UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, ~~2013~~2014 Or o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-32832

Jazz Technologies, Inc.*

(Exact name of registrant as specified in its charter)

Delaware	20-3320580
(State of incorporation)	(I.R.S. Employer Identification No.)

4321 Jamboree Road, Newport Beach, California	92660
(Address of principal executive offices)	(Zip Code)

(949) 435-8000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

_____________________

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes x No o

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes o No x

Note: As a voluntary filer not subject to the filing requirements, the Registrant has filed all reports under Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K: Not Applicable

Indicate by check mark whether the registrant is large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o

Accelerated filer o

Non-accelerated filer x

Smaller reporting company o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

Aggregate market value of the common equity held by non-affiliates of the Registrant: Not Applicable

The number of shares outstanding of the registrant’s common stock: 100

DOCUMENTS INCORPORATED BY REFERENCE:

None.

*	Jazz Technologies, Inc. meets the conditions set forth in General Instruction I (1) (a) and (b) of Form 10-K and is therefore filing this form with the reduced disclosure format.

JAZZ TECHNOLOGIES, INC.

FORM 10-K

Year Ended December 31, ~~2013~~2014

TABLE OF CONTENTS

		Page No.
PART I
Item 1.	Business	1
Item 1A.	Risk Factors	7
Item 1B.	Unresolved Staff Comments	1819
Item 2.	Properties	1819
Item 3.	Legal Proceedings	19
Item 4.	Mine Safety Disclosures	19
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	20
Item 6.	Selected Financial Data	20
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 7A	Quantitative and Qualitative Disclosures About Market Risk	2223
Item 8.	Financial Statements and Supplementary Data	2324
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	47
Item 9A.	Controls and Procedures	47
Item 9B.	Other Information	47
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	48
Item 11.	Executive Compensation	48
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	48
Item 13.	Certain Relationships and Related Transactions and Director Independence	48
Item 14.	Principal Accounting Fees and Services	48
PART IV
Item 15.	Exhibits and Financial Statement Schedules	49
EXHIBIT LIST		49
SIGNATURES		52

iii

FORWARD-LOOKING STATEMENTS

Some of the information contained or incorporated by reference in this ~~current~~annual report constitutes forward-looking statements within the definition of the Private Securities Litigation Reform Act of 1995. You can identify these statements by forward-looking words such as “may,” “expect,” “anticipate,” “contemplate,” “believe,” “estimate,” “intends,” and “continue” or similar words. You should read statements that contain these words carefully because they:

discuss future expectations;

contain projections of future results of operations or financial condition; or

state other “forward-looking” information.

We believe it is important to communicate our expectations to our shareholders. However, there may be events in the future that we are not able to predict accurately or over which we have no control. The risk factors and cautionary language discussed or incorporated by reference in this ~~current~~annual report provide examples of risks, uncertainties and events that may cause actual results to differ materially from the expectations described by us in such forward-looking statements, including among other things:

outcomes of government reviews, inquiries, investigations and related litigation;

continued compliance with government regulations;

legislation or regulatory environments, requirements or changes adversely affecting the business in which we are engaged;

fluctuations in customer demand;

management of rapid growth; and

general economic conditions.

You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this ~~current~~annual report.

All forward-looking statements included or incorporated herein attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Except to the extent required by applicable laws and regulations, we undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this annual report or to reflect the occurrence of unanticipated events.

You should be aware that the occurrence of the events described in the “Risk Factors” portion of this annual report, the documents incorporated herein and our other SEC filings could have a material adverse effect on our business, prospects, financial condition and operating results.

Part I

Item 1. Business

Overview

Jazz Technologies, Inc., through its wholly owned subsidiaries, is an independent pure-play semiconductor foundry focused on specialty process technologies for the manufacture of analog and mixed-signal semiconductor devices. Typically, pure-play foundries do not offer products of their own, but focus on producing integrated circuits, or ICs, based on the design specifications of their customers. We manufacture semiconductors for our customers primarily based on third party designs and our ~~own~~ process technology and engineering support. We also provide design support and complementary technical services. ICs manufactured by us are incorporated into a wide range of products in diverse markets, including cellular phones, wireless local area networking devices, digital TVs, set-top boxes, gaming devices, switches, routers and broadband modems.

Organization

Jazz Technologies, Inc., formerly known as Acquicor Technology Inc. was incorporated in Delaware in August 2005 as a blank check company for the purpose of acquiring one or more domestic and/or foreign operating businesses in the technology, multimedia or networking sectors.

