation through 2028 in exchange for prepayment received and to be received, which would be credited to them against their future purchases.

Contingent upon subsidy approval from METI following the formal application, and subject to other considerations including funding, permits and the engagement of contractors and equipment vendors, Tower’s Japanese affiliate may purchase the adjacent land on terms pre-agreed between Tower and NTCJ, which would be used for a new potential fab shell build-out to significantly expand its 300mm capacity and capabilities through the purchase of machinery and cleanroom facilities, and related investments.

We seek to maintain capital efficiency by leveraging our operational model and ensuring cost-effectiveness. With a global capacity footprint, including six fabs in three continents, we are focused on sharing and applying best practices across the organization to provide our customers with high-quality solutions, along with the applications knowledge and technical support that allow them to benefit from a competitive edge in the market. Our geographical diversity allows us to perform internal benchmarking across global facilities to gain knowledge of work processes and methodologies, thereby ensuring that we maintain a high level of operations across all facilities at which we manufacture. Our global foothold also provides our customers with flexibility and business continuity by maximizing opportunities for capacity availability.

Over the last several years, we have consistently sought to expand our presence in global markets, enter new geographical areas, increase the markets we serve, and expand our technology offering through business and development ventures.

This may also be accomplished through (i) the establishment of new facilities with third-party collaboration and/or funding, (ii) mergers and acquisitions involving potential target facilities that may include a solid base of customer demand to fill the increase in capacity, and/or (iii) the development of technologies that may expand our serviceable and/or available market potential and increase our revenue, customer base, and margins. Such transactions are also beneficial because they provide our customers with capacity diversification and opportunities for additional growth through access to increased capacity. We continuously evaluate potential acquisition opportunities and seek to secure additional capacity. Our current cash balance and deposits may be used to enable us to pursue and execute such opportunities, and we may require additional financing through, among others, debt (including convertible debt, bonds, notes, or debentures) and/or equity issuances (including shares and warrants) in order to consummate such opportunities and/or fund our other operational and capital expenditure cash needs, as well as our strategy to expand our global footprint, capacity, and capabilities.

Our financial statements are prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, as well as related disclosures. We evaluate our estimates, assumptions and judgments on an ongoing basis. Our estimates, assumptions and judgments are based on historical experience and various other factors that we believe to be reasonable under the circumstances. Different assumptions and judgments would change the estimates used in the preparation of our financial statements, which, in turn, could change the results from those reported.

The critical accounting policies used in the preparation of our consolidated financial statements that we believe were most affected by significant management estimates and judgments are discussed below. See Note 2 to the consolidated financial statements included elsewhere in this annual report for further information on all significant accounting policies that we used to prepare our consolidated financial statements.

Our provision for income taxes is affected by income taxes in a multinational tax environment. The income tax provision is an estimate determined based on currently enacted tax laws and tax rates in each of our geographic locations, using acceptable allocation methodologies based on our organizational structure, operations, and business model, resulting in applicable taxable income attributable to each of the locations in which we operate.

For the year ended December 31, 2025, the consolidated provision for income taxes was $21.6 million, as detailed in Note 17 to our financial statements.

In December 2021, the OECD issued the Pillar Two model rules, which introduce a 15% global minimum tax applicable on a jurisdiction-by-jurisdiction basis to multinational corporations with consolidated annual revenue exceeding €750 million. As of December 31, 2025, the rules had been partially enacted in certain jurisdictions in which we operate. The Pillar Two model rules include transitional safe harbor provisions that, if met, allow such corporations to defer the application of the rules for periods commencing after December 31, 2025. Through December 31, 2025 (inclusive), the Company qualified for the transitional safe harbor provisions in all jurisdictions in which we operate. As such, the Pillar Two model rules did not have an impact on our consolidated financial statements through December 31, 2025; however, we believe they would result in significant additional income tax expenses for the years 2026 and beyond, mainly with respect to our Israeli operations.  For additional information, see “Item 10. Additional Information—E. Taxation—Israeli Taxation.”

Set forth below is information regarding our senior management and directors as of April 15, 2026:

Dr. Marco Racanelli has served as our President since November 2023. Prior to that, Dr. Racanelli served as Senior Vice President and General Manager of the Analog Business Unit from December 2018, and as the Newport Beach Site Manager from April 2014.  Dr. Racanelli serves as a board member of Tower Semiconductor Newport Beach, Inc. Prior to that, Dr. Racanelli served as Senior Vice President from June 2012 through April 2014, and General Manager, RF & High-Performance Analog Business Group and Aerospace & Defense Group from September 2008 through June 2012. Prior to that, Dr. Racanelli served as Vice President of Technology & Engineering, and Aerospace & Defense General Manager for Jazz Semiconductor. Prior to that, Dr. Racanelli held several positions at Conexant Systems and Rockwell Semiconductor from 1996 in the area of technology development, where he helped establish industry leadership in SiGe, BiCMOS and MEMS technology and built a strong design support organization. Prior to Rockwell, Dr. Racanelli worked at Motorola, Inc., where he contributed to bipolar, SiGe, and SOI development for its Semiconductor Products Sector. Dr. Racanelli holds a Ph.D. and an M.Sc. degree in Electrical and Computer Engineering from Carnegie Mellon University, and a B.Sc. degree in Electrical Engineering from Lehigh University. Dr. Racanelli holds over 35 U.S. patents.

Oren Shirazi has served as our Chief Financial Officer and Senior VP Finance since November 2004. Mr. Shirazi serves as a board member of Tower Semiconductor Newport Beach, Inc. Mr. Shirazi joined us in October 1998, serving initially as Vice Controller and then as Controller commencing in July 2000. Prior to joining us, Mr. Shirazi was employed as an audit manager at the accounting firm of Ratzkovski-Fried & Co., which merged into Ernst & Young (Israel). Mr. Shirazi is a Certified Public Accountant in Israel (CPA). Mr. Shirazi holds an MBA degree with honors from the Graduate School of Business of Haifa University and a B.A. degree in economics and accounting from Haifa University.

Rafi Mor has served as Chief Operating Officer of Tower since August 2014. Mr. Mor serves as a board member of Tower Semiconductor Newport Beach, Inc., Tower Semiconductor NPB Holdings, Inc., Tower Partners Semiconductor Co., Ltd., Tower Semiconductor San Antonio, Inc., and Tower Semiconductor Italy, S.r.l.  Mr. Mor served as Chief Executive Officer of TowerJazz Japan from October 2011 until August 2014, after serving as Senior Vice President and General Manager of Tower Semiconductor Newport Beach, Inc. from September 2008. In October 2010, Mr. Mor was nominated to be the manager of our Newport Beach Fab, in addition to his General Manager role. Prior thereto, Mr. Mor served at Tower Semiconductor Ltd. as Vice President of Business Development from April 2007, after serving as Vice President and Fab 2 Manager from August 2005, and as Fab 1 Manager from March 2003. From November 2000 to March 2003, Mr. Mor served as Senior Director of Process Device & Yield of Fab 1. From 1998 to 2000, Mr. Mor served as Director of Equipment Reliability & Support of Fab 1. Previously, Mr. Mor was employed by National Semiconductor in various engineering and management capacities. Mr. Mor holds M.A. and B.A. degrees in chemical engineering from Ben Gurion University.

Dr. Avi Strum has served as Senior Vice President and General Manager of the Sensors and Displays Business Unit since 2018.  Dr. Strum has served as a member of the board of directors of TPSCo since 2019. From November 2023 to July 2025, Dr. Strum also served as the Corporate CTO. Prior to that, Dr. Strum served as Vice President and General Manager of the Specialty Business Unit, Vice President of Europe Sales, Head of the Design Center in Netanya, and Device and Integration Department Manager. Prior to joining Tower, Dr. Strum served as the President and COO of TransChip Inc., and from 1996 to 2001, he served in various positions with Intel Corp., both in Israel and the United States. From 1990 to 1996, Dr. Strum served as the R&D Manager of SCD and was in charge of all infrared detector development at SCD. Dr. Strum received his Ph.D. and B.Sc. degrees in Electrical Engineering from the Technion – Israel Institute of Technology.

Amir Elstein has served as the Chairman of our Board since January 2009.  Mr. Elstein serves as a director of Teva Pharmaceutical Industries Ltd. and as Chairman of the Israel Democracy Institute. From 2010 to 2013, Mr. Elstein served as Chairman of the Board of Directors of Israel Corporation. Mr. Elstein was a member of Teva Pharmaceutical Industries’ senior management team from 2005 to 2008, where he ultimately held the position of Executive Vice President at the Office of the Chief Executive Officer, overseeing Global Pharmaceutical Resources. Prior to that, Mr. Elstein was an executive at Intel Corporation, where he worked for 23 years, eventually serving as General Manager of Intel Electronics Ltd., an Israeli subsidiary of Intel Corporation.  Mr. Elstein received a B.Sc. degree in physics and mathematics from the Hebrew University of Jerusalem and an M.Sc. degree in the Solid-State Physics Department of Applied Physics from the Hebrew University of Jerusalem. In 1992, Mr. Elstein received his diploma in Senior Business Management from the Hebrew University of Jerusalem.

Yoav Z. Chelouche has served as a director since April 2016, as a member of the Corporate Governance and Nominating Committee since January 2018, and as the Chair and member of our Audit Committee since May 2017. Mr. Chelouche is classified by the Board of Directors as an audit committee financial expert under applicable Commission rules. Mr. Chelouche has served as Managing Partner of Aviv Ventures since its inception in 2001.  Between 1995 and 2001, Mr. Chelouche served as President & Chief Executive Officer of Scitex Corp.  Until 2015, Mr. Chelouche was Co-Chairman of Israel Advanced Technology Industries.  Mr. Chelouche currently serves on the Board of Directors of the following publicly listed companies: Check Point Software Technologies, Ltd. (NASDAQ) and Malam-Team Ltd. (TASE). Mr. Chelouche also previously served as Chairman and/or director of several public companies, including the Tel-Aviv Stock Exchange, Ltd. (TASE) and Shufersal Ltd. (TASE). Mr. Chelouche also serves as a director of Ogen, , Israel's largest social lending and business mentoring nonprofit organization. Mr. Chelouche holds a B.A. degree in economics and statistics from Tel Aviv University and an MBA degree from INSEAD, Fontainebleau, France.

