IQE & Tower: Semiconductor Manufacturing for Data Centres

In response to growing connectivity demands, semiconductor materials specialist IQE and foundry provider Tower Semiconductor have signed a multi-year agreement for optical connectivity solutions.

It focuses on indium phosphide (InP) technologies targeting AI-driven data centre infrastructure that supports industrial applications.

The deal will see IQE supply InP epiwafers for use across several of Tower's silicon photonics platforms, supporting optical technologies designed for high-performance AI environments that power smart factories and advanced manufacturing systems.

Scaling optical infrastructure

The companies say their collaboration covers production technologies capable of supporting 200Gb/s per lane pluggable transceivers, alongside development work on future 400Gb/s per lane modulators.

The agreement extends to optical circuit switch applications, a technology attracting growing attention as operators seek more efficient ways to manage traffic inside large-scale AI data centres serving manufacturing operations.

As AI deployments increase across industrial sectors, networking infrastructure is becoming an important bottleneck. The optical components that move data between systems are attracting fresh investment across the supply chain.

The agreement strengthens IQE's position within the rapidly growing market for AI and cloud infrastructure supporting manufacturing digitalisation.

Jutta Meier, Chief Executive Officer of IQE, said in a statement: "I am pleased to move forward together with Tower, already the leader in silicon photonics.

"This agreement reinforces IQE's position within Tier 1 global hyperscale cloud and AI infrastructure markets.

"With decades of InP epitaxy expertise and established high-volume manufacturing capability, IQE is primed to support next-generation optical connectivity applications as they scale from innovation to commercial deployment."

Optical networking technologies

AI is fuelling a race for ever-more-powerful chips, but the infrastructure connecting those processors is just as critical.

As hyperscale operators build larger AI clusters, moving vast amounts of data between servers, switches and storage systems is becoming a major challenge.

While there is no 'silver bullet', optical networking technologies are being seen as a solution as they allow data centres to scale bandwidth while managing power consumption and latency.

Building the next generation of silicon photonics

The collaboration between the two companies combines IQE's expertise in compound semiconductor materials with Tower's established silicon photonics manufacturing capabilities.

Silicon photonics enables optical communications components to be integrated using semiconductor manufacturing processes, helping improve performance while supporting large-scale production—a principle familiar to high-volume manufacturers.

Tower believes adding InP-based components to its silicon photonics platforms will help meet the performance requirements of future AI infrastructure.

Dr. Marco Racanelli, President of Tower Semiconductor, said in a statement: "We are pleased to partner with IQE as a key supplier for our next-generation photonic technologies that add InP high-performance components to our high-volume, mature, silicon photonics platform.

“The combination will enable products that can deliver both the performance and high volumes required to scale future AI infrastructure capacity.”

Settling intellectual property disputes

Alongside the supply agreement, the companies have also settled an intellectual property dispute.

Under a separate arrangement, Tower will provide IQE with a worldwide royalty-free licence covering porous silicon patents that had been the subject of litigation between the two businesses.

The settlement removes a potential obstacle as both companies focus on expanding their role in the fast-growing market for AI.