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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of Each Class	Name of Each Exchange on Which Registered
Ordinary Shares, par value New Israeli Shekels 15.00 per share	NASDAQ Global Select Market
Securities registered or to be registered pursuant to Section 12(g) of the Act:  None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:  None

US GAAP ☒

International Financial Reporting Standards as issued by the International Accounting Standards Board  ☐

Other  ☐

PART I			5
	ITEM 1.	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS	5
	ITEM 2.	OFFER STATISTICS AND EXPECTED TIMETABLE	5
	ITEM 3.	KEY INFORMATION	5
	ITEM 4.	INFORMATION ON THE COMPANY	29
	ITEM 4A.	UNRESOLVED STAFF COMMENTS	45
	ITEM 5.	OPERATING AND FINANCIAL REVIEW AND PROSPECTS	45
	ITEM 6.	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	58
	ITEM 7.	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	76
	ITEM 8.	FINANCIAL INFORMATION	77
	ITEM 9.	THE OFFER AND LISTING	78
	ITEM 10.	ADDITIONAL INFORMATION	79
	ITEM 11.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	97
	ITEM 12.	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	99
PART II			99
	ITEM 13.	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	99
	ITEM 14.	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	99
	ITEM 15.	CONTROLS AND PROCEDURES	99
	ITEM 16.	[RESERVED]	100
	ITEM 16A.	AUDIT COMMITTEE FINANCIAL EXPERT	100
	ITEM 16B.	CODE OF ETHICS	100
	ITEM 16C.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	100
	ITEM 16D.	EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES.	101
	ITEM 16E.	PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.	101
	ITEM 16F.	CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT	101
	ITEM 16G	CORPORATE GOVERNANCE	101
	ITEM 16H	MINE SAFETY DISCLOSURE	101
PART III			101
	ITEM 17.	FINANCIAL STATEMENTS	101
	ITEM 18.	FINANCIAL STATEMENTS	101
	ITEM 19.	EXHIBITS	102

		Year Ended December 31,
		2018				2017				2016				2015				2014
		(Dollars in thousands, except per share data)
Consolidated Statement of Operations Data:
Revenues		$	1,304,034			$	1,387,310			$	1,249,634			$	960,561			$	828,008
Cost of revenues			1,011,087				1,033,005				946,534				755,196				764,220
Gross profit			292,947				354,305				303,100				205,365				63,788
Research and development			73,053				67,664				63,134				61,669				51,841
Marketing, general and administrative			64,951				66,799				65,439				62,793				58,783
Nishiwaki Fab restructuring and impairment cost (income), net			--				--				(627	)			(991	)			55,500
Acquisition related costs			--				--				--				--				1,229
Operating profit (loss)			154,943				219,842				175,154				81,894				(103,565	)
Financing expense, net			(13,184	)			(15,447	)			(24,349	)			(123,109	)			(88,813	)
Gain from acquisition, net			--				--				50,471				--				166,404
Other income (expense), net			(2,442	)			(2,627	)			9,322				(190	)			(140	)
Profit (loss) before income tax			139,317				201,768				210,598				(41,405	)			(26,114	)
Income tax benefit (expense			(5,938	)			99,888				(1,432	)			12,278				24,742
Net Profit (loss) ……………………...			133,379				301,656				209,166				(29,127	)			(1,372	)
Net loss (income) attributable to non-controlling interest			2,200				(3,645	)			(5,242	)			(520	)			5,635
Net Profit (loss) attributable to the Company		$	135,579			$	298,011			$	203,924			$	(29,647	)		$	4,263
Basic earnings (loss) per ordinary share		$	1.35			$	3.08			$	2.33			$	(0.40	)		$	0.08
Diluted earnings per ordinary share		$	1.32			$	2.90			$	2.09							$	0.07
Other Financial Data:
Depreciation and amortization, including amortization of financing expenses and accretion		$	214,391			$	208,411			$	197,756			$	256,005			$	243,362

		As of December 31,
		2018				2017				2016				2015				2014
		(Dollars and share data in thousands)
Selected Balance Sheet Data:
Cash, cash equivalents and short-term interest-bearing deposits		$	505,170			$	445,961			$	389,377			$	205,575			$	187,167
Working capital		$	784,238			$	571,959			$	450,883			$	235,608			$	93,759
Total assets		$	1,789,977			$	1,673,639			$	1,379,884			$	965,368			$	884,146
Short-term bank debt and current maturities of loans, leases and debentures.		$	10,814			$	105,958			$	48,084			$	33,259			$	119,999
Loan from banks, net of current maturities		$	100,118			$	87,533			$	133,163			$	210,538			$	159,776
Debentures, net of current maturities		$	120,170			$	128,368			$	162,981			$	45,481			$	107,311
Capital leases, net of current maturities		$	36,381			$	12,822			$	--			$	--			$	--
Shareholders’ equity		$	1,236,205			$	1,029,706			$	682,614			$	385,586			$	195,561
Number of shares outstanding as of December 31 of any year			104,980				98,458				92,985				82,058				58,034