Iris Avner has served as a director since June 2016 (until November 2016 as an external director, within the meaning of the Companies Law), and has served as a member of the Audit Committee since June 2016.  Ms. Avner served as a member of the Compensation Committee from June 2016 until October 2019.  Ms. Avner is classified by the Board of Directors as an audit committee financial expert under applicable SEC rules. Ms. Avner serves as Chief Executive Officer of Nika Holdings, Ltd. From 2008 to 2015, Ms. Avner served as Managing Partner of Mustang Mezzanine Fund, L.P. and served on Mustang’s board of directors from 2014 until 2015.  From 1996 until 2008, Ms. Avner served as Chief Executive Officer of Mizrahi Tefahot Capital Markets Ltd. and from 1996 until 2005, served as Senior Credit Officer & Deputy Chief Executive Officer of Mizrahi Tefahot Bank. In addition, from 1997 until 2002, Ms. Avner served as Assistant Professor and external lecturer in the Executive MBA Program at Tel Aviv University.  From 1988 until 1996, Ms. Avner held various positions at Israel Discount Bank, including Senior Credit Officer and Senior Economist.  Ms. Avner has served as a member of the board of directors of Israel Discount Bank since March 2018 and as the Chairperson of its Credit Committee since 2024.  Ms. Avner has served as a board member and Chairperson of the Audit Committee of Amir Marketing and Investments in Agriculture since May 2017.  In addition, Ms. Avner has served as a member of the board of directors of Rotshtein Real Estate from August 2016 until December 2025 and as Chairperson of its Audit Committee and Nomination Committee from 2017 until 2025.  Ms. Avner previously served on several other boards and board committees in Israel and abroad, both as director and Chairperson.  Ms. Avner holds a B.A. degree in accounting and economics from the Hebrew University of Jerusalem and an MBA degree from Tel Aviv University.

Dr. Michal Vakrat Wolkin has served as a director since September 2020, and as a member of the Corporate Governance and Nominating Committee since November 2020.  In 2023, Dr. Wolkin served as the Director of Global Battery Investments for General Motors.  Dr. Wolkin has served as a partner at GFT Ventures, a global venture capital firm, since 2020 and on the Advisory Board of RACAH Nano Tech Fund of the Hebrew University of Jerusalem since 2019.  In addition, since August 2024, Dr. Wolkin has served on the Advisory Board of Salion Energy, a startup focused on energy storage, and since April 2026, on the Advisory Board of Adama Ventures, a venture fund investing in early-stage start-ups.  Dr. Wolkin served as Managing Director of Lear Innovation Ventures from January 2017 until 2020. From 2014 to 2016, Dr. Wolkin served as Head of 3M R&D Israel, and from 2012 until 2014, she served as Technical Chair of the Night Rover Challenge of NASA/CleanTech Open.  Dr. Wolkin served as Director of Energy Storage Technologies at Better Place from 2008 until 2012, and from 2004 until 2008, she served as Member of Research Staff II at the Hardware System Lab at Xerox PARC.  Dr. Wolkin serves as a Professor and Head of the MBA program in Climate-Tech Management since October 2024, as well as a lecturer in “Disruptive Innovation in Multinational Corporations” since 2021, at Reichman University.  Dr. Wolkin received her B.Sc. degree in Chemical Engineering from the Technion – Israel Institute of Technology in Israel in 1996 and a Ph.D. degree in Applied Physics and Materials Science from the University of Rochester, NY in 2000. From 2003 until 2004, Dr. Wolkin completed her Post-doctorate at the Electronics Materials Lab at Xerox PARC.

Avi Hasson has served as a director since September 2020, and as a member of the Audit Committee and Compensation Committee since November 2020.  Mr. Hasson is classified by the Board of Directors as an audit committee financial expert under applicable Commission rules. Mr. Hasson served as the Chief Executive Officer of Start-Up Nation Central, an independent non-profit that connects Israeli innovation to global partners, from 2021 to January 2026. Mr. Hasson previously served as a partner at Emerge, a leading early-stage venture capital firm. Mr. Hasson serves in several non-profit organizations, including as a director on the board of directors of Sheba Medical Center at Tel Hashomer and SpaceIL.  From January 2011 until July 2017, Mr. Hasson served as the Chief Scientist in the Ministry of Economy and Industry and as Chairman of the IIA.  From 2000 until 2010, Mr. Hasson served as General Partner at Gemini Israel Funds, a top-tier venture capital fund in Israel.  Prior thereto, Mr. Hasson held executive positions in product management, marketing, and business development at various telecommunication technology companies, including ECI Telecom, eCtel, and Tadiran Systems.  Mr. Hasson received his B.A. degree in Economics and Middle East studies from Tel Aviv University in 1997 and an M.B.A. degree from Tel Aviv University in 2002.

Sagi Ben Moshe has served as a director since May 2024 and as a member of the Audit Committee since October 2024.  Mr. Ben Moshe has served as the founder and Chief Executive Officer of Lumana since August 2021, a company developing an AI platform to analyze and manage visual data. Mr. Ben Moshe previously served as Chief Incubation Officer, Corporate Vice President, and General Manager of Emerging Growth Incubation at Intel Corporation, as well as other roles at Intel Corporation from January 2012 until August 2021, including VP and GM of RealSense, VP and GM of Hardware Engineering, Senior VP of Sensing Technologies of Mobileye, and GM of EyeC LIDAR and EyeC Radar. Mr. Ben Moshe was the founder and served as Chief Executive Officer of Invision Ltd. from January 2009 until January 2012.  Mr. Ben Moshe received his B.Sc. degree in Computer Science in 2007 and M.Sc. degree in Computer Science in 2010, both from the Technion – Israel Institute of Technology.  In addition, Mr. Ben Moshe is a 2018 graduate of the Stanford Executive Program at Stanford University's Graduate School of Business.

Carolin Seward has served as a director since December 2024, and as a member of the Compensation Committee since January 2025.  Ms. Seward has served as Vice President of Custom Silicon Sourcing and Operations at Google, in its Platforms and Devices Group, since April 2022.  Prior to her role at Google, Ms. Seward held several executive positions at Intel Corporation, including Vice President of Global Supply Chain and External Manufacturing Sourcing, Vice President of the Data Solutions Group, Customer Experience and Fulfillment, and Vice President of Capital Equipment Development, Technology Manufacturing Group.  Ms. Seward received her B.Sc. degree in Materials Engineering from San Jose State University and an M.B.A. degree from Pepperdine University.

We are not party to, and are not aware of, any arrangements or understandings with major shareholders, customers, suppliers or others, pursuant to which any director or executive officer was selected as a director or member of senior management, as the case may be.

Under the Companies Law, a public company must have a compensation policy regarding the terms of engagement of office holders, as such term is defined in the Companies Law. The compensation policy must be approved at least once every three years, first, by our board of directors, upon recommendation of our compensation committee, and second, by the shareholders by a majority of the ordinary shares present, in person or by proxy, and voting at a shareholders meeting, provided that either: (i) a majority of the shares voted by shareholders who are not controlling shareholders and shareholders who do not have a “personal interest” in the proposal (excluding abstaining votes) voted in favor of the proposal; or (ii) the total number of shares voted against the proposal by shareholders who are not controlling shareholders and shareholders who do not have a personal interest in the proposal does not exceed two percent (2%) of the Company’s outstanding voting rights. Under special circumstances, the board of directors may approve the compensation policy despite the objection of the shareholders on the condition that the compensation committee and then the board of directors decide, on the basis of detailed grounds and after discussing again the compensation policy, that approval of the compensation policy, despite the objection of shareholders, is for the benefit of the company.

Our current compensation policy for executive officers and directors, as approved by our shareholders in July 2023 and amended by our shareholders in July 2024, serves as the basis for decisions concerning the financial terms of employment or engagement of our office holders (within the meaning of the Companies Law), including cash compensation, equity-based awards, indemnification and insurance, severance and other benefits. Our compensation policy is performance-based and is designed to align our officers’ and directors’ interests with those of our company and shareholders in order to enhance shareholder value. Our compensation policy allows us to provide incentives to senior management that reflect short-term, mid-term and long-term goals and performance, as well as motivate the achievement of company targets, while providing compensation that is competitive in the global marketplace in which we recruit our senior management.

As an Israeli company with a significant global footprint, we aim to adopt compensation policies and procedures that align with global companies of similar complexity, including companies in our industry and other companies which compete with us for similar talent.

Under the Companies Law, a company’s compensation policy must be determined and later reevaluated according to certain factors, including: the advancement of the company’s objectives, business plan and long-term strategy; the creation of appropriate incentives for office holders, while considering, among other things, the company’s risk management policy; the size and the nature of the company’s operations; and with respect to variable compensation, the contribution of the office holder towards the achievement of the company’s long-term goals and the maximization of its profits, all with a long-term objective and according to the position of the office holder. The compensation policy must furthermore consider the following additional factors:

In addition, under the Companies Law, a company’s compensation policy must also include the following features: (i) with respect to variable components of the compensation of the chief executive officer, determining the variable compensation components on long-term performance and measurable metrics; however, an immaterial portion of the variable components of the compensation of the chief executive officer, in the amount of up to three monthly salaries per annum, can be discretion-based awards (i.e., not based on measurable metrics), taking into account the contribution of the chief executive officer to the company. This requirement applies also to any other office holder (within the meaning of the Companies Law) who is not subordinate to the chief executive officer, if any (such as directors, including the chairman of the board of directors); (ii) the ratio of variable components and fixed components and a cap on variable components at the time of their payment, except that the cap for equity-based compensation is determined at the time of grant; (iii) the conditions under which an office holder would be required to return compensation paid, in the event that it is later revealed that such amounts were paid on the basis of data that was inaccurate and was required to be restated in the company’s financial statements; (iv) the minimum holding or vesting periods for equity-based variable components of compensation, while taking into consideration long term incentives; and (v) maximum limits on grants or benefits paid upon termination.

Compensation under our compensation policy may include: base salary; benefits and perquisites; performance-based cash bonuses and other bonuses (such as special bonuses for substantial achievements and sign-on bonuses); equity-based compensation; and retirement, termination and other arrangements. Our compensation policy aims to optimize the mix of fixed compensation and variable compensation in order to (among other things) appropriately incentivize office holders to meet our goals while considering our management of business risks and sets maximum ratios between the two types of compensation elements.

All compensation arrangements of officers and directors are required to be approved in the manner prescribed by applicable law (see details in Exhibit 2.1 to this annual report).

For the year ended December 31, 2025, we paid to all our directors and senior management whose names are specified in Item 6A and who served during the period, as a group, an aggregate of $7.67 million in salaries, fees, payments upon termination and bonuses (excluding employer cost, relocation related expenses and equity-based compensation, which are detailed below). In addition, the total employer cost for personal vehicles, relocation related expenses, amounts set aside or accrued to provide for insurance, severance, retirement, vacation and similar benefits or expenses for such persons was approximately $1.45 million for the year ended December 31, 2025.

The following is a summary of the cost to the Company, including non-cash cost to the Company relating to equity-based awards, as well as the Company’s required payments to tax authorities, social security and financial institutions (e.g., pension and other institutions and funds), in connection with the terms of employment of our five most highly compensated officers and/or directors for the year ended December 31, 2025, which consist of the individuals listed as A, B, C, D and E in the table set forth in Item 6A above (collectively referred to herein as the “Covered Officers”).

