Company: TSEM
Filing Date: 2025-04-30
Form Type: 20-F
Source: 0001178913-25-001537
Chunk: 47

Company: TOWER SEMICONDUCTOR LTD
Filing Date: 2025-04-30
Form: 20-F
Item: Item 3
Chunk 47
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. Our customers often use third-party service providers for the performance of wafer assembly and
testing, and to a smaller extent, part of such process may be performed independently by us.

31

RAW MATERIALS

Our processes utilize various raw materials, including silicon
wafers, chemicals, gases, and different types of metal targets. Although most of our raw materials are available from multiple suppliers,
certain materials are purchased from sole-sourced vendors. Our raw material procurement policy is to select only those vendors who have
demonstrated quality control and reliable delivery times, and to maintain multiple sources for each raw material whenever feasible in
order that a quality or delivery issue with any one vendor will not adversely affect our operations. We may establish long-term supply
agreements with our vendors where necessary or beneficial to Tower.

Our general inventory policy is to maintain sufficient stock of
each principal raw material to meet operational needs and rolling forecasts of near-term customer requirements. In addition, we have agreements
with some material suppliers under which they reserve certain levels of inventory in their warehouses for our use. We typically work with
our vendors to plan our raw material requirements on a monthly basis, with pricing generally set on an annual basis. The actual purchase
price is generally determined based on prevailing market conditions. Although we have not experienced any shortage of raw materials that
had a material effect on our operations, and current supplies of raw materials we use are adequate, shortages could occur in various critical
materials due to supply interruptions or increased industry demand.

The most important raw material we use is the silicon wafer, which
is our basic raw material. We have historically obtained and believe that we will continue to be able to obtain a sufficient supply of
silicon wafers. We believe that we have close working relationships with our wafer suppliers, and based on these long-term relationships,
we believe that these major suppliers will make their best efforts to meet our demand.

In addition, certain materials are purchased from sole-sourced
vendors under pre-committed volume contracts for specified pre-defined quantities that must be purchased on a monthly, quarterly or annual
basis. If such predefined quantities are not required for production when purchased, it may result in excess payment and/or expense write-offs
in our financial statements, which may adversely impact our financial results. See “ Item 3. Key Information - D. Risk Factors - Risks
Affecting Our Business - “ If we are unable to purchase equipment and/or raw materials and
other supplies, or there are