●

The cyclical nature of the semiconductor industry and the volatility of the markets served by our customers;

●

Changes in the economic conditions of geographical regions where our customers and their markets are located;

●

Inventory and supply chain management of our customers;

●

The loss of a key customer, not attracting new designs from key customers, postponement of an order from a key customer or the rescheduling or cancellation of large orders;

●

The occurrence of accounts receivable write-offs, failure of a key customer to pay accounts receivable in a timely manner, the financial condition of certain of our customers and the regulatory or other payment difficulties that may be imposed in a region in which customers reside, such as China;

●

The occurrence of an unexpected event, such as environmental events or industrial accidents such as fire or explosions, electricity outage or misprocess, affecting the manufacturing process and our ability to recover the lost or damaged products and provide quality and timely production to our customers without charging them significant additional costs;

●

Completing capacity expansions and recruitment of personnel in a timely manner to address product demands by our customers;

	●	Mergers and acquisitions in the semiconductor industry and their effect on our market share;
	●	Our ability to satisfy our customers’ demand for quality and timely production;

●

The timing and volume of orders relative to our available production capacity;

●

Our ability to obtain raw materials and equipment on a timely and cost-effective basis;

●

Price erosion in the industry and our ability to negotiate prices with our current and new customers;

●

Our susceptibility to intellectual property rights’ disputes;

●

Our dependency on export licenses and other permits required for our operations and the sale of our products;

●

Our ability to maintain existing partners and to enter into new partnerships and technology and supply alliances on mutually beneficial terms;

●

Interest, price index and currency rate fluctuations that were not hedged;

●

Technological changes and short product life cycles;

●

Timing for the design and qualification of new products; and

●

Changes in accounting rules affecting our results.

●

limiting our ability to fulfill our debt obligations and other liabilities;

●

requiring the use of a substantial portion of our cash to service our indebtedness rather than investing our cash to fund our strategic growth opportunities and plans, working capital and capital expenditures;

●

increasing our vulnerability to adverse economic and industry conditions;

●

limiting our ability to obtain additional financing;

●

limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we compete;

●

placing us at a competitive disadvantage with respect to less leveraged competitors and competitors that have better access to capital resources;

●

volatility in our non-cash financing expenses due to increases in the fair value of our debt obligations;

●

fluctuations of the payable amounts in USD of JP loans or other expenses which are denominated in JPY;

●

potential enforcement by the lenders of their liens against our respective assets, as applicable, if an event of default occurs.

●

We may fail to identify acquisitions that would enable us to execute our business strategy.

●

Other foundries may bid against us to acquire potential targets. This competition may result in decreased availability of, or increased prices for, suitable acquisition candidates.

●

We may not be able to obtain the necessary regulatory approvals, or we may not be able to obtain the necessary approvals from our lenders, and as a result, or for other reasons, we may fail to consummate certain acquisitions.

●

Potential acquisitions and integration require the dedication of substantial management effort, time and resources which may divert management’s attention, focus and resources from our existing business operations or other strategic opportunities, which may have a negative adverse effect on our business.

●

We may fail to integrate acquisitions successfully in accordance with our business strategy, achieve anticipated benefits depending in part on successfully consolidating functions and integrating operations, procedures and personnel in a timely and efficient manner, expected synergies, attract sufficient business to newly acquired facilities in a timely manner or realize the anticipated growth opportunities from integrating an acquired business into our existing business.

●

We may not be able to retain experienced management and skilled employees from the businesses we acquire and, if we cannot retain such personnel, we may not be able to attract new skilled employees and experienced management to replace them.

●

We may purchase a company with excessive unknown contingent liabilities, including, among others, patent infringement or product liability.

●

We may not be able to obtain sufficient financing which could limit our ability to engage in certain acquisitions.

●

The amount or terms of financing actually required before and after acquisition may vary from our expectations, resulting in a need for more funding that may not be available to us in order to finance the operations of the target acquisition, which may negatively impact our financial position and profitability.

