Tower Semiconductor Reports First Quarter 2009 Financial Results

Record growth in specialty products enabling significant ASP increase

MIGDAL HAEMEK, Israel – May 14, 2009 – Tower Semiconductor Ltd. (NASDAQ: TSEM, TASE: TSEM), an independent specialty foundry, today announced financial results for the first quarter ended March 31, 2009.

First Quarter Highlights

• Revenue of $58.1 million
• Posted positive cash flow from operations for the tenth consecutive quarter and positive EBITDA for the fourteenth consecutive quarter
• Over-achieved post-merger Tower/Jazz $60 million cost reduction plans, with approximately $80 million of annual cost run-rate reductions, as evidenced by maintaining $4 million non-GAAP net profit despite $19 million quarter-over-quarter decrease in revenue
• Achieved record revenue in medical imaging business and, in conjunction with other specialty businesses, enabled an ASP increase of 10 percent sequentially

First quarter 2009 revenue was $58.1 million, which was at the mid-point of the Company’s previously provided guidance range. Revenue declined 25 percent as compared to the fourth quarter 2008 (the first full quarter of consolidation with Jazz), as compared to a weighted average reduction of 41 percent for the top four foundries worldwide.

Calculated in accordance with GAAP, net loss for the first quarter narrowed by $2.0 million as compared to the first quarter of 2008 and was $27.6 million, or $0.17 per share.

On a non-GAAP basis, as described and reconciled below, the Company achieved first quarter 2009 gross profit of $12.3 million and a net profit of $4.4 million.

“The synergies and operational efficiencies realized through the September 2008 merger with Jazz enabled us to complete this quarter with the same operating cash  and EBITDA performance as the fourth quarter of 2008 despite a 25 percent revenue decline,” commented Russell Ellwanger, Chief Executive Officer of Tower Semiconductor, Ltd. “Although our results were impacted by the global economic environment, our revenue decrease was 40 percent less than the industry weighted average due to our focus on specialized non-commodity products and services. The growth of such products has resulted in a notable increase in our average wafer selling price.”

Ellwanger further commented, “We are very pleased with customer response to several of our new platforms such as SiGe as a replacement for GaAs power amplifiers; large area, stitched field dental and medical image sensors; and multiple process innovative and integration intense MEMs products.”
“Our strategy to enhance Tower’s profitable growth, focusing on our specialty business, is gaining momentum, bringing in the results we were hoping for, even in today’s challenging environment,” said Amir Elstein, chairman of the board of directors of Tower Semiconductor. “As a result, although we remain cautious, we are highly optimistic to achieve significant growth.”

Conference Call/ Web Cast Announcement
Tower will host a conference call to discuss first quarter 2009 results today, May 14, 2009, at 10:00 a.m. Eastern Time (ET) / 5:00 p.m. Israel time. To participate, please call: 1-866-345-5855 (U.S. toll-free number) or 972-3-918-0692 (international) and mention ID code: TOWER. Callers in Israel are invited to call locally by dialing 03-918-0692. The conference call will also be Web cast live at http://www.earnings.com and at www.towersemi.com and will be available thereafter on both Web sites for replay for 90 days, starting at approximately 2:00 p.m. ET on the day of the call.

Financial Tables
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About Tower Semiconductor Ltd.
Tower Semiconductor Ltd. is a pure-play independent specialty wafer foundry. Tower manufactures integrated circuits with geometries ranging from 1.0 to 0.13-micron; it also provides complementary technical services and design support. In addition to digital CMOS process technology, Tower offers advanced mixed-signal & RF-CMOS, Power Management, CMOS image-sensor and non-volatile memory technologies. Through access to the process portfolio of its wholly owned subsidiary, Jazz Semiconductor, Tower offers RF CMOS, Analog CMOS, Silicon and SiGe BiCMOS, SiGe C-BiCMOS, Power CMOS and High Voltage CMOS. To provide world-class customer service, Tower maintains two manufacturing facilities in Israel with access to Jazz Semiconductor’s fab in the U.S. and manufacturing capacity in China through Jazz’s partnerships with ASMC and HHNEC. For more information, please visit www.towersemi.com and www.jazzsemi.com.