OnIn February ~~16,~~ 2007, we completed the acquisition of all of the outstanding capital stock of Jazz Semiconductor. Jazz Semiconductor’s business was originally created in March 2002 by the spin-off by Conexant Systems, Inc. of its Newport Beach, California semiconductor fabrication operations. The acquisition was accounted for under the purchase method of accounting in accordance with United States (U.S.) generally accepted accounting principles (“US GAAP”) for accounting and financial reporting purposes with Jazz Semiconductor being treated as the acquired company. On September 19, 2008, we completed a merger under an Agreement and Plan of Merger and Reorganization (“Merger”) with Tower Semiconductor Ltd., an Israeli company (“Tower”) and its wholly-owned subsidiary under which such subsidiary merged with and into the Company, with the Company surviving the Merger as a wholly-owned subsidiary of Tower.

Under the terms of the Merger, Tower acquired all of our outstanding shares in a stock-for-stock transaction. As a result of the Merger, Tower became the sole holder of the Company’s common stock and a change in control occurred. The Merger was accounted for under the purchase method of accounting in accordance with US GAAP, with Jazz being treated as the “acquired” company. In connection with this Merger, the Company adopted Tower’s fiscal year for reporting purposes.

As used in this annual report, “we,” “us,” “our,” “Jazz,” the “Company” and words of similar import refer to Jazz Technologies, Inc. including its subsidiaries and “Jazz Semiconductor” refers solely to Jazz Semiconductor, Inc. ~~The term “Successor” refers to the Company following the Merger, and the term “Predecessor” refers to the Company prior to the Merger.~~

Jazz’s Solution

Jazz is an independent semiconductor foundry, providing specialty process technologies, design solutions and application knowledge for the manufacture of analog and mixed-signal semiconductors. Key elements of its solution are as follows:

Jazz offers an independent and focused source for the manufacture of semiconductors using specialty process technologies. Most other independent foundries focus on standard process technologies, rather than specialty process technologies. Some vertically integrated semiconductor companies who internally design, fabricate, package, test and market their own semiconductors, known as integrated device manufacturers, or IDMs, offer specialty process foundry services but also manufacture their own semiconductor products, which may be competitive with the products of their potential customers who seek these services. Jazz combines the benefits of independence with a focus on specialty process technologies.

Jazz offers a specialized design platform for analog and mixed-signal semiconductors. Jazz’s design engineering support team assists its customers with their advanced designs by leveraging Jazz’s application knowledge and experience to help guide their technology selection and design implementation. Jazz’s sophisticated design tools and services are specifically tailored to meet analog and mixed-signal design needs, and include specialized device modeling and characterization features that allow simulation of a variety of real world situations, including different temperatures, power levels and speeds.

· Jazz offers a broad range of specialty process technologies. Jazz’s specialty process technology portfolio includes advanced analog CMOS, RF CMOS, RF SOI, high voltage CMOS, BiCMOS and SiGe BiCMOS processes. In addition to these specialty process technologies, we have recently begun to offer BCD processes optimized for analog semiconductors such as power management, high efficiency audio amplification, and optical driver integrated circuits. The breadth of Jazz’s portfolio allows it to offer its customers a wide range of solutions to address their high-performance, high-density, low-power and low-noise requirements for analog and mixed-signal semiconductors.

Jazz is a leader in high-performance SiGe process technologies. Jazz offers high performance 240 GHz 0.18 micron SiGe BiCMOS technology, which Jazz believes is one of the most advanced SiGe process technologies in production today. Analog and mixed-signal semiconductors manufactured with SiGe BiCMOS process technologies can be smaller, require less power and provide higher performance than those manufactured with standard CMOS processes. Moreover, SiGe BiCMOS process technologies allow for higher levels of integration of analog and digital functions on the same mixed-signal semiconductor device.

· Jazz is a leader in high-performance SiGe process technologies. Jazz offers high performance 200 GHz 0.18 micron SiGe BiCMOS technology, which Jazz believes is one of the most advanced SiGe process technologies in production today. Analog and mixed-signal semiconductors manufactured with SiGe BiCMOS process technologies can be smaller, require less power and provide higher performance than those manufactured with standard CMOS processes. Moreover, SiGe BiCMOS process technologies allow for higher levels of integration of analog and digital functions on the same mixed-signal semiconductor device.

Jazz’s Strategy

Key elements of Jazz’s strategy are as follows:

Further strengthen Jazz’s position in specialty process technologies for the manufacture of analog and mixed-signal semiconductors. Jazz is continuing to invest in its portfolio of specialty process technologies to address the key product attributes that make its customers’ products more competitive.