●

fluctuations in the level of revenues from our operating activities;

●

fluctuations in the collection of receivables;

●

timing and size of payables;

●

the timing and size of capital expenditures;

●

the net impact of JPY/ USD fluctuations on our JPY income and JPY expenses;

●

the repayment schedules of our debt service obligations;

●

our ability to fulfill our obligations and meet performance milestones under our agreements;

●

fluctuations in the USD to NIS exchange rate.

●

rapid technological developments;

●

evolving industry standards;

●

changes in customer and product end user requirements;

●

frequent new product introductions and enhancements; and

●

short product life cycles with declining prices as products mature.

●

greater manufacturing capacity and /or availability of same;

●

a more diverse and established customer base;

●

greater financial, sales, marketing, distribution and other resources;

●

a better cost structure; and/or

●

better operational performance, including cycle time and yields.

●

difficulties in upgrading or expanding existing facilities;

●

unexpected breakdowns in our manufacturing equipment and/or related facility systems;

●

unexpected events, such as an electricity outage or misprocess, affecting the manufacturing process;

●

difficulties in changing or upgrading our process technologies;

●

raw material shortages or impurities;

●

delays in delivery or shortages of spare parts; and

●

difficulties in maintenance and upgrade of our equipment.

●

negotiating cross-license agreements;

●

acquiring licenses to the allegedly infringed patents, which may not be available on commercially reasonable terms, if at all;

●

discontinuing use of certain process technologies, architectures, or designs, which could cause us to stop manufacturing certain integrated circuits if we are unable to design around the allegedly infringed patents;

●

litigating the matter in court, incurring substantial legal fees and paying substantial monetary damages in the event we lose; or

●

developing non-infringing technologies, which may not be feasible.

●

JPY fluctuations against the USD, see above risk factor “Our exposure to currency exchange and interest rate fluctuations may impact our costs and financial results”;

●

the burden and cost of compliance with foreign government regulation, as well as compliance with a variety of foreign laws;

●

general geopolitical risks, such as political and economic instability, international terrorism, potential hostilities and changes in diplomatic and trade relationships;

●

natural disasters affecting the countries in which we conduct our business;

●

imposition of regulatory requirements, tariffs, import and export restrictions and other trade barriers and restrictions, including the timing and availability of export licenses and permits;

●

adverse foreign and international tax rules and regulations, such as withholding taxes deducted from amounts due to us may not be refunded to us by the tax authorities since we are not entitled to foreign tax credit in Israel;

●

weak protection of our intellectual property rights in certain foreign countries;

●

delays in product shipments due to local customs’ restrictions;

●

laws and business practices favoring local companies;

●

difficulties in collecting accounts receivable; and

●

difficulties and costs of staffing and managing foreign operations.

		Year ended December 31,
		2018				2017				2016
United States			52	%			52	%			49	%
Japan			34	%			32	%			36	%
Asia, excluding Japan*			10	%			12	%			12	%
Europe			4	%			4	%			3	%
Total			100	%			100	%			100	%

		Year ended December 31,
		2018				2017				2016
Statement of Operations Data:
Revenues			100	%			100	%			100	%
Cost of revenues			77.5				74.5				75.7
Gross Profit			22.5				25.5				24.3
Research and development expense			5.6				4.9				5.1
Marketing, general and administrative expense			5.0				4.8				5.2
Nishiwaki Fab restructuring and impairment cost (income), net			--				--				(0.1	)
Operating profit			11.9				15.8				14.1
Financing expense, net			(1.0	)			(1.1	)			(1.9	)
Gain from acquisition, net			--				--				4.0
Other income (expense), net			(0.2	)			(0.2	)			0.7
Profit (loss) before tax			10.7				14.5				16.9
Income tax benefit (expense)			(0.5	)			7.2				(0.1	)
Net profit			10.2				21.7				16.8
Net loss (income) attributable to non-controlling interest			0.2				(0.3	)			(0.4	)
Net profit attributable to the Company			10.4	%			21.4	%			16.4	%

		Payment Due
		Total				Less than 1 year				2 Years				3 Years				4 Years				5 Years				After 5 years
		(in thousands of dollars)
Contractual Obligations
Short term liabilities (mainly trade accounts payable)			167,223				167,223				--				--				--				--				--
Loans, related  interests and Capital leases			169,520				13,611				13,371				41,043				37,654				29,807				34,034
Debentures and related  interest			139,399				3,612				40,086				39,054				38,022				18,625				--
Operating leases (1)			13,321				7,318				2,792				2,653				558				--				--
Equipment purchase agreements(2)			25,151				25,151				--				--				--				--				--
Other long-term liabilities			3,974				--				--				--				--				--				3,974
Other Purchase obligations (3)			97,122				69,826				19,614				3,182				2,500				2,000				--
Total contractual obligations			615,710				286,741				75,863				85,932				78,734				50,432				38,008

