Investing.com -- Tower Semiconductor shares rose nearly 19% in pre-market trading Tuesday following the company's announcement of a $3 billion expansion in Japan.

The chipmaker said it will expand its 300mm Silicon Photonics, Silicon Germanium, and advanced packaging operations in Japan through a dual-track plan. The Government of Japan will provide $1 billion in grants to support the total investment.

The first phase includes converting the Arai facility, previously known as Fab 6, for 300mm Silicon Photonics capacity and advanced packaging. Tower will also increase production at Fab 7 in Uozu. The company expects full production readiness for this phase in the fourth quarter of 2027.

Tower updated its business outlook in connection with the first phase, targeting $3.6 billion in revenue and $1.2 billion in net profit for 2028.

The second phase involves building a new 300mm manufacturing facility next to Fab 7. The new facility will add Silicon Photonics and Silicon Germanium capacity and is expected to contribute to earnings starting in 2029. This phase depends on signing and closing related agreements.

Tower CEO Russell Ellwanger stated: "We are honored and appreciative that the Government of Japan has selected Tower to lead the expansion of these strategically important technologies."

Tower operates in Japan through TPSCo, which includes former Panasonic Semiconductor manufacturing operations where Tower holds majority ownership. The expansion sites are in Toyama and Niigata Prefectures.