Target large, growing and diversified end markets. Jazz targets end markets characterized by high growth and high performance for which it believes its specialty process technologies have a high value proposition, including the wireless and high-speed wireline communications, consumer electronics, automotive and industrial markets. For example, Jazz believes that its specialty process technologies can provide performance and cost advantages over current GaAs and CMOS solutions in the realization of switches and power amplifiers for wireless handsets.

Continue to diversify Jazz’s customer base. Jazz intends to continue to grow and diversify its business by attracting new customers and expanding its customer base.

· Maintain capital efficiency by leveraging its capacity and manufacturing model. Jazz seeks to maximize the utilization of its Newport Beach, California manufacturing facility to maintain cost-effective manufacturing. Jazz can ~~typically~~ increase its specialty process technology capacity and meet its customer performance requirements using adapted semiconductor process equipment sets that are typically one or two generations behind leading-edge digital CMOS process equipment. This ~~typically~~ allows Jazz to acquire lower-cost semiconductor process equipment to operate its Newport Beach, California fab.

Jazz’s Specialty Process Technologies

Jazz refers to its digital CMOS and standard analog CMOS process technologies as standard process technologies, and offers these standard process technologies in 0.5 micron, 0.35 micron, 0.25 micron, 0.18 micron and 0.13 micron.

Jazz refers to its advanced analog CMOS, RF CMOS, RF SOI, high voltage CMOS, BiCMOS, SiGe BiCMOS and BCD process technologies, as specialty process technologies. Most of Jazz’s specialty process technologies are based on CMOS processes with added features to enable improved size, performance and cost characteristics for analog and mixed-signal semiconductors. Products made with Jazz’s specialty process technologies are typically more complex to manufacture than products made using standard process technologies employing similar line widths. Generally, customers who use Jazz’s specialty process technologies cannot easily move designs to another foundry because the analog characteristics of the design are dependent upon ~~its implementation of~~ the ~~applicable~~specific process technology used for manufacturing. The relatively small engineering community with specialty process know-how has also limited the number of foundries capable of offering specialty process technologies. In addition, the specialty process design infrastructure is complex and includes design kits and device models that are specific to the foundry in which the process is implemented and to the process technology itself.

Jazz’s advanced analog CMOS process technologies have more features than standard analog CMOS process technologies and are well suited for higher performance or more highly integrated analog and mixed-signal semiconductors, such as high-speed analog-to-digital or digital-to-analog converters and mixed-signal semiconductors with integrated data converters. These process technologies generally incorporate higher density passive components, such as capacitors and resistors, as well as improved active components, such as native or low voltage devices, and improved isolation techniques, into standard analog CMOS process technologies. Jazz currently has advanced analog CMOS process technologies in 0.5 micron, 0.35 micron, 0.25 micron, 0.18 micron and 0.13 micron. These advanced analog CMOS processes form the baseline for Jazz’s other specialty process technologies.

Jazz’s RF CMOS process technologies have more features than advanced analog CMOS process technologies and are well suited for wireless semiconductors, such as highly integrated wireless transceivers, power amplifiers, and television tuners. These process technologies generally incorporate integrated inductors, high performance variable capacitors, or varactors, and RF laterally diffused metal oxide semiconductors into an advanced analog CMOS process technology. In addition to the process features, Jazz’s RF offering includes design kits with RF models, device simulation and physical layouts tailored specifically for RF performance. Jazz currently has RF CMOS process technologies in 0.25 micron, 0.18 micron and 0.13 micron. These RF CMOS process technologies form the baseline for some of Jazz’s other specialty process technologies.

Jazz’s high voltage CMOS and BCD process technologies have more features than advanced analog CMOS processes and are well suited for power and driver semiconductors such as voltage regulators, battery chargers, power management products and audio amplifiers. These process technologies generally incorporate higher voltage CMOS devices such as 5V, 8V, 12V and 40V devices, and, in the case of BCD, bipolar devices, into an advanced analog CMOS process. Jazz currently has high voltage CMOS offerings in 0.5 micron, 0.35 micron, 0.25 micron and 0.18 micron, and BCD offerings in 0.5 micron. Jazz also offers high voltage options that include a 0.35 micron BCD process technology and 40V capabilities to enable higher levels of analog integration at voltage ranges that are suitable for automotive electronics and line power conditioning for consumer devices.2