Officer		Senior Managements’ Name		Age		Title
A		Russell C.  Ellwanger		64		Chief Executive Officer and Director of Tower,  and  Chairman of the Board of Directors of its subsidiaries, Tower Semiconductor USA, Inc., Tower US Holdings, Inc., Jazz US Holdings, Inc., Jazz Semiconductor, Inc., TowerJazz Panasonic Semiconductor Co., Ltd. and TowerJazz Texas, Inc.
B		Oren Shirazi		49		Chief Financial Officer, Senior  Vice President of Finance
C		Dr.  Itzhak Edrei		59		President
D		Rafi Mor		55		Chief Operating Officer
E		Nati Somekh		43		Senior Vice President, Chief Legal Officer and Corporate Secretary
F		Yossi Netzer		55		Senior Vice President of Corporate Planning
G		Dalit Dahan		50		Senior Vice President of Human Resources and IT
H		Ilan Rabinovich		62		Senior Vice President of Quality and Reliability and Fab 1 Manager
I		Dr. Marco Racanelli		52		Newport Beach Site Manager and Senior Vice President and General Manager of Analog IC Business Unit
J		Guy Eristoff		56		Chief Executive Officer of TowerJazz Panasonic Semiconductor Company (TPSCo)
k		Dr. Avi Strum		57		Senior Vice President and General Manager of the CMOS Image Sensor Business Unit
L		Zmira Shternfeld-Lavie		53		Senior Vice President and General Manager of Transfer, Optimization and Development Process Services Business Unit (TOPS) and Head of Process Engineering R&D
M		Noit Levy		35		Vice President of Investor Relations and Corporate Communications

		Directors’ Name*		Age		Title
N		Amir Elstein		63		Chairman of the Board
O		Kalman Kaufman		73		Director
P		Alex Kornhauser		72		Director
Q		Dana Gross		51		Director
R		Ilan Flato		62		Director
S		Rami Guzman		80		Director
T		Yoav Z. Chelouche		65		Director
U		Iris Avner		54		Director
V		Jerry D. Neal		74		Director

Guy Eristoff was appointed Chief Executive Officer of TowerJazz Panasonic Semiconductor Company Ltd. (TPSCo) at the time of its foundation in April 2014. Previously, he served as Vice President, Global Operational Excellence at Tower Semiconductor Ltd. Prior to this, he served in various positions in the semiconductor industry such as Director of 200mm Fabs Core Engineering at Global-Foundries (Technology Development, Marketing, Industrial Engineering & Central Engineering) for the 200mm Business Unit, (5 fabs), General Manager, Singapore and Asia Region at Intevac, Thin Films Section Manager, Thin Films Module Manager and Process Integration Deputy Director at Chartered Semiconductor and Process/Hardware Engineer and Field Service Manager at Applied Materials. Mr. Eristoff received his B.S. degree in Physics from Rensselaer Polytechnic Institute, (RPI) Troy New York.

Dr. Avi Strum serves as our Senior Vice President and General Manager of the CMOS Image Sensor Business Unit. Previously, Dr. Strum was Vice President and General Manager of the Specialty Business Unit, Vice President of Europe Sales, Head of the Design Center in Netanya and Device and Integration Department Manager. Prior to joining Tower, Dr. Strum served as the President and COO of TransChip Inc. and from 1996 to 2001, he served in various positions with Intel Corp., both in Israel and the US. From 1990 to 1996, he was the R&D Manager of SCD and was in charge of all the Infrared Detectors development in SCD. Dr. Strum received his Ph.D. and B.Sc. in Electrical Engineering from the Technion - Israel Institute of Technology in 1990 and 1985 respectively.

Zmira Shternfeld-Lavie serves as our Senior Vice President and General Manager of Transfer, Optimization and Development Process Services Business Unit (TOPS) and Head of Process Engineering R&D. Ms. Lavie has over 25 years’ experience with silicon processing technologies, fabrication management and research and development. She joined the R&D Group as Thin Film Section Manager when it was established in 1996. In her current position, she is also leading the R&D Process Group, MEMS and manages the process transfer activity. Previously, Ms. Lavie served at National Semiconductor as Thin Film Process Engineer. She has expertise in thin films metallization and process integration and has several patents within this area. Ms. Lavie received a B.Sc. in Chemical Engineering from the Technion - Israel Institute of Technology.

