Tower Semiconductor Secures a Multi-Million-Dollar Manufacturing Agreement With a Major European IC Company

Tower to Manufacture Advanced Chips for DECT Cordless Phones and Wireless Game Controllers

MIGDAL HAEMEK, Israel -- June 12, 2006 -- Tower Semiconductor Ltd. (NASDAQ: TSEM; TASE: TSEM), a pure-play independent specialty foundry, today announced that the company has signed a committed-sales agreement to manufacture mixed-mode IC (Integrated Circuits) for a major European fabless company. The agreement includes a mutual commitment which amounts to the range of $10 million in sales during 2006.

The products are used in DECT cordless phones and wireless game controllers. According to market analysts, the market for residential DECT-based phones will increase from 38 million units in 2005 to more than 55 million units in 2009. The video game console market is estimated to grow from approximately 40 million units in 2005 to 70 million units in 2008.

Tower and the customer ramped the new products into volume manufacturing in 0.18-micron technology, at Tower's Fab2, in a record time of 3 months.

"Tower's advanced technology and customer service enabled us to win this opportunity and penetrate to a new segment in a rapidly growing market", said Hagay Dvir, Tower's vice president of sales for Europe, Israel and Asia. "We look forward to further expand our relationship with this and with additional European fabless companies during 2007."

About Tower Semiconductor Ltd.

Tower Semiconductor Ltd. is a pure-play independent wafer foundry established in 1993. The company 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 non-volatile memory solutions, mixed-signal and CMOS image-sensor technologies. To provide world-class customer service, the company maintains two manufacturing facilities: Fab 1 has process technologies from 1.0 to 0.35 micron and can produce up to 16,000 150mm wafers per month. Fab 2 features 0.18-micron and below standard and specialized process technologies, and has the current capacity of up to 15,000 200mm wafers per month. Tower's Web site is located at http://www.towersemi.com/.