Jazz’s RF SOI CMOS process technologies make available many of the features of Jazz’s RF CMOS process on Silicon-on-Insulator (SOI) substrates. The devices on Jazz’s RF SOI CMOS process are further optimized to work with the SOI substrate and deliver higher performance and improved isolation relative to the devices of Jazz’s RF CMOS process. Jazz currently has RF SOI CMOS process technologies in the 0.18um and 0.13um lithography nodes.Jazz’s high voltage CMOS and BCD process technologies have more features than advanced analog CMOS processes and are well suited for power and driver semiconductors such as voltage regulators, battery chargers, power management products and audio amplifiers. These process technologies generally incorporate higher voltage CMOS devices such as 5V, 8V, 12V and 40V devices, and, in the case of BCD, bipolar devices, into an advanced analog CMOS process. Jazz currently has high voltage CMOS offerings in 0.5 micron, 0.35 micron, 0.25 micron and 0.18 micron, and BCD offerings in 0.5 micron. Jazz also offers high voltage options that include a 0.35 micron BCD process technology and 40V capabilities to enable higher levels of analog integration at voltage ranges that are suitable for automotive electronics and line power conditioning for consumer devices.

Jazz’s BiCMOS process technologies have more features than RF CMOS process technologies and are well suited for RF semiconductors such as wireless transceivers and television tuners. These process technologies generally incorporate high-speed bipolar transistors into an RF CMOS process. The equipment requirements for BiCMOS manufacturing are specialized and require enhanced tool capabilities to achieve high yield manufacturing. Jazz currently has BiCMOS process technologies in 0.35 micron.

Jazz’s SiGe BiCMOS process technologies have more features than BiCMOS processes and are well suited for more advanced RF semiconductors such as high-speed, low noise, highly integrated multi-band wireless transceivers, television tuners and power amplifiers. These process technologies generally incorporate a silicon germanium bipolar transistor, which is formed by the deposition of a thin layer of silicon germanium within a bipolar transistor. It is also possible to achieve higher speeds using SiGe BiCMOS process technologies equivalent to those demonstrated in standard CMOS processes that are two process generations smaller in line-width. For example, a 0.18 micron SiGe BiCMOS process is able to achieve speeds comparable to a 90 nanometer RF CMOS process. As a result, SiGe BiCMOS makes it possible to create analog products using a larger geometry process technology at a lower cost while achieving similar or superior performance to that achieved using a smaller geometry standard CMOS process technology. The equipment requirements for SiGe BiCMOS manufacturing are similar to the specialized equipment requirements for BiCMOS. We have developed enhanced tool capabilities in conjunction with large semiconductor tool suppliers to achieve high yield SiGe manufacturing. Jazz believes this equipment and related process expertise makes Jazz one of the few silicon manufacturers with demonstrated ability to deliver SiGe BiCMOS products. Jazz currently has SiGe BiCMOS process technologies at 0.35 micron and 0.18 micron and 0.13 micron SiGe BiCMOS process.

Jazz also has technologies that integrate micro-electro-mechanical-system (MEMS) devices with CMOS.

Jazz continues to invest in technology that helps improve the performance and integration level and reduce the cost of analog and mixed-signal products. This includes improving the density of passive elements such as capacitors and inductors, improving the analog performance and voltage handling capability of active devices, and integrating advanced features in Jazz’s specialty CMOS processes that are currently not readily available. Examples of such features currently under development include adding silicon-on-insulator (SOI) substrates to enable increased functionality of RF and analog products and scaling the features Jazz offers today in 0.18 micron to the 0.13 micron process technology.

Manufacturing

We have placed significant emphasis on achieving and maintaining a high standard of manufacturing quality. Jazz seeks to enhance its production capacity for its high-demand specialty process technologies and to design and implement manufacturing processes that produce consistently high manufacturing yields. Jazz’s production capacity in each of its specialty process technologies enables Jazz to provide its customers with volume production, flexibility and quick-to-market manufacturing services. Jazz’s process research and development is performed in its manufacturing facility in Newport Beach, California and in a design center in Netanya, Israel.

General

Jazz currently has the capability in its Newport Beach, California fab to manufacture standard CMOS as well as specialty eight-inch wafers. We have the ability to rapidly change the mix of production processes in use in order to respond to changing customer needs and maximize utilization of the fab.

Raw Materials

Jazz’s manufacturing processes use highly specialized materials, including semiconductor wafers, chemicals, gases and photomasks. These raw materials are generally available from several suppliers. However, Jazz often selects one vendor to provide it with a particular type of material in order to obtain preferred pricing. In those cases, Jazz generally also seeks to identify, and in some cases qualify, alternative sources of supply.

We have agreements with several key material suppliers under which they hold certain levels of inventory at Jazz’s warehouse and fab. Jazz is not under any obligation under these agreements to purchase raw material inventory that is held by its vendors at its site until Jazz actually uses it, unless Jazz holds the inventory beyond specified time limits.