·          Base salary;

·          Benefits and perquisites;

·          Performance-based cash bonuses;

·          Equity based compensation; and

·          Retirement, termination and other arrangements.

·	An annual fee which shall be capped at up to $60,000.

·	Per meeting fee shall be capped at up to $2,000.

·	Reasonable travel expenses.

		As of December 31,
		2018				2017				2016
Process and product engineering, R&D and design			1,065				1,054				1,015
Manufacturing and operations			3,860				3,917				3,895
Manufacturing support			394				399				370
Sales and marketing, finance & administration			267				271				272
Total			5,586				5,641				5,552

Identity of Person or Group		Percent of Class(1)				Percent of Class (Diluted)(2)
Phoenix holdings  (3)			7.96	%			7.82	%
Senvest Management, LLC (4)			8.64	%			8.49	%
Harel Insurance Investments & Financial    Services (5)			5.33	%			5.24	%

		NASDAQ Stock Market								Tel Aviv Stock Exchange
		High ($)				Low ($)				High (NIS)				Low (NIS)
Period
March 2019			18.39				16.10				66.00				58.34
February 2019			19.03				14.36				68.87				52.00
January 2019			15.19				13.57				55.54				50.41
December 2018			17.21				13.56				64.10				50.41
November 2018			16.58				13.78				60.12				51.53
October 2018			22.41				13.87				80.17				54.01
First quarter 2019			19.03				13.57				68.87				50.41
Fourth quarter 2018			22.41				13.56				80.17				50.41
Third quarter 2018			23.55				19.26				86.31				72.00
Second quarter 2018			29.36				21.69				102.00				79.29
First quarter 2018			36.08				26.52				124.00				91.60
Fourth quarter 2017			36.69				30.40				128.00				106.40
Third quarter 2017			30.91				23.38				109.90				82.70
Second quarter 2017			25.89				20.60				92.14				76.46
First quarter 2017			23.65				19.02				86.51				73.17
2018			36.08				13.56				124.00				50.41
2017			36.69				19.02				128.00				73.17
2016			20.04				10.36				76.55				40.32
2015			18.29				10.68				73.79				41.85
2014			14.26				5.44				56.00				19.20

●

an individual citizen or resident of the United States;

●

a corporation created or organized in or under the laws of the United States or of any state of the United States or the District of Columbia;

●

an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or

●

a trust if the trust has elected validly to be treated as a United States person for U.S. federal income tax purposes or if a U.S. court is able to exercise primary supervision over the trust’s administration and one or more United States persons have the authority to control all of the trust’s substantial decisions.

●

insurance companies;

●

dealers in stocks, securities or currencies;

●

financial institutions and financial services entities;

●

real estate investment trusts;

●

regulated investment companies;

●

persons that receive ordinary shares as compensation for the performance of services;

●

tax-exempt organizations;

●

persons that hold ordinary shares as a position in a straddle or as part of a hedging, conversion or other integrated instrument;

●

individual retirement and other tax-deferred accounts;

●

expatriates of the United States;

●

persons (other than Non-U.S. Holders) having a functional currency other than the U.S. dollar; and

●

direct, indirect or constructive owners of 10% or more, by voting power or value, of us.

(a)

the stock of that corporation with respect to which the dividends are paid is readily tradable on an established securities market in the U.S., or

(b)

that corporation is eligible for benefits of a comprehensive income tax treaty with the U.S. which includes an information exchange program and is determined to be satisfactory by the U.S. Secretary of the Treasury. The Internal Revenue Service has determined that the U.S.-Israel Tax Treaty is satisfactory for this purpose.

●

that gain is effectively connected with the conduct by the Non-U.S. Holder of a trade or business in the United States, or

●

in the case of any gain realized by an individual Non-U.S. Holder, that holder is present in the United States for 183 days or more in the taxable year of the sale or exchange, and other conditions are met.

(1)

a U.S. person;

(2)

the government of the U.S. or the government of any state or political subdivision of any state (or any agency or instrumentality of any of these governmental units);

(3)

a controlled foreign corporation;

(4)

a foreign partnership that is either engaged in a U.S. trade or business or whose Untied States partners in the aggregate hold more than 50% of the income or capital interests in the partnership;

(5)

a foreign person that derives 50% or more of its gross income for certain periods from the conduct of a trade or business in the U.S.; or

(6)

a U.S. branch of a foreign bank or insurance company.

		2018				2017
		(US dollars In Thousands)
Audit Fees (1)			809				790
Audit Related Fees (2)			31				27
Tax Fees (3)			18				26
Other (4)			--				26
			858				869