December 9, 2004 – Tower Semiconductor Ltd. has announced that it has agreed to sell all of its holdings in Saifun Semiconductor to a US-based private equity investor for approximately $39 million in cash. Following the transaction, Tower will record a $32 million capital gain in the fourth quarter.

As agreed, Tower may receive additional payments through August 2005 subject to certain future events. The 1997 Non Volatile Memory (NVM) technology agreement between Tower and Saifun remains unchanged.

“This transaction and its timing is an important step in our Fab 2 financing plan and, together with the recently announced cost reduction measures, would enable us to focus on growing our businesses,” said Carmel Vernia, chairman and chief executive officer of Tower. “We purchased our position in Saifun for $6 million and it has been an excellent performer for us over the years.”

The closing of the transaction is expected within the next few weeks. The transaction is subject to the rights of first refusals held by Saifun’s other shareholders and receipt of regulatory approvals.