Jazz’s Services

Jazz primarily manufactures semiconductor wafers for its customers.

~~The~~Generally, the processes required to ~~take~~manufacture ~~raw wafers and turn them into finished~~ semiconductor devices ~~are~~from ~~generally~~raw ~~accomplished~~silicon ~~through~~wafers include circuit design, mask making, wafer fabrication, probe, assembly and test. Jazz offers manufacturing services and related technical, engineering and other support services. Assembly and test are generally performed independently by our customers through third parties.

Sales Contracts

A few of Jazz’s major customers purchase services and products from us onby a contract ~~basis~~. Most other customers purchase from Jazz using purchase orders. Jazz prices its products for these customers on a per wafer or per die basis, taking into account the complexity of the technology, the prevailing market conditions, volume forecasts, the strength and history of its relationship with the customer and its current capacity utilization.

Most of our customers usually place their orders only two to four months before shipment; however a few of our major customers are obligated to provide Jazz with longer forecasts of their wafer needs.

~~Special~~Jazz ~~Security~~Semiconductor ~~Agreement~~Trusted ~~with~~Foundry ~~DSS~~(JSTF)

In connection with the Company's aerospace and defense business, its facility security clearance and trusted foundry status, the Company ~~and~~created ~~Tower~~a ~~have~~wholly ~~worked~~owned ~~with~~subsidiary ~~the~~named ~~Defense~~Jazz ~~Security~~Semiconductor ~~Service~~Trusted ofFoundry ~~the~~("JSTF") ~~United~~in ~~States~~2013 ~~Department~~and has limited the possession of ~~Defense~~all ~~("DSS")~~classified information solely to JSTF. To mitigate any concern of foreign ownership, control or influence over the operations of Jazz specifically relating to protection of classified information and prevention of potential unauthorized access thereto, byTower ~~creating~~and Jazz ~~Semiconductor~~have ~~Trusted~~further ~~Foundry~~agreed ("to operate JSTF") asunder a ~~subsidiary~~special ofsecurity agreement signed with the ~~Company~~Defense ~~and~~Security ~~limiting~~Service ~~possession~~(“DSS”). JSTF ofhas ~~all~~been ~~classified~~certified ~~information~~by ~~solely~~the toDefense ~~JSTF. Tower~~Microelectronics Activity (“DMEA”) for participation in the Department of Defense’s accredited supplier program and ~~Jazz~~has ~~have~~obtained ~~further~~a ~~agreed~~facility tosecurity ~~operate~~clearance ~~JSTF~~from ~~under~~DSS and accreditation by DMEA as a ~~Special~~Category ~~Security~~1A ~~Agreement~~and ~~signed~~1B ~~with~~accredited ~~DSS~~supplier.

Customers, Markets and Applications

Jazz’s customers use Jazz’s processes to design and market a broad range of digital, analog and mixed-signal semiconductors for diverse end markets including wireless and high-speed wireline communications, consumer electronics, automotive and industrial. Jazz manufactures products that are used for high-performance applications such as transceivers and power management for cellular phones; transceivers and power amplifiers for wireless local area networking products; power management, audio amplifiers and driver integrated circuits for consumer electronics; tuners for digital televisions and set-top boxes; modem chipsets for broadband access devices and gaming devices; serializer/deserializers, or SerDes, for fiber optic transceivers; focal plan arrays for imaging applications; and wireline interfaces for switches and routers.

Order Backlog

All of Jazz’s orders are subject to possible rescheduling by its customers. Rescheduling may relate to quantities or delivery dates, and sometimes relates to the specifications of the products it is shipping. Most customers do business with Jazz on a purchase order basis, and some of these orders may be cancelled by the customer without penalty. Jazz also may elect to permit cancellation of orders without penalty where management believes it is in its best interests to do so. Consequently, Jazz cannot be certain that orders on backlog will be shipped when expected or at all. For these reasons, as well as the cyclical nature of its industry, Jazz believes that its backlog at any given date may not be a reliable indicator of its future revenues.

Competition

Jazz competes internationally and domestically with dedicated foundry service providers such as Taiwan Semiconductor Manufacturing Company, United Microelectronics Corporation, Semiconductor Manufacturing International Corporation and Chartered Semiconductor Manufacturing Ltd., which, in addition to providing leading edge CMOS process technologies, also have capacity for some specialty process technologies. Jazz also competes with integrated device manufacturers that have internal semiconductor manufacturing capacity or foundry operations, such as IBM. In addition, several new dedicated foundries have commenced operations and may compete directly with Jazz. Many of Jazz’s competitors have higher capacity, longer operating history, longer or more established relationships with their customers, superior research and development capability, smaller geometries and greater financial and marketing resources than Jazz. As a result, these companies may be able to compete more aggressively over a longer period of time than Jazz.