The base salary of our executive officers is individually determined according to past performance, educational background, country of residence, professional experience, qualifications, specializations, role, business responsibilities, achievements of the officer and prior salary and compensation arrangements, as well as comparative peer group analyses and our compensation policy. Base salary cost gross recorded by the Company for the compensation of Covered Officers A, B, C, D and E for the year ended December 31, 2025, amounted to $1.01 million, $0.55 million, $0.47 million, $0.40 million and $0.34 million, respectively. Executive officers are entitled to social and other benefits in accordance with applicable law, our policies and common practice. The cost of social and other benefits awarded to the Covered Officers A, B, C, D and E for the year ended December 31, 2025, amounted to $0.33 million, $0.18 million, $0.25 million, $0.21 million and $0.19 million, respectively. In addition, relocation and related reimbursement expenses awarded to Covered Officer A for the year ended December 31, 2025, amounted to $0.28 million. No relocation-related payments or accruals were made to any of the Covered Officers B, C, D and E during the year ended December 31, 2025.

Our policy is to award annual cash bonuses to executive officers, subject to the attainment of pre-determined annual measurable objectives, which are set in the first quarter of each year, and personal performance evaluation. In accordance with our compensation policy, the pre-defined annual bonus plans include measurable metrics and the weight (in percentage terms) of each metric as a portion of the annual measurable metrics, as well as a minimum threshold for achievement of corporate measurable metrics below which no portion of the pre-determined corporate measurable metrics component of the annual bonus will be awarded, and a portion of the annual bonus is based on performance evaluation, in accordance with our compensation policy and subject to applicable law. The bonus cost of the gross bonus amounts paid by the Company to Covered Officers A, B, C, D and E for the year ended December 31, 2025, amounted to $1.80 million, $0.65 million, $0.53 million, $0.44 million and $0.36 million, respectively.

Equity based compensation for directors and officers is intended to be in the form of restricted share units (“RSUs”), performance-based stock units (“PSUs”), options and/or other equity forms, in accordance with our equity-based compensation policies and programs in place from time to time and in accordance with our compensation policy. Equity-based compensation may be granted as an annual grant and/or from time to time, and is individually determined. Generally, equity awards shall not begin to vest before the end of the first year from the date of grant. We calculate the fair market value of equity-based compensation for officers and directors at the time of grant according to the Black-Scholes model, binomial model or any other best practice or commonly accepted equity-based compensation valuation model, when such award is duly approved in accordance with applicable law and amortize such value in our statements of operations over the applicable vesting schedule.  Total value of equity-based compensation awarded to the Covered Officers A, B, C, D and E and recorded for the year ended December 31, 2025 (calculated based on the total amortization cost recorded in the Company’s statement of operations for the year ended December 31, 2025 with respect to all equity-based grants awarded to the applicable Covered Officer), amounted to $12.28 million, $3.49 million, $2.66 million, $2.23 million and $1.54 million, respectively.

Under our compensation policy, we may grant our executive officers certain termination and retirement payments, including change of control-related compensation, contingent upon the termination of employment or resignation of the officer under certain circumstances as specified in such change of control provision, and subject to obtaining the applicable corporate approvals as required by law. In accordance with our compensation policy and the employment terms of our chief executive officer, upon termination of his employment, including upon a change of control, our chief executive officer may be eligible for a payment of twelve-monthly base salaries, and in the event of termination of his employment upon a change of control, he may also be entitled to acceleration of all unvested equity. In addition, under our compensation policy, upon a change of control, all other executive officers may be entitled to a payment in the amount of up to nine months’ base salary and acceleration of all unvested equity, and the chairman of the board of directors and other directors may be entitled to acceleration of all of their unvested equity. No such payment or accrual was made or earned during the year ended December 31, 2025.

In accordance with the approval of our shareholders at our annual general meeting held in July 2025 and consistent with our compensation policy, we pay each of our directors (other than our chief executive officer, who also serves as a director, and the chairman of our board of directors, each of whose compensation is detailed below) the following fees: (i) an annual fee of $75,000; (ii) an annual committee membership fee of between $6,000 and $10,000 (depending on the specific committee); and (iii) an additional annual fee to each committee chairperson of between $6,000 and $10,000 (depending on the specific committee), as well as reimbursement for reasonable travel and other expenses in accordance with our policies.

Our shareholders also approved at our 2025 annual general meeting the payment to the chairman of our board of directors of an annual cash fee of $300,000 (paid in monthly installments) and the award of time-based vesting RSUs in the value of $300,000 (which represented 6,273 RSUs as of the date of grant in July 2025), which vest in three equal installments, of one-third of the RSUs each, on each of the three anniversaries of the date of grant. If the service of the chairman of our board of directors is terminated for any reason other than for cause, including by way of resignation, prior to the third anniversary of the date of grant, all unvested RSUs shall be accelerated.

In addition, at our 2025 annual general meeting of shareholders, our shareholders approved the grant of annual equity awards to each of our directors (other than our chief executive officer and the chairman of our board of directors, whose compensation is detailed above) of time-based vesting RSUs at a value of $200,000 (which represented 4,182 time-based vesting RSUs as of the date of grant in July 2025), which vest over a two-year period, with 50% vesting at the end of each of the two anniversaries of the date of grant. In the event any such director’s service is terminated for any reason other than for cause, including by way of resignation, prior to the second anniversary of the date of grant, (i) if the director has served on the board of directors for five years or more, all unvested RSUs shall be accelerated; and (ii) if the director has served on the board of directors for less than five years, 50% of all unvested RSUs shall be accelerated.

We have entered into exemption and indemnification agreements with each of our officers and directors, pursuant to which, subject to the limitations set forth in the Companies Law, the Israeli Securities Law, 1968 and our articles of association, they will be exempt from liability for breaches of the duty of care and we agreed to indemnify them for certain costs, expenses and liabilities with respect to events specified in such agreements. In addition, our officers and directors are currently covered by a directors’ and officers’ liability insurance policy.

In 2013, the Company adopted a share incentive plan for its directors, officers, employees and its subsidiaries’ employees (the “2013 Plan”). In accordance with our compensation policy, the aggregate amount of outstanding equity-based compensation awarded by the Company at any time shall not exceed 10% of the fully-diluted share capital of the Company, as calculated at the time of grant (which fully-diluted share capital will be calculated pro-forma after taking into account the proposed grants and shares underlying all outstanding equity-based awards).

As of December 31, 2025, we had a total of approximately 1.33 million outstanding and unvested RSUs and PSUs which were awarded to our directors and officers specified in Item 6A under the 2013 Plan, of which approximately 0.66 million were awarded to our chief executive officer and approximately 0.014 million were awarded to the chairman of our board of directors.

At our 2025 annual general meeting, our shareholders approved, following the approval and recommendation of the Compensation Committee and Board of Directors, the award of the following equity grants to our chief executive officer:

(a) An annual equity grant in the value of approximately $8.8 million, comprised of 40% time-based vesting RSUs (the “Base RSUs”), which vest over a three-year period, such that one-third shall vest at the end of each year over a three-year period from the date of grant, and 60% PSUs (the “Base PSUs”), which are subject to vesting as follows: (y) 80% of the Base PSUs are subject to the attainment of certain pre-defined financial performance metrics of net profit and annual revenue for the year ended December 31, 2025, as determined by the Compensation Committee and Board of Directors, weighted equally (“Base PSUs Type-1”), and if earned, the Base PSUs Type-1 vest in equal thirds on each of the three anniversaries of the grant, and (z) 20% of the Base PSUs vest subject to share price performance over three performance periods: March 26, 2025 to March 26, 2026; March 26, 2025 to March 26, 2027; and March 26, 2025 to March 26, 2028, with the number of Base PSUs Type-2 that may be earned for each performance period measured against pre-defined criteria (“Base PSUs Type-2”).

(b) Additional equity grants in the form of additional PSUs (the “Upside PSUs”), as follows: (i) Upside PSUs with a value of up to 50% of the Base PSUs Type-1 (the “Upside PSUs Type-1”), the vesting of which was conditioned upon the Company’s actual financial performance in 2025 exceeding the pre-defined 2025 financial performance metrics for the vesting of the Base PSUs Type-1, with the Upside PSUs Type-1 earned in proportion to the degree by which the pre-defined 2025 financial performance targets are exceeded in relation to a certain target percentage that was pre-defined by the Compensation Committee and Board of Directors, and such portion of Upside PSUs Type-1 earned vests over the three-year time-vesting schedule as detailed above for the Base PSUs Type-1; and (ii) Upside PSUs with a value of up to 100% of the Base PSUs Type 2 (the “Upside PSUs Type 2”), which vest subject to share price performance over three performance periods and measured against pre-defined criteria, as described above for the Base PSUs Type 2.

Actual net profit for 2025 was $220.5 million and annual revenue for 2025 was $1,566.1 million. Since these 2025 actual financial results met the pre-defined financial performance metrics for the vesting of the Base PSUs and achieved 29 percent of the pre-defined financial performance metrics for the vesting of the Upside PSUs Type-1, the chief executive officer was entitled to all of the Base PSUs and to 29% of the Upside PSUs Type-1, which continue to be subject to the three-year time-vesting schedule described above.  In addition, as the conditions for the vesting of the Base and Upside PSUs Type 2 were fully attained, the chief executive officer was entitled to all of the Base and Upside PSUs Type 2, which continue to be subject to the three-year time-vesting schedule described above.

Accordingly, in accordance with the shareholder approval described above, in July 2025, we granted the chief executive officer 73,257 RSUs, 87,908 Base PSUs Type-1 (all of which were earned by him), 43,954 Upside PSUs Type-1 (29% of which were earned by him), 21,977 Base PSUs Type-2 (of which 7,325 RSUs relating to the first performance period were earned by him and the remainder is pending future performance) and 21,977 Upside PSUs Type 2 (of which 7,325 RSUs relating to the first performance period were earned by him and the remainder is pending future performance), subject to the time-vesting schedule detailed above, for a total compensation value of approximately $11.9 million.

Our compensation policy includes minimum shareholding guidelines (the “Minimum Holding”), pursuant to which: (i) the chief executive officer is required to own ordinary shares with a minimum value equal to at least three times his annual base salary; and (ii) the directors and other executive officers are required to own ordinary shares with a minimum value equal to at least 50% of their respective annual fee or annual base salary, as applicable. The chief executive officer had until May 2024 and the directors and other officers then in office had five years (until July 2025) from the date on which our board of directors approved the Minimum Holding to attain their respective Minimum Holding. Directors and officers who are elected or appointed (as the case may be) subsequent to the date the board of directors approved the Minimum Holding have five years from the date of their election or appointment to attain their respective Minimum Holding. During such period, and until they accumulate the applicable Minimum Holding, each officer or director must retain at least 20% of the shares issued upon the vesting of time-based vesting RSUs granted to him/her during such period.  As of December 31, 2025, the directors, our chief executive officer and other executive officers are in compliance with the above requirements, to the extent applicable.

For further information concerning our employee equity plans and outstanding employee equity, see Note 13B to the consolidated financial statements included in this annual report.

