Tower Semiconductor posted a $102.6 million US dollar loss for the first half of 2005. The losses widened significantly from the same period a year ago when it reported losses of $75.0 million US dollars.

The great news is that the foundry has cut losses quarter on quarter, from $55.3 million (1Q05) to $47.2 million (2Q05). On the back of that the foundry is slowly starting to provide tangible evidence of a potential improvement in its dire financial position.

Key to any future revenue growth is the activity in customer tapeouts. New CEO, Russell Ellwanger highlighted that in the most recent quarter it had a record number of customer product tape-outs at Fab2 (22), which exceeded the total for the whole of 2004.

However, successful tapeouts do not necessarily move straight into production. This is still very much determined by the market the customer is playing in. In a period of softness when demand is poor, customers have little need to start production as inventories would rise. As the semiconductor market place picks up in the second half of the year we would expect more of these tapeouts to enter production.

Tower noted that revenues would rise slightly in the third quarter, which indicates to us that few of the 22 new tapeouts are going into production next quarter.

Interestingly, Ellwanger refrained from talking about the breakeven point and a return to profitability for the second half of 2005, that his predecessors had done. With revenues for the 3Q05 expected to be a pretty pathetic $20 to $22 million the company would have to have the most amazing fourth quarter in the history of the company to get that many wafers out the door and count the cash. It looks increasingly like we will have to wait till next year to write the turnaround success story article that you are all waiting to read.

In the meantime the tower keeps burning and Steve McQueen has left the building.