IBM competes in both the standard CMOS segment and in specialty process technologies. In addition, there are a number of smaller participants in the specialty process arena. Jazz believes that most of the large dedicated foundry service providers compete primarily in the standard CMOS segment, but they also have capacity for specialty process technologies. Prior to Jazz’s separation from Conexant, Conexant entered into a long-term licensing agreement with Taiwan Semiconductor Manufacturing Company under which Taiwan Semiconductor Manufacturing Company licensed from Conexant the right to manufacture semiconductors using Conexant’s then existing 0.18 micron or greater SiGe BiCMOS process technologies. Taiwan Semiconductor Manufacturing Company publicly announced in 2001 that it planned to use the licensed technology to accelerate its own foundry processes for the networking and wireless communications markets. Since Jazz’s formation, we have continued to make improvements to our SiGe BiCMOS process technology. We have not licensed any of these improvements to Taiwan Semiconductor Manufacturing Company. In the event Taiwan Semiconductor Manufacturing Company wishes to focus its business on the SiGe BiCMOS market, it may use and develop the technology licensed to it in 2001 to compete directly with Jazz in the specialty market, and such competition may harm Jazz’s business.Competition

Jazz competes internationally and domestically with dedicated foundry service providers such as Taiwan Semiconductor Manufacturing Company, United Microelectronics Corporation, Semiconductor Manufacturing International Corporation and Global Foundries, which, in addition to providing leading edge CMOS process technologies, also have capacity for some specialty process technologies. Jazz also competes with integrated device manufacturers that have internal semiconductor manufacturing capacity or foundry operations, such as IBM or ST. In addition, several new dedicated foundries have advanced operations such as X-Fab, Dong Bu and Vanguard and may compete directly with Jazz in certain areas, flows and technology capabilities.

IBM competes in both the standard CMOS product type and in specialty process technologies. In addition, there are a number of smaller participants in the specialty process arena. Jazz believes that most of the large dedicated foundry service providers compete primarily in the standard CMOS product type, but they also have capacity for specialty process technologies. Prior to Jazz’s separation from Conexant, Conexant entered into a long-term licensing agreement with Taiwan Semiconductor Manufacturing Company under which Taiwan Semiconductor Manufacturing Company licensed from Conexant the right to manufacture semiconductors using Conexant’s then existing 0.18 micron or greater SiGe BiCMOS process technologies. Taiwan Semiconductor Manufacturing Company publicly announced in 2001 that it planned to use the licensed technology to accelerate its own foundry processes for the networking and wireless communications markets. Since Jazz’s formation, we have continued to make improvements to our SiGe BiCMOS process technology. We have not licensed any of these improvements to Taiwan Semiconductor Manufacturing Company. In the event Taiwan Semiconductor Manufacturing Company wishes to focus its business on the SiGe BiCMOS market, it may use and develop the technology licensed to it in 2001 to compete directly with Jazz in the specialty market, and such competition may harm Jazz’s business.

As Jazz’s competitors continue to increase their manufacturing capacity, there could be an increase in specialty semiconductor capacity during the next several years. As specialty capacity increases there may be more competition and pricing pressure on Jazz’s services, and underutilization of its capacity may result. Any significant increase in competition or pricing pressure may erode its profit margins, weaken Jazz’s earnings or increase its losses.

Additionally, some semiconductor companies have advanced their CMOS designs to 9035 nanometers or smaller geometries. These smaller geometries may provide the customer with performance and integration features that may be comparable to, or exceed, features offered by Jazz’s specialty process technologies, and may be more cost-effective at higher production volumes for certain applications, such as when a large amount of digital content is required in a mixed-signal semiconductor and less analog content is required. Jazz’s specialty process technologies will therefore compete with these advanced CMOS processes for customers and some of its potential and existing customers could elect to design their next generation products using these advanced CMOS processes. Jazz is not currently capable, and does not currently plan to become capable, of providing CMOS processes at these smaller geometries. If Jazz’s existing customers or new customers choose to design their products using these advanced CMOS processes, Jazz’s business may suffer.