Our Articles of Association provide that the Board of Directors shall consist of at least five and no more than 11 members. Our Board of Directors is currently comprised of 10 directors. Our directors are elected by our shareholders by the vote of a majority of the ordinary shares present, in person or by proxy, and voting at that meeting. Generally, our directors hold office until their successors are elected at the next annual general meeting of shareholders (or until any of their earlier resignation or removal in accordance with the Companies Law). In addition, our Articles of Association allow our board of directors to appoint directors (other than the external directors) to fill vacancies on our board of directors, until the next annual general meeting of shareholders.

The Companies Law requires Israeli companies with shares that have been offered to the public in or outside of Israel to appoint at least two external directors. However, pursuant to the Companies Regulations (Relief for Companies Whose Shares are Registered for Trading Outside of Israel) – 2000 (the “Relief Regulations”), an Israeli public company whose shares are dual listed on the TASE and certain foreign (non-Israeli) stock exchanges, including the NASDAQ Global Select Market, or are listed solely on a foreign (non-Israeli) securities exchange, may elect to exempt itself from the Companies Law requirement to appoint external directors and related rules concerning the composition of the audit committee and compensation committee of the board of directors if it meets both of the following conditions:

In accordance with the Relief Regulations, we elected to “opt out” of the Companies Law requirement to appoint external directors and related Companies Law rules concerning the composition of the audit committee and compensation committee of the board of directors.

In accordance with the exemption from the Israeli law requirement to have external directors serving on our Board of Directors, we comply with the director independence requirements and the audit committee and compensation committee composition requirements under U.S. laws (including applicable Nasdaq Stock Market rules) applicable to U.S. domestic issuers. In addition, the composition of our corporate governance and nominating committee complies with the requirements of the Nasdaq Listing Rules applicable to U.S. domestic issuers. Under the Nasdaq Listing Rules, a majority of the board of directors must be comprised of independent directors (as defined in the Nasdaq Listing Rules). Our board of directors has made a determination of independence under the Nasdaq Listing Rules with respect to all directors, other than Mr. Ellwanger, our Chief Executive Officer.

Our audit committee currently consists of Mr. Yoav Z. Chelouche, Mr. Avi Hasson, Mrs. Iris Avner and Mr. Sagi Ben Moshe. Mr. Yoav Z. Chelouche serves as the audit committee chairman.

The Companies Law requires public companies to appoint an audit committee; however, following the Company’s determination to adopt the exemption with respect to external directors under the Relief Regulations, as described above, the composition of our audit committee is governed by the rules set forth in the Nasdaq Listing Rules and the Exchange Act.

Under Nasdaq Listing Rules, we are required to maintain an audit committee consisting of at least three independent directors (within the meaning of the Exchange Act and Nasdaq Listing Rules), each of whom must meet certain requirements for financial literacy and one of whom has accounting or related financial management expertise, and none of whom has participated in the preparation of our or any of our subsidiaries financial statements at any time during the prior three years.

The Board of Directors has determined that all of the members of the audit committee meet the independence and financial knowledge requirements for audit committee service of the Nasdaq Listing Rules and the Exchange Act.  In addition, the Board of Directors has determined that Yoav Chelouche, Iris Avner and Avi Hasson meet the Nasdaq Listing Rules requirement regarding financial sophistication and that each of the above is an audit committee financial expert pursuant to the applicable SEC rules.

Our board of directors has adopted an audit committee charter setting forth the responsibilities of the audit committee consistent with the Companies Law, SEC rules, and the Nasdaq Listing Rules, which include:

Our compensation committee is comprised of Mrs. Dana Gross, Mr. Avi Hasson and Ms. Carolin Seward. Mrs. Dana Gross serves as the compensation committee chairperson.

The Companies Law requires public companies to appoint a compensation committee; however, following the Company’s determination to adopt the relief provided under the Relief Regulations, as described above, the composition of our compensation committee is governed by the rules set forth in the Nasdaq Listing Rules and the Exchange Act.

Under the Nasdaq Listing Rules, we are required to maintain a compensation committee consisting of at least two directors, each of whom is an independent director within the meaning of the Nasdaq Listing Rules.

The Board of Directors has determined that all members of the compensation committee meet the independence requirements for compensation committee service of the Nasdaq Listing Rules, including the additional independence requirements applicable to the members of a compensation committee.

Our board of directors adopted a compensation committee charter, which sets forth the responsibilities of the compensation committee consistent with the Nasdaq Listing Rules and the requirements for compensation committees under the Companies Law, including the following:

Our corporate governance and nominating committee is comprised of Mr. Kalman Kaufman, Mrs. Dana Gross, Ms. Michal Vakrat Wolkin and Yoav Z. Chelouche. Mr. Kalman Kaufman serves as the corporate governance and nominating committee chairman.

Our board of directors has adopted a corporate governance and nominating committee charter setting forth the responsibilities of the corporate governance and nominating committee, which include:

Under the Companies Law, the board of directors of an Israeli public company must appoint an internal auditor, who is recommended by the audit committee. The role of the internal auditor is to examine, among other matters, whether the company’s actions comply with the law and orderly business procedure. Under the Companies Law, the internal auditor may be an employee of the company but not an office holder (within the meaning of the Companies Law) or an interested party (i.e., a person who holds more than 5% of the Company’s outstanding shares or voting rights or who has the power to appoint a director or the general manager of the company) or a relative of an office holder or interested party, and may not be the company’s independent auditor or its representative. Oren Grupi of KPMG Israel serves as our internal auditor.

Other than under the employment arrangement with Mr. Russell Ellwanger, our Chief Executive Officer and a director, as detailed in “Item 6. Directors, Senior Management and Employees—B. Compensation,” we do not have written agreements with any director providing for benefits upon the termination of his or her services with our Company. Under the terms of our directors’ equity awards, as approved by the shareholders, in the event a director’s service is terminated for any reason, including by way of resignation, prior to the second anniversary from the date of the equity grant, (i) if the director has served on our board of directors for five years or more, all unvested equity shall be accelerated; and (ii) if the director has served on our board of directors for less than five years, 50% of all unvested equity shall be accelerated.

The following table sets forth, for the last three fiscal years, the number of our employees engaged in the specified activities.

As of December 31, 2025, we had 1,296 employees located in Israel, 1,586 employees located in the United States, 2,398 employees located in Japan and 36 employees located in other countries in the Asia Pacific region and across Europe.

Other than a special collective agreement relating to our Israeli employees regarding employer payments to pension funds of such employees, as described below, our employees in Israel are not covered by a collective bargaining agreement. However, in Israel, we are subject to certain labor statutes and national labor court precedents, as well as to certain provisions of the collective bargaining agreements between the Histadrut and the Coordination Bureau of Economic Organizations, by virtue of expansion orders issued in accordance with relevant labor laws by the Israeli Ministry of Labor and Welfare, extending such agreement provisions to our employees even though they are not directly part of a union that has signed a collective bargaining agreement. The labor laws and court rulings that apply to our employees primarily concern minimum wage laws, procedures for dismissing employees, determination of severance pay, leaves of absence (such as annual vacation or maternity leave), sick pay and other conditions of employment. The expansion orders that apply to our employees primarily concern the length of the workday and workweek, mandatory employer payments to employees’ pension funds, annual recreation allowance, travel expense payments, and other conditions of employment.

There have been past and recent attempts, by the Histadrut to organize and establish a representative labor union for our Israeli employees. Under Israeli law, establishing a representative labor union requires that at least one-third of the Israeli employees join the Histadrut, in which case all employees would be liable to pay its membership fees. If a representative labor union were to be established in the future, we would need to conduct negotiations with the representative labor union and the Histadrut regarding the employees’ terms of employment and benefits.

Under the special collective bargaining agreement relating to our Israeli employees to which we are a party, we are required to make payments to an employee’s insurance fund and/or pension fund. Such funds generally provide a combination of savings plans, insurance and severance pay benefits to the employee, securing their right to receive a pension or providing the employee a lump sum payment upon retirement, or, under certain circumstances, if legally entitled, upon termination of employment. Tower’s Israeli employees contribute an amount equal to 6% of their wages to the insurance fund or pension fund, and Tower contributes an additional 14.83% to 15.83% of the employee’s wages to such funds. Israeli law generally requires severance pay upon the retirement or death of an employee or termination of employment by the employer. Under the special collective bargaining agreement, Section 14 of the Israeli Severance Pay Law, 5723-1963, applies to Tower, according to which the employer’s payments to severance pay are in lieu of payment of severance pay upon termination of employment. Therefore, the monthly payments mentioned above constitute the entire required payments for severance pay, and we are not required to pay any additional severance upon termination of employment of our Israeli employees.

A portion of the employees at our Newport Beach, California fab are represented by a union and covered by a collective bargaining agreement. NPB Co. maintains a defined benefit pension plan for certain of its employees covered by a collective bargaining agreement that provides for monthly pension payments to eligible employees upon retirement. The pension benefits are based on years of service and specified benefit amounts. In addition, the bargaining agreement includes a post-retirement medical plan for certain employees. Certain eligible union employees who terminate employment are provided with a lump-sum benefit payment.

Most of TPSCo’s employees at its Japan fabs are represented by a union and covered by a collective bargaining agreement. TPSCo established a Defined Contribution Retirement Plan (the “DC Plan”) for its employees, through which TPSCo contributes approximately 8% with an employee average match of 1% from the employees’ base salary to the DC Plan. Such payment releases the employer from further obligation for any payments upon termination of employment. The payment is remitted either to third-party benefit funds that are responsible for investing the funds based on employee preference, or directly to those employees who elected not to enroll in the DC Plan.

As of March 31, 2026, no individual director or senior management member beneficially owned (as defined in Rule 13d-3 under the Exchange Act) one percent or more of our ordinary shares and all directors and senior management in the aggregate beneficially owned 0.50% of our ordinary shares. As of March 31, 2026, our directors and senior management beneficially owned an aggregate of approximately 1.15 million RSUs and PSUs for our ordinary shares. For information regarding our equity-based incentive plans, see Note 13B to our consolidated financial statements included in this annual report.

Information concerning the beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of our ordinary shares by any person known to us to beneficially own 5% or more of our issued and outstanding ordinary shares as of March 31, 2026, is set forth below. The percentage of beneficial ownership of our ordinary shares is based on 112,824,944 ordinary shares issued and outstanding as of March 31, 2026.

The voting rights of our major shareholders do not differ from the voting rights of other holders of our ordinary shares.

Other than as disclosed in the table above, in Item 7A of our annual report on Form 20-F for each of the years ended December 31, 2024 and 2025, and other filings with the SEC, we are not aware of a significant change in the percentage ownership held by our major shareholders since January 1, 2024.

