May 18, 2006 – Specialty foundry Tower Semiconductor Ltd., Migdal Haemek, Israel, said its board has approved accelerating the ramp of its Fab 2 site by 50%, and has secured funds to support the expansion.

Tower aims to raise about $130 million during 2006 to ramp capacity at Fab 2, which offers 0.18-micron and below standard and specialized process technologies, from current output of 15,000 200mm wafers/month to 24,000 wafers/month — including “a considerable increase” in capacity for 0.13-micron process technologies. In the company’s recent 1Q06 financial report, CEO Russell Ellwanger noted that Fab 2’s customers in production baseline has more than doubled in the past year.

The foundry said it has signed a memorandum of understanding for refinancing a $527 long-term debt with lender banks Bank Leumi and Bank Hapoalim, and has received a commitment from holding company The Israel Corp. (TIC) It also has amended its credit facility, to delay repayment of $100 million in long-term loans from October of this year to July 2007.

Under the new investment commitment from TIC, the holding firm will order up to approximately $100 million worth of equipment for Fab 2, and sell it to tower at cost plus related expenses. If after five months TIC has not sold the equipment to Tower, it can sell the tools to a third party, with Tower paying the difference between the cost, plus expenses.

Tower also said a 15% sequential increase in 1Q06 sales to $35.9 million, and reduced net losses to $45.1 million, including $38.1 million in depreciation and amortization. The company expects another 17%-25% jump in revenues in 2Q, to $42-$45 million.