The principal elements of competition in the semiconductor wafer foundry ~~industry~~market include:

· technical ~~competence~~competency;

production speed and cycle time;

time-to-market;

· research and development ~~quality~~capabilities;

· ~~technological~~technology offering, available geometries and wafer size;

available capacity;

· ~~fab~~quality ~~and~~of manufacturing ~~yields~~process and products manufactured;

· ~~customer~~access ~~service~~to intellectual property;

manufacturing yields;

design and customer support services;

price;

· management expertise; ~~and~~

· strategic relationships.; and

stability and reliability of supply in order to be a dependable supplier.

There can be no assurance that Jazz will be able to compete effectively on the basis of all or any of these elements. Jazz’s ability to compete successfully may depend to some extent on factors outside of its control, including industry and general economic trends, import and export controls, exchange controls, exchange rate fluctuations, interest rate fluctuations and political developments. If Jazz cannot compete successfully in its industry, its business and results of operations may be harmed.

Research and Development

The semiconductor industry is characterized by rapid changes in technology. As a result, effective research and development is essential to Jazz’s success. Jazz plans to continue to invest significantly in research and development activities to develop advanced process technologies for new applications.

Jazz’s research and development activities seek to upgrade and integrate manufacturing technologies and processes. Jazz maintains a central research and development team primarily responsible for developing cost-effective technologies that can serve the manufacturing needs of its customers. A substantial portion of Jazz’s research and development activities are undertaken in cooperation with its customers and equipment vendors.

Intellectual Property

Jazz’s success depends in part on its ability to obtain patents, licenses and other intellectual property rights covering and relating to wafer manufacturing and production processes, semiconductor structures and other structures fabricated on wafers. To that end, we have acquired certain patents and patent licenses and intend to continue to seek patents. As of December 31, ~~2013~~2014, Jazz had ~~164~~165 patents in force.

Jazz Semiconductor entered into a technology license agreement that grants to it worldwide perpetual license rights from PolarFab regarding certain process technologies that it intends to incorporate into its BCD process technologies for the manufacture of wafers by Jazz for its customers and customers of PolarFab. Jazz also entered into an associated technology transfer agreement for such processes. Jazz is able to adapt, prepare derivatives based on, or otherwise exploit the licensed technology; however, Jazz is restricted from using certain licensed BCD process technologies with respect to motor controllers for hard disk drives. Jazz is also permitted to sublicense the process technologies to any of its future manufacturing suppliers to manufacture wafers using these process technologies for Jazz and its customers.

During 2004, Jazz Semiconductor entered into a cross license and release agreement with an unrelated third party. The license includes technology developed by the third party related to Jazz’s manufacturing process. In exchange for the license and release, Jazz agreed to make certain payments through 2007. Jazz’s parent Tower entered into a cross license and release agreement with an unrelated third party under which some Jazz patents were licensed to the third party and Jazz received a license to some of the third party’s patents. Jazz may choose to obtain additional patent licenses or enter into additional patent cross-licenses in the future. However, there can be no assurance as to whether future agreements will be reached or as to the terms of any agreement that is consummated.

In connection with Jazz Semiconductor’s separation from Conexant, Conexant contributed to Jazz Semiconductor a substantial portion of its intellectual property, including software licenses, patents and intellectual property rights in know-how related to its business. Jazz Semiconductor agreed to license back to Conexant and its affiliates intellectual property rights relating to the intellectual property contributed to Jazz Semiconductor by Conexant. Conexant may use this license to have Conexant products produced by third-party manufacturers and to sell such products, but must obtain Jazz Semiconductor’s prior consent to sublicense these rights.

Jazz’s ability to compete depends on its ability to operate without infringing the proprietary rights of others. The semiconductor industry is generally characterized by frequent litigation regarding patent and other intellectual property rights. As is the case with many companies in the semiconductor industry, we have from time to time received communications from third parties asserting that their patents cover certain of Jazz’s technologies or alleging infringement of their intellectual property rights. Jazz expects that it will receive similar communications in the future. Irrespective of the validity or the successful assertion of such claims, Jazz could incur significant costs and devote significant management resources to the defense of these claims, which could seriously harm the Company.

Environmental Matters

Semiconductor manufacturing processes generate solid, gaseous, liquid and other industrial wastes in various stages of the manufacturing process. We have installed various types of pollution control equipment in our fab to reduce, treat and, where feasible, recycle the wastes generated infrom our manufacturing process. Jazz’s operations are subject to strict regulation and periodic monitoring by the United States Environmental Protection Agency along with several state and local environmental agencies.

We have implemented an environmental management system that assists Jazz in identifying applicable environmental regulations, evaluating compliance status and establishing timely waste preventive measures. We have also obtained certification for implementing the standard requirements of ISO 14001:2004. ISO 14001 consists of a set of standards that provide guidance on achieving an effective environmental management system.