As of March 31, 2026, based on information provided to us by our transfer agent in the United States, there were a total of 14 holders of record of our ordinary shares, of which 9 were registered with addresses in the United States. Such U.S. record holders were, as of such date, the holders of record of approximately 71% of our outstanding ordinary shares. The number of record holders in the United States is not representative of the number of beneficial holders, nor is it representative of where such beneficial holders are resident, since many of these ordinary shares were held by brokers or other nominees (including one U.S. nominee company, CEDE & Co., which held approximately 71.8% of our outstanding ordinary shares as of such date, including those held for the account of the TASE Clearing House as a member of Depository Trust Company).

Other than executive officer and director compensation, executive officer employment arrangements, equity-based compensation award agreements with officers and directors, indemnification and exculpation arrangements with officers and directors, and directors’ and officers’ liability insurance, as discussed elsewhere in this annual report, from the beginning of 2025 and through the date of the filing of this annual report with the SEC, we have not been and are not a party to any transactions in which any of our directors, executive officers or holders of 5% or more of our share capital, or any immediate family member of, or person sharing the household with, any of these individuals or entities, had or will have a direct or indirect material interest. For additional information, see Note 16 to the consolidated financial statements included herein.

Not applicable.

See “Item 18 – Financial Statements”.

NPB Co. leases its facility under an operating lease agreement that was extended in 2025 through 2030. In prior amendments to the lease, NPB Co. (i) secured various contractual safeguards designed to limit and mitigate any adverse impact of the landlord’s construction activities, being conducted adjacent to Fab 3, on its operations; and (ii) committed to certain obligations, including certain noise abatement actions, in relation to the facility.  The landlord has asserted claims that NPB Co.’s noise abatement efforts are not adequate under the terms of the amended lease and has requested a judicial declaration that NPB Co. has committed a material, non-curable breach of the lease. NPB Co. does not agree with these assertions and is disputing the landlord’s claims. See “Item 3. Key Information—D. Risk Factors—Risks Affecting Our Business—Risks relating to the Fab 3 lease could harm our business, operations and financial results.”

We currently intend to use our future cash and earnings, along with our existing cash balance and deposits, to finance our growth and acquisition strategy, capacity expansion, ongoing operations, and our other business and operational needs, including the buildout of the Agrate facility, the $920 million capital expenditure plan described above, primarily to support our SiPho and SiGe capability and capacity growth in Fabs 2, 3, 7 and 9, and the potential new fab shell build-out in Japan (subject to METI subsidies and other considerations) described above. Therefore, we do not anticipate paying dividends in the foreseeable future. We may, however, use our existing cash balance and/or future cash earnings to execute share repurchases. Our board of directors has sole discretion regarding whether to pay dividends or adopt a share repurchase program. If our board of directors decides in the future to pay dividends or adopt a share repurchase program, the form, timing, frequency and amount will depend on several factors, including our future growth and acquisition strategy, capacity growth plans, future operations and earnings, capital requirements and surplus, general financial condition, contractual and legal restrictions, the trading price of our ordinary shares, and other factors that our directors may deem relevant. The Companies Law and regulations thereunder impose conditions on our ability to declare and pay dividends and/or execute share repurchases.  See Exhibit 2.1 to this annual report, “Description of Securities—Dividend and Liquidation Rights,” for additional information. Payment of dividends and share repurchases may also be subject to Israeli withholding taxes. See “Item 10. Additional Information—E. Taxation—Israeli Taxation” for additional information.

No significant change has occurred since December 31, 2025, except as disclosed in this annual report.

Our ordinary shares are listed and traded on the NASDAQ Stock Market (on the NASDAQ Global Market through March 16, 2012; on the NASDAQ Capital Market from March 17, 2012, through September 6, 2012; and on the NASDAQ Global Select Market since that date) and on the TASE under the symbol “TSEM”. 

Not applicable.

A copy of our Articles of Association is attached as Exhibit 1.1 to this annual report, as amended by Exhibits 1.2-1.7 to this annual report. Other than as disclosed below, the information called for by this Item is set forth in Exhibit 2.1 to this annual report and is incorporated by reference into this annual report.

Our registration number with the Israeli Companies Registrar is 520041997. Pursuant to Section 4 of our Articles of Association, our objective is to engage in any lawful activity.

Under Israeli law and our Articles of Association, we are required to hold an annual general meeting of shareholders each year that must be held no later than 15 months from the last annual meeting, upon at least 21 days’ prior notice to our shareholders.

A special general meeting may be convened by the Board of Directors at such times as it deems fit.  In addition, the Board of Directors is required to convene a special general meeting at the request of (i) any two directors or twenty-five percent of the board members, or (ii) one or more shareholders holding at least 5% of our issued share capital and 1% of the voting rights, or one or more shareholders holding at least 5% of the voting rights. Shareholders requesting a special general meeting must submit their proposed resolution with their request.  Within 21 days of receipt of the request, the Board of Directors must convene a special general meeting and provide notice for the meeting, setting forth the date, time and place of the meeting, which generally shall not be convened more than 35 days after the notice for the meeting. If the special general meeting is not convened by the Board of Directors as set forth above, the person who requested the Board to convene the meeting may convene the meeting in the same manner a special general meeting is convened by the Board of Directors, provided that such meeting shall not be held after three months have elapsed from the date the request was submitted.

Pursuant to the Companies Law, resolutions regarding the following matters are required to be approved by our shareholders at a general meeting:

Subject to the provisions of the Companies Law and regulations promulgated thereunder, shareholders entitled to participate and vote at general meetings are the shareholders of record on a date to be decided by the board of directors, which, as a company listed on an exchange outside Israel,  may be between four and 60 days prior to the date of the meeting.

The Companies Law requires that a notice of any annual general meeting or special general meeting be provided to shareholders at least 21 days prior to the meeting and if the agenda of the meeting includes, among other things, the appointment or removal of directors, the approval of transactions with office holders or interested or related parties, an approval of a merger, or the approval of the compensation policy, notice must be provided at least 35 days prior to the meeting.

Each of the proposals presented for approval at the 2025 Annual General Meeting of Shareholders of the Company held on July 30, 2025 (the “Meeting”) were approved by the requisite vote of the Company’s shareholders in accordance with the Companies Law and the Company’s articles of association, as described in the Notice and Proxy Statement for the Meeting that was attached as Exhibit 99.1 to a Report of Foreign Private Issuer on Form 6-K furnished by the Company to the SEC on June 12, 2025.  The percentage of shares represented at the Meeting that voted in favor of each proposal (excluding abstentions) is as follows (and with respect to Proposals 3, 4, and 5, the percentage is of the shares represented at the Meeting that voted in favor of the proposal by shareholders who are not controlling shareholders and shareholders who do not have a personal interest (within the meaning of the Companies Law) in the applicable proposal (excluding abstentions).  Proposal 1, to elect ten members to the Board of Directors of the Company to serve until the Company’s next annual general meeting of shareholders and until their respective successors are duly elected and approval of their cash compensation in such capacity: Mr. Amir Elstein – approximately 98%; Mr. Russell Ellwanger – approximately 96%; Mr. Kalman Kaufman – approximately 94%; Ms. Dana Gross – approximately 98%; Mr. Yoav Chelouche - approximately 99%; Ms. Iris Avner - approximately 98%; Ms. Michal Vakrat – approximately 99%; Mr. Avi Hasson – approximately 100%; Sagi Ben Moshe – approximately 100%; Ms. Caroline Seward – 100% . Proposal 2, to appoint Mr. Amir Elstein as the Chairman of the Company’s Board of Directors and approve the terms of his compensation in such capacity: approximately 85%. Proposal 3, to approve the increase in the annual base salary of the Company’s Chief Executive Officer: approximately 92%. Proposal 4, to approve the grant of an annual equity-based award to the Company’s Chief Executive Officer: approximately 72%.  Proposal 5, to approve certain employment terms for the Company’s Chief Executive Officer: approximately 82%.   Proposal 6, to approve the grant of an annual equity-based award to each member of the Board of Directors (other than Mr. Amir Elstein and Mr. Russell Ellwanger), approximately 88%.   Proposal 7, to approve the re-appointment of Brightman Almagor Zohar & Co., Certified Public Accountants, a firm in The Deloitte Global Network, as the independent registered public accountants of the Company for the year ending December 31, 2025, and for the period commencing January 1, 2026 and until the next annual shareholders’ meeting, and to further authorize the Audit Committee of the Board of Directors to determine the remuneration of such firm in accordance with the volume and nature of its services: approximately 98%.

Our Board of Directors may, from time to time, at its discretion, approve the receipt of credit by the Company in any amount and the discharge thereof, in such manner as it deems fit, as well as the grant of collateral to secure any such credit, of whatsoever type. The Board of Directors may, from time to time, at its discretion, approve the issuance of a series of debentures, including capital notes or bonds, and including debentures, capital notes or bonds convertible into or exercisable for shares, and determine the terms thereof, and to charge all or any of our present or future property by way of a floating or fixed charge. In accordance with our Articles of Association, debentures, capital notes, bonds, or other securities, as aforesaid, may be issued at a discount, with a premium, or in any other manner, with deferred rights, special rights, privileges, or other rights, all as determined by the Board of Directors at its discretion.

The Company and its subsidiaries have not been a party to any material contract, other than contracts entered into in the ordinary course of business or as otherwise described elsewhere in this Annual Report on Form 20-F, for the two years prior to the date of this Annual Report on Form 20-F.

For additional information regarding material contracts, see Notes 9, 10, 11, 12 and 13 to our consolidated financial statements for the year ended December 31, 2025, included in this annual report and the agreements described in this annual report under the captions “Item 4. Information on the Company—Property, Plants and Equipment,” “Item 5. Operating and Financial Review and Prospects–B. Liquidity and Capital Resources” and “Item 6. Additional Information-B. Compensation.

There are currently no Israeli government laws, decrees, regulations or other legislation that restrict or affect our import or export of capital, including the availability of cash and cash equivalents for use by us, or the remittance of dividends, interest or other payments to holders of our securities that are non-residents of Israel (provided that all taxes were paid or withheld), except under certain circumstances, for nationals of countries that are, or have been, in a state of war with Israel.

The discussion below does not purport to be an official interpretation of the tax law provisions mentioned therein or to be a comprehensive description of all tax law provisions that might apply to the acquisition, ownership and disposition of our securities, or a reflection of the views of the relevant tax authorities, and it is not intended to replace professional advice in these matters. The discussion below is based on current, applicable tax law, which may be changed by future legislation or reforms. Shareholders should obtain professional tax advice regarding the tax consequences of acquiring, holding or selling our securities under the laws of their countries of residence.

The following is a summary of the material Israeli tax laws applicable to us. This section also contains a discussion of material Israeli tax consequences concerning the ownership and disposition of our shares. This summary does not discuss all aspects of Israeli tax law that may be relevant to a particular investor in light of their personal investment circumstances or to some types of investors subject to special treatment under Israeli law. Examples of this kind of investor include residents of Israel or traders in securities who are subject to special tax regimes not covered in this discussion. To the extent that this discussion is based on new tax legislation that has not yet been subject to judicial or administrative interpretation, we cannot assure you that the appropriate tax authorities or the courts will accept the views expressed in this discussion. The discussion below is subject to change, including due to amendments under Israeli law or changes to the applicable judicial or administrative interpretations of Israeli law, which change could affect the tax consequences described below.

Israeli companies are generally subject to statutory corporate income tax currently at the rate of 23%. However, the effective tax rate payable by Tower that derives income from a “Preferred Enterprise” (as further discussed below) may be considerably less.

An individual is subject to a tax at a rate of 25% on real capital gains derived from the sale of shares, unless such individual claims a deduction for interest and linkage differences expenses in connection with the purchase and holding of such shares and as long as the individual is not a “Substantial Shareholder” in the company issuing the shares. In the case of a “Substantial Shareholder”, the tax rate is 30%.

According to the definition of the term under the Israeli Income Tax Ordinance [New Version], 5721-1961 (the “Ordinance”), a “Substantial Shareholder” is generally a person who alone, or together with his relative or another person who collaborates with him on a regular basis, holds, directly or indirectly, at least 10% of any of the “means of control” of the corporation. “Means of control” generally include: (1) the right to vote, (2) the right to receive profits, (3) the right to nominate a director, an officer or any other similar positions in the corporation, (4) the right to receive assets upon liquidation, or (5) the right to instruct someone who holds any of the aforesaid rights regarding the manner in which he or she is to exercise such right(s), and all regardless of the source of such right.

An individual who is a substantial shareholder at the time of sale or at any time during the preceding 12-month period, is subject to tax at a rate of 30% in respect of real capital gains derived from the sale of shares issued by the company in which he or she is a substantial shareholder.

Individual shareholders dealing in securities in Israel are taxed at their marginal tax rates applicable to business income (up to 47% and an additional excess tax, if applicable, as described below).

Under present Israeli tax legislation, the tax rate applicable to real capital gain derived by Israeli resident corporations from the sale of shares of an Israeli company is the statutory Israeli corporate income tax rate at a current rate of 23%. 

Non-Israeli residents are exempt from Israeli capital gains tax on any gains derived from the sale of shares in an Israeli corporation publicly traded on the TASE and/or on a foreign stock exchange, provided such gains do not derive from a permanent establishment of such shareholders in Israel and that such shareholders did not acquire their shares prior to the issuer’s initial public offering. However, non-Israeli corporations will not be entitled to such exemption if Israeli residents (i) have a controlling interest of more than 25% in such non-Israeli corporation, or (ii) are the beneficiaries of or is entitled to 25% or more of the revenues or profits of such non-Israeli corporation, whether directly or indirectly. In addition, the sale of the shares may be exempt from Israeli capital gains tax under the provisions of an applicable tax treaty (subject to the receipt in advance of a valid certificate from the Israel Tax Authority (“ITA”) allowing for such an exemption). For example, the Convention between the Government of the United States of America and the Government of Israel with respect to taxes on income, or the “US-Israel Tax Treaty”, generally exempts U.S. residents from Israeli capital gains tax in connection with such sale, provided that (i) the U.S. resident owned, directly or indirectly, less than 10% of the Israeli resident company’s voting power at any time within the 12-month period preceding such sale; (ii) the seller, if an individual, has been present in Israel for less than 183 days (in the aggregate) during the taxable year; and (iii) the capital gain from the sale was not generated through a permanent establishment of the U.S. resident in Israel.

The purchaser of the shares, the stockbrokers who effected the transaction or the financial institution holding the shares through which payment to the seller is made are obligated, subject to the above-referenced exemptions if certain conditions are met, (including the receipt in advance of a valid tax certificate from the ITA allowing for an exemption), to withhold tax on the amount of consideration paid upon the sale of the shares (or on the real capital gain on the sale, if known) at the rate of 25% in respect of an individual and 23% in respect of a corporation.

Israeli resident corporations are generally exempt from Israeli corporate tax for dividends paid on our ordinary shares.

On distributions of dividends other than a pro-rata distribution of bonus shares, or stock dividends, to Israeli and non-Israeli resident individuals and non-Israeli resident corporations, we would be required to withhold income tax at the rate of 25% (or 30% if such shareholder is a “Substantial Shareholder” at the time receiving the dividend or on any date in the 12 months preceding such date and the shares are not held through a nominee company). If the income out of which the dividend is being paid is attributable to a Benefited Enterprise or Preferred Enterprise or Preferred Technology Enterprise under the Investment Law, the tax rate is generally not more than 20%. A different rate may be provided pursuant to an applicable tax treaty (subject to the receipt in advance of a valid certificate from the ITA allowing for such a reduced tax rate or an exemption).

Under the US-Israel Tax Treaty, Israeli withholding tax on dividends paid to a U.S. resident may not, in general, exceed 25%. Where the recipient is a U.S. resident corporation owning 10% or more of the voting stock of the paying corporation during the part of the tax year which precedes the date of payment of the dividend and during the entire tax year preceding such year, the Israeli tax withheld may not exceed 12.5% or 15% in the case of dividends paid out of the profits of a corporation entitled to the benefits of the Investment Law, subject to certain conditions.

The Law for the Encouragement of Capital Investments, 5719-1959, generally referred to as the Investment Law, was originally enacted in order to provide certain incentives for capital investments in production facilities (or other eligible assets).

In recent years, the Investment Law has undergone major reforms and several amendments which were intended to provide expanded tax benefits and to simplify the bureaucratic process relating to the approval of investments qualifying under the Investment Law. The different benefits under the Investment Law depend on the enterprise’s geographic location in Israel, the specific year in which the enterprise received approval from the Investment Center or the year it was eligible for Approved/Benefited/Preferred Enterprise status under the Investment Law, and the benefits available at that time.

An amendment to the Investment Law that became effective on January 1, 2011, generally referred to as the 2011 Amendment, made significant changes to the Investment Law, which revamped the tax incentive regime in Israel. The main changes are, inter alia, as follows:

“Preferred Income” is defined as income from a Preferred Enterprise, as specified below, with the condition that the income was produced or arose in the course of the enterprise's ordinary activity in Israel from one of the following (excluding certain income derives from intangible assets which are not attributed to the enterprise's production): income from the sale of products of the Preferred Enterprise (including components that were produced by other enterprises) and excluding certain products that are sourced from Israel’s natural resources); income from the sale of semiconductors produced by other non-related enterprises which use the Preferred Enterprise’s self-developed know-how; income for providing a right to use the Preferred Enterprise’s know how or software; royalties from the use of the know-how or software which was confirmed by the Head of the Investment Center to be related to the production activity of the Preferred Enterprise; and services with respect to the aforementioned sales. In addition, the definition of “Preferred Income” also includes income from the provision of industrial R&D services to foreign residents to the extent that the services were approved by the IIA.

A “Preferred Enterprise” is defined as an Industrial Enterprise (including, inter alia, an enterprise which provides approved R&D services to foreign residents), which generally more than 25% of its business income is from export. As mentioned above, these tax incentives no longer depend on minimum qualified investments nor on foreign ownership.

The Investment Law also determines the conditions and limitations applying to the tax benefits offered to a “Special Preferred Enterprise” (as defined below). A “Special Preferred Enterprise” will be able to enjoy a corporate income tax rate of 5% if located in a development Zone A and 8% if not located in a development Zone A.

A “Special Preferred Enterprise” is defined as a Preferred Enterprise which meets all of the following conditions, during the relevant tax year: (a) its Preferred Income is equal to or exceeds NIS 1 billion; (b) the total income of the company which owns the Preferred Enterprise or which operates in the same field of the Preferred Enterprise and which consolidates in its financial reports the company that owns the Preferred Enterprise equals or exceeds NIS 10 billion; and (c) its business plan was approved by the authorities as significantly benefitting the Israeli economy according to the Investment Law provisions.

Dividends paid out of income attributed to a Preferred Enterprise are generally subject to withholding tax at source at a rate of 20% or such a lower rate as may be provided in an applicable tax treaty (subject to the receipt in advance of a valid certificate from the ITA allowing for such reduced tax rate or an exemption). However, if such dividends are paid to an Israeli company, no tax will be withheld.

As Tower’s facilities located in Israel qualify as a Preferred Enterprise, it was entitled, until December 2025, to the 7.5% preferred tax rate described above with respect to its Preferred Income, and therefore, applied a 7.5% tax rate in determining its Israeli current tax provision, deferred tax assets and liabilities. In December 2021, the OECD released Pillar Two model rules, which impose on large multinational corporations, with revenue above €750 million, a minimum effective corporate income tax rate of 15% in each jurisdiction in which they operate. As of December 31, 2025, these rules have been partially enacted in certain jurisdictions where the Company operates including in Israel (as described below); however, they did not impact the Company’s financial statements, tax payments or liabilities as of December 31, 2025. For all periods ended December 31, 2025, the Company complied with the transitional safe harbor rules in each of its jurisdictions, however, the Company believes these rules will result in significant additional income tax expenses for the years 2026 and beyond, mainly with respect to our Israeli operation.  Any portion of Tower’s taxable income that is not eligible for Preferred Enterprise benefits, if at all, is to be taxed at the Israeli statutory corporate tax rate of 23%.

An amendment to the Investment Law was enacted as part of the Economic Efficiency Law that was published on December 29, 2016, and became effective as of January 1, 2017, generally referred to as the 2017 Amendment. The 2017 Amendment provides new tax benefits for two types of “Preferred Technology Enterprises,” as described below, and is in addition to the other existing tax beneficial programs under the Investment Law.

The 2017 Amendment provides that a technology company satisfying certain conditions will qualify as a “Preferred Technology Enterprise” and will thereby enjoy a reduced corporate tax rate of 12% on income that qualifies as “Preferred Technology Income”, as defined in the Investment Law. The tax rate is further reduced to 7.5% for a Preferred Technology Enterprise located in development Zone A (In December 2021, the OECD released Pillar Two model rules, which impose on large multinational corporations, with revenue above €750 million, a minimum effective corporate income tax rate of 15% in each jurisdiction in which they operate. As of December 31, 2025, these rules have been partially enacted in certain jurisdictions where the Company operates; however, they did not impact the Company’s financial statements, tax payments or liabilities as of December 31, 2025. For all periods ended December 31, 2025, the Company complied with the transitional safe harbor rules in each of its jurisdictions, however, the Company believes these rules will result in significant additional income tax expenses for the years 2026 and beyond, mainly with respect to our Israeli operation). In addition, a Preferred Technology Enterprise will enjoy a reduced corporate tax rate of 12% on capital gain derived from the sale of certain “Benefitted Intangible Assets” (as defined in the Investment Law) to a related foreign company if the Benefitted Intangible Assets were acquired from a foreign company on or after January 1, 2017 for at least NIS 200 million, and the sale receives prior approval from the IIA.

The 2017 Amendment further provides that a technology company satisfying certain conditions (group turnover of at least NIS 10 billion) will qualify as a “Special Preferred Technology Enterprise” and will thereby enjoy a reduced corporate tax rate of 6% on its “Preferred Technology Income” regardless of the company’s geographic location within Israel. In addition, a Special Preferred Technology Enterprise will enjoy a reduced corporate tax rate of 6% on capital gain derived from the sale of certain “Benefitted Intangible Assets” to a related foreign company if the Benefitted Intangible Assets were either developed by the Special Preferred Technology Enterprise or acquired from a foreign company on or after January 1, 2017, and the sale received prior approval from the IIA. A Special Preferred Technology Enterprise that acquires Benefitted Intangible Assets from a foreign company for more than NIS 500 million will be eligible for these benefits for at least ten years, subject to certain approvals as specified in the Investment Law.

Dividends distributed to Israeli shareholders by a Preferred Technology Enterprise or a Special Preferred Technology Enterprise, paid out of Preferred Technology Income, are generally subject to withholding tax at source at the rate of 20% (in the case of non-Israeli shareholders subject to the receipt in advance of a valid certificate from the ITA allowing for a reduced tax rate of 20% or such lower rate as may be provided in an applicable tax treaty). However, if such dividends are paid to an Israeli company, no tax is required to be withheld. If such dividends are distributed to a foreign company that holds solely or together with other foreign companies 90% or more in the Israeli company and other conditions are met, the withholding tax rate will be 4%.

From time to time, the Israeli Government has discussed reducing the benefits available to companies under the Investment Law. The termination or substantial reduction of any of the benefits available under the Investment Law could materially increase our tax liabilities.

In December 2021, the OECD released Pillar Two model rules, which impose on large multinational corporations, with revenue above €750 million, a minimum effective corporate income tax rate of 15% in each jurisdiction in which they operate. As of December 31, 2025, these rules have been partially enacted in certain jurisdictions where the Company operates; however, they did not impact the Company’s financial statements, tax payments or liabilities as of Demeter 31, 2025 For all periods ended December 31, 2025, the Company complied with the transitional safe harbor rules in each of its jurisdictions, however, the Company believes they would result in significant additional income tax expenses for the years 2026 and beyond, mainly with respect to our Israeli operation.

The State of Israel has recently enacted the Law for the Taxation of Multinational Enterprise Groups – 2025, entered into force as of January 1, 2026, implementing key aspects of the OECD’s Pillar Two framework. In particular, the legislation introduces a domestic minimum top-up tax (Qualified Domestic Minimum Top-Up Tax, or QDMTT) generally applicable to Israeli entities that are part of multinational enterprise groups with consolidated annual revenues of at least €750 million, with the objective of ensuring a minimum effective tax rate of 15% on profits attributable to activities in Israel and preventing the allocation of taxing rights to foreign jurisdictions under the Income Inclusion Rule or the Undertaxed Profits Rule under the Pillar Two framework. As of the date of this report, the Income Inclusion Rule (IIR) and the Undertaxed Profits Rule (UTPR) have not been enacted under Israeli law. In addition, various jurisdictions in which we operate have adopted, or are in the process of adopting, other elements of the Pillar Two (including the IIR and the UTPR rules).

We continue to monitor these developments. We did not have an impact on our consolidated financial statements through December 31, 2025; however, we believe these rules will result in significant additional income tax expenses for the years 2026 and beyond, primarily with respect to our Israeli operation.

Subject to the provisions of an applicable tax treaty, individuals subject to tax in Israel (whether an Israeli resident or a non-Israeli resident) and who have taxable income that exceeds a certain threshold in a tax year (NIS 721,560 in 2024, 2025 and 2026), will be subject to an additional tax on any income in excess of such amount, at the rate of 3% on any such taxable income prior to January 1, 2025, and at the rate of 3% on any such active taxable income and 5% on any such passive taxable income commencing January 1, 2025. For this purpose, passive taxable income includes taxable capital gains from the sale of securities and taxable income from interest and dividends.

Israeli law presently does not impose estate or gift taxes.

The following discussion is a description of the material U.S. federal income tax considerations applicable to an investment in the ordinary shares by U.S. Holders who acquire our ordinary shares and hold them as capital assets for U.S. federal income tax purposes. As used in this section, the term “U.S. Holder” means a beneficial owner of an ordinary share who is:

This description is based on provisions of the U.S. Internal Revenue Code of 1986, as amended, referred to in this discussion as the “Code”, existing and proposed U.S. Treasury regulations and administrative and judicial interpretations, each as available and in effect as of the date of this annual report. These sources may change, possibly with retroactive effect, and are open to differing interpretations. This description does not discuss all aspects of U.S. federal income taxation that may be applicable to investors in light of their particular circumstances or to investors who are subject to special treatment under U.S. federal income tax law, including: 

This discussion does not address the tax treatment of partnerships or other pass-through entities that hold ordinary shares or persons that indirectly hold ordinary shares through a partnership or other pass-through entity.  Entities that are treated as partnerships for U.S. federal income tax purposes and persons holding ordinary shares through such entities should consult their own tax advisors..

This discussion also does not discuss the possible application of United States federal gift, estate or other non-income tax, alternative minimum tax or any state or local tax.

Subject to the discussion under “Passive Foreign Investment Companies” below, a U.S. Holder generally will be required to include in gross income as ordinary dividend income the amount of any distributions paid on the ordinary shares, including the amount of any Israeli taxes withheld, to the extent that those distributions are paid out of our current or accumulated earnings and profits as determined for U.S. federal income tax purposes. Distributions in excess of our earnings and profits will be applied against and will reduce the U.S. Holder’s tax basis in its ordinary shares and, to the extent they exceed that tax basis, will be treated as gain from a sale or exchange of those ordinary shares. We do not maintain calculations of our earnings and profits under U.S. federal income tax principles. If we do not report to a U.S. holder the portion of a distribution that exceeds earnings and profits, the distribution will generally be taxable as a dividend even if that distribution would otherwise be treated as a non-taxable return of capital or as a capital gain under the rules described above. Thus, U.S. Holders should expect to treat any distribution on our ordinary shares as a dividend. Our dividends will not qualify for the dividends-received deduction available to U.S. Holders that are corporations in respect of dividends received from other U.S. corporations.

Dividends paid in NIS, including the amount of any Israeli taxes withheld, will be includible in the income of a U.S. Holder in a U.S. dollar amount calculated by reference to the exchange rate in effect on the date they are included in income by the U.S. Holder, regardless of whether the payment in fact is converted into USD. on such date. If the payment is converted to USD on such date, no foreign currency gain or loss will be recognized. If the payment is converted on a later date, any gain or loss resulting from currency exchange fluctuations during the period from the date the dividend is includible in the income of the U.S. Holder to the date that payment is converted into USD generally will be treated as ordinary income or loss.

Dividend received by a non-corporate U.S. Holder may constitute “qualified dividend income” which is subject to tax at lower capital gains. For this purpose, “qualified dividend income” generally includes dividends paid by a foreign corporation if either:

For this purpose, stock is considered to be readily tradable on an established securities market in the United States if they are listed on the Nasdaq Global Market, as our ordinary shares are, but we cannot guarantee that our ordinary shares will always be so listed.

In addition to the foregoing requirements, a non-corporate U.S. Holder must hold their ordinary shares for a minimum period (generally more than 60 days during a 121 day period beginning 60 days prior to the ex-dividend date) for a dividend to constitute qualified dividend income.

Further, dividends paid by a foreign corporation will not qualify for the reduced rates, if such corporation is treated, for the tax year in which the dividend is paid or the preceding tax year, as a “passive foreign investment company” for U.S. federal income tax purposes.

Any dividend income resulting from distributions we pay to a U.S. Holder with respect to the ordinary shares generally will be treated as foreign source income for U.S. foreign tax credit purposes, which may be relevant in calculating such holder’s foreign tax credit limitation. Subject to certain conditions and limitations, Israeli tax withheld on dividends may be deducted from taxable income or credited against a U.S. Holder’s U.S. federal income tax liability. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. For this purpose, dividends that we distribute generally should constitute “passive category income,” or, in the case of certain U.S. Holders, “general category income.” The rules relating to the determination of foreign source income and the foreign tax credit are complex, and the availability of a foreign tax credit depends on numerous factors. Each prospective purchaser who would be a U.S. Holder should consult with its own tax advisor to determine whether its income with respect to the ordinary shares would be foreign source income and whether and to what extent that purchaser would be entitled to the credit.

Subject to the discussion below under the heading “Passive Foreign Investment Companies,” upon the sale or other disposition of ordinary shares, a U.S. Holder generally will recognize capital gains or loss equal to the difference between the amount realized on the disposition and the holder’s adjusted tax basis in the ordinary shares.

Capital gain or loss upon the disposition of the ordinary shares will be treated as long-term if, at the time of the sale or disposition, the ordinary shares were held for more than one year. Long-term capital gains realized by non-corporate U.S. Holders are generally subject to a lower tax rate. The deductibility of capital losses by a U.S. Holder is subject to limitations.

If a U.S. Holder receives payment in a currency other than USD upon such sale or other disposition and the payment is converted to USD on such date, no foreign currency gain or loss will be recognized. If the payment is converted to USD on a later date, any gain or loss resulting from currency exchange fluctuations during the period from the date of the sale to the date that the payment is converted into USD generally will be treated as ordinary income or loss.

In general, any gain or loss recognized by a U.S. Holder on the sale or other disposition of ordinary shares will be U.S. source income or loss for U.S. foreign tax credit purposes. U.S. Holders should consult their own tax advisors concerning the source of income for U.S. foreign tax credit purposes and the effect of the U.S.-Israel Tax Treaty on the source of income. In the event there is an Israeli income tax on gain from the disposition of ordinary shares, such tax should generally be the type of tax that is creditable for U.S. tax purposes; however, because it is likely that the source of any such gain would be a U.S. source, a U.S. foreign tax credit may not be available. U.S. shareholders should consult their own tax advisors regarding the ability to claim such credit.

For U.S. federal income tax purposes, we will be considered a passive foreign investment company (“PFIC”) for any taxable year in which either (i) 75% or more of our gross income is “passive income”, as defined in the relevant provisions of the Code; or (ii) on average, at least 50% of our assets (generally determined on a quarterly basis) produce or are held for the production of passive income. For this purpose, passive income generally includes dividend, interest, royalty, rent, and annuity income and the excess of gains over losses from the disposition of assets which produce passive income. If we were determined to be a PFIC for U.S. federal income tax purposes, highly complex rules would apply to U.S. Holders owning ordinary shares.

Based on our estimated gross income, the average value of our gross assets and the nature of our business, we do not believe that we will be classified as a PFIC in the current taxable year. Our status in any taxable year will depend on our assets and activities in each year and because this is a factual determination made annually at the end of each taxable year, there can be no assurance that we will not be considered a PFIC for any future taxable year. If we were treated as a PFIC in any year during which a U.S. Holder owns ordinary shares, such U.S. Holder may be subject to materially adverse tax consequences, including additional U.S. federal income tax liability and tax filing obligations. Given our current business plans, however, we do not expect that we will be classified as a PFIC in future years.

Payment of dividends on ordinary shares and proceeds from the sale, retirement or other disposition of ordinary shares made by a U.S. paying agent or other U.S. intermediary will be subject to U.S. tax reporting requirements. Any paying agent may be required to withhold tax (back-up withholding), currently at a rate of 24%, if a non-corporate U.S. Holder fails to provide an IRS certification or otherwise establish an exemption. Back-up withholding and information reporting will not apply to payments made to non-U.S. Holders if they have provided the required certification that they are not United States persons.

Back-up withholding is not an additional tax. The amount of any back-up withholding may be allowed as a credit against a holder’s U.S. federal income tax liability and may entitle the holder to a refund, provided that required information is timely furnished to the IRS.

Certain U.S. Holders who are specified individuals or specified domestic entities are required to report information relating to an interest in our ordinary shares on IRS Form 8938 (Statement of Specified Foreign Financial Assets) if the aggregate value of certain foreign financial assets exceeds certain threshold amounts, subject to certain exceptions (including an exception for shares held in accounts maintained by financial institutions). U.S. Holders are encouraged to consult their tax advisors regarding their information reporting obligations, if any, with respect to their ownership and disposition of our ordinary shares.

Not applicable.

Not applicable.

We are required to file reports and other information with the SEC under the Exchange Act, as applicable to foreign private issuers. As a foreign private issuer, we are not required to file periodic reports and financial statements as frequently or as promptly as U.S. companies; however, we generally publicly announce our quarterly and year-end results promptly and file periodic information with the SEC under cover of Form 6-K. As a foreign private issuer, we are also exempt from the rules under the Exchange Act prescribing the furnishing and content of proxy statements. In addition, our principal shareholders are exempt from the reporting provisions of Section 16(a) of the Exchange Act and our directors, officers and principal shareholders are exempt from the short-swing profit recovery provisions of Section 16(b) of the Exchange Act.

The SEC maintains an internet website that contains reports, proxy and information statements and other information about issuers, like us, that file electronically with the SEC. Our filings with the SEC are available to the public through the SEC's website (http://www.sec.gov). Our filings with the SEC are also available to the public via the Israel Securities Authority’s website at http://www.isa.gov.iland the TASE’s website at http://www.maya.tase.co.il. We also generally make available on our own website (www.towersemi.com) our quarterly and year-end financial statements as well as other information. We do not intend for any information contained on our website to be considered part of this annual report, and we have included our website address in this annual report solely as an inactive textual reference. We will post on our website any materials required to be posted on such website under applicable corporate or securities laws and regulations, including posting any XBRL interactive financial data required to be filed with the SEC, and any notices of general meetings of our shareholders.

Any statement in this annual report about any of our contracts or other documents is not necessarily complete. If the contract or document is filed as an exhibit to this annual report or a registration statement, the contract or document is deemed to modify the description contained in this annual report. We urge you to review the exhibits themselves for a complete description of the contract or document.

Not applicable.

Not applicable.

Our cash equivalents and short-term deposits are exposed to market risk due to fluctuations in interest rates, which may affect our interest income. We manage this exposure by performing ongoing evaluations of our investments in these deposits. Due to the short maturities of our investments, their carrying value approximates their fair value.

The 2024 JPY Loan (with an outstanding principal of approximately $92 million as of December 31, 2025) bears annual fixed interest of 2%. Additionally, approximately $29 million of our subsidiaries’ equipment capital leases bear annual fixed interest of approximately 2%. Therefore, we are not subject to cash flow exposure, financing expenses or interest rate fluctuations with respect to the 2024 JPY Loan or such equipment capital leases.

However, in the event that market interest rates for similar debt decrease and are lower than the interest rate provided under our capital leases or loans, our actual financing costs would be higher than they otherwise would have been had our loans or capital leases provided for interest at a floating interest rate. Assuming a 10% change in market interest rates, the effective impact on our capital leases and loans would be immaterial.

We currently operate in four different regions: the United States, Japan, Israel and Italy. The functional currency of our entities in the United States, Israel and Italy is the USD. The functional currency of our operations in Japan is the JPY. Our expenses and costs are denominated mainly in USD, JPY, NIS and Euro; revenues are denominated mainly in USD and JPY; and cash from operations, investing and financing activities are denominated mainly in USD, JPY and NIS. Therefore, we are exposed to the risk of currency exchange rate fluctuations in Japan, Israel and Italy.

The majority of TPSCo’s revenues are denominated in JPY and the majority of TPSCo’s expenses and costs are denominated in JPY, which limits the exposure to fluctuations of the USD-to-JPY exchange rate on TPSCo’s results of operations. In order to mitigate a portion of the net exposure to the USD-to-JPY exchange rate, we have engaged in cylinder hedging transactions to contain currency fluctuations within a predefined, fixed range. During the year ended December 31, 2025, the USD appreciated against the JPY by 0.01%, as compared to a 10.7% appreciation during the year ended December 31, 2024. The net effect of USD appreciation against the JPY on TPSCo’s assets and liabilities denominated in JPY is presented in the Cumulative Translation Adjustment (“CTA”) as part of Other Comprehensive Income (“OCI”) on the balance sheet.

As of December 31, 2025, we are subject to currency exchange rate fluctuations of the JPY against the USD in connection with the following JPY-denominated debt financings: (i) the 2024 JPY Loan, in a principal amount of approximately $92 million, bearing a fixed interest rate of 2% per annum; and (ii) approximately $29 million of liabilities under equipment capital lease agreements with an annual interest rate of approximately 2%. However, as of December 31, 2025, we had approximately $57 million of cash and cash equivalents held in JPY currency accounts, partially mitigating the JPY debt exposure described above. Based on our cash and cash equivalents and the terms of our debt financings as of December 31, 2025, an assumed 10% appreciation of the JPY against the USD rate as of December 31, 2025 (from 156.6 JPY/$ to 142.4 JPY/$), would not have a material effect on our balance sheet as of December 31, 2025.

Assuming a 10% appreciation of the JPY against the USD on December 31, 2025 (from 156.64 JPY/$ to 142.40 JPY/$), the effective impact on our quarterly operating results would be lower profitability (higher operating expenses, net of higher revenue) by approximately $5 million, which would be partially offset by the net impact of the hedging using the above-described cylinder transactions and our natural hedging.

The USD cost of the Company’s operations in Israel is influenced by changes in the USD-to-NIS exchange rate, with respect to expenses and costs denominated in NIS. During the year ended December 31, 2025, the USD depreciated against the NIS by 12.5%, as compared to a 0.6% appreciation during the year ended December 31, 2024.  Appreciation of the NIS may increase the costs, in USD terms, of our Israeli facility, such as utilities, taxes and labor costs that are denominated in NIS, which may lead to erosion of profit margins. We use foreign currency cylinder and forward transactions to hedge a portion of this currency exposure and maintain it within a predefined fixed range.

Assuming a 10% appreciation of the NIS against the USD on December 31, 2025 (from 3.19 NIS/$ to 2.90 NIS/$), the effective impact on our quarterly Israeli expenses would be higher operating expenses by approximately $4 million, which would be partially offset by the net impact of the hedging executed using the above-described cylinder transactions.

The USD cost of our operations in Italy is influenced by changes in the USD-to-Euro exchange rate, with respect to expenses and costs denominated in Euro. During the year ended December 31, 2025, the USD appreciated against the Euro by 12.8%, as compared to a 5.9% depreciation during the year ended December 31, 2024. This exposure is partially mitigated and maintained within a predefined fixed range through foreign currency cylinder and forward transactions in which we engage.

Assuming a 10% appreciation of the Euro against the USD on December 31, 2025 (from 1.174 Euro/$ to 1.292 Euro/$), the effective impact on our quarterly expenses would be higher operating expenses by approximately $1 million, which would be partially offset by the net impact of the hedging executed using the above-described cylinder transactions.

Not applicable.

None.

Not applicable.

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Act”) as of the end of the period covered by this annual report on Form 20-F. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that these disclosure controls and procedures were effective as of such date, at a reasonable level of assurance, in ensuring that the information required to be disclosed by our company in the reports we file or submit under the Act is (i) accumulated and communicated to our management (including the Chief Executive Officer and Chief Financial Officer) in a timely manner, and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on our evaluation, management has concluded that our internal control over financial reporting was effective as of December 31, 2025.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The effectiveness of our internal control over financial reporting as of December 31, 2025 has been audited by Brightman Almagor Zohar & Co., Certified Public Accountants, a Firm in The Deloitte Global Network, an independent registered public accounting firm, as stated in their report which appears herein.

There has been no change in our internal control over financial reporting during the period covered by this annual report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Our board of directors has determined that each of Mr. Yoav Chelouche, Mr. Avi Hasson and Ms. Iris Avner, is an audit committee financial expert as defined under Item 16A. of Form 20-F and has the requisite financial experience as defined by the Nasdaq Listing Rules. Each of the members of our audit committee is “independent” as such term is defined in Rule 10A-3(b)(1) under the Exchange Act and satisfies the independent director requirements under the Nasdaq Listing Rules.

We adopted a code of ethics that applies to all directors, officers and employees of our Company and our subsidiaries, including our Chief Executive Officer, Chief Financial Officer, controller, and persons performing similar functions. We have posted our code of ethics on our website, www.towersemi.com, under “About Tower.” The information contained on our website is not incorporated by reference in this annual report.

The following table presents fees for professional services rendered by Brightman Almagor Zohar & Co., Certified Public Accountants, a Firm in The Deloitte Global Network, our independent registered public accounting firm, for the years ended December 31, 2025 and 2024, by category of service:

Not applicable.

Not applicable.

Not applicable.

As a foreign private issuer whose shares are listed on the NASDAQ Global Select Market, we are permitted to follow certain home country corporate governance practices instead of certain requirements of the Nasdaq Listing Rules. We have elected to follow the practices of our home country, rather than the Nasdaq Listing Rules, with respect to the following requirements:

Except as stated above, we currently intend to comply with the rules generally applicable to U.S. domestic companies listed on the NASDAQ Global Select Market. We may in the future decide to use the foreign private issuer exemption with respect to some or all of the other Nasdaq Listing Rules. Following our home country governance practices, as opposed to the requirements that would otherwise apply to a company listed on Nasdaq, may provide investors less protection than is accorded to investors under the Nasdaq Listing Rules applicable to domestic issuers. For more information, see “Item 3. “Key Information – D. Risk Factors - Risks Related to Our Securities – We are a foreign private issuer and, as a result, the public reporting and disclosure rules to which we are subject, and the corporate governance practices that we are permitted to follow, may provide less protection to our investors than is accorded to investors under rules applicable to domestic U.S. issuers”.

Not applicable.

Not applicable.