Jazz ~~believes~~has ~~that~~adopted itmeasures ~~has~~to ~~adopted~~minimize pollution ~~measures~~ for the effective maintenance of environmental protection standards substantially consistent with U.S. federal, state and local environmental regulations. Jazz ~~also believes that it~~ is ~~currently~~ in material compliance with applicable environmental laws and regulations.

Risk Management and Insurance

As part of its risk management program, Jazz surveyed its buildings and fab for resistance to potential earthquake damage. As a result of this survey, Jazz implemented additional measures to minimize its fab’s exposure to potential damage caused by future earthquakes and seismically qualified its fab for a high magnitude earthquake.

Jazz maintains industrial special risk insurance for its facilities, equipment and inventories that covers physical damage and consequential losses from natural disasters and certain other risks up to the policy limits and except for exclusions as defined in the policies. Jazz also maintains public liability insurance for losses to others arising from its business operations and carries insurance for business interruption resulting from such events and if its suppliers are unable to provide Jazz with supplies. While Jazz believes that its insurance coverage is adequate and consistent with industry practice, significant damage to any of its or its manufacturing suppliers’ production facilities, whether as a result of fire or other causes, could seriously harm its business and results of operations.

Properties

Our headquarters and manufacturing facilities are located in Newport Beach, California. Since 2002, the Company has leased its fabrication facilities, land and headquarters from Conexant. In December 2010, Conexant sold the Company’s fabrication facilities, land and headquarters. In connection with the sale, the Company negotiated amendments to its operating leases that confirm the Company’s ability to remain in the fabrication facilities through 2027, including the Company's option to extend the lease terms at its sole discretion from 2017 to 2022 and from 2022 to 2027. Under our amended leases with the new owner, the Company’s rental payments consist of fixed base rent and fixed management fees and our pro rata share of certain expenses incurred by the landlord in the ownership of these buildings, including property taxes, building insurance and common area maintenance. These lease expenses are included in operating expenses in the accompanying consolidated statements of operations.

InThe ~~regards to the office building lease, the~~ Company’s landlord exercised its right to terminate the previous office building lease, effective January 1, 2014. The Company moved its offices to the fabrication building and to nearby new leased office space. The Company and the landlord signed an additional amendment to the amended lease to reflect termination of the office building lease and certain obligations of the Company and the landlord, including certain noise abatement actions at the fabrication facility. This office building lease termination has no impact whatsoever on the Company’s fabrication buildings, facilities and operations and the Company’s ability to remain in the fabrication facilities through 2027 (including by exercising its two consecutive five-year extension periods which it can exercise in its sole discretion).

Item 1A. Risk Factors

We have a large amount of debt which may have significant negative consequences, and there is no assurance that we will be able to obtain sufficient funding sources in a timely manner to allow us to re-finance it and/or repay our debt obligations and other liabilities.

Our debt par value as of December 31, 2013 was approximately $112.7 million, comprised of approximately $93.6 million par value of notes due June 2015 and $19.1 million borrowing under the Wells Fargo line of credit. Said debt could have significant negative consequences, including:

· requiring the dedication of a substantial portion of our expected cash flow from operations to service our debt;

· increasing our vulnerability to general 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 to less leveraged competitors and competitors that have better access to capital resources;

· affecting our ability to make interest payments and other required debt service on our debt;

· enforcement by the lenders under the Wells Fargo line of credit of their liens against our assets in the event of default; and/or

· limiting our ability to fulfill our debt obligations and other liabilities.

To serve our debt and meet our other cash needs, we may need significant amount of cash, which may not be available to us. We will need to re-finance and/or repay $93.6 million outstanding under our notes on June 30, 2015 and $19.1 million borrowings under the Wells Fargo line of credit, by 2018. Our ability to make payments on, or repay or refinance, our debt and to fund capital expenditures, working capital and other cash needs will depend largely upon our future operating performance, our ability to refinance the notes and our ability to drawdown additional funds, if required, from Wells Fargo. Our future operating performance, to a certain extent, is subject to general economic conditions, financial market, competitive, legislative, regulatory and other factors that are beyond our control. We cannot assure you that our business will generate sufficient cash flow from operations, that future borrowings will be available to us under the credit facilities or from other sources in an amount and on terms and conditions sufficient to enable us to make payments on our debt or to fund our other liquidity needs. In order to finance our short and long-term debt and other liabilities and obligations, we continue to explore measures to obtain funds from sources in addition to cash on hand and expected cash flow from our ongoing operations, including sales of assets; issuance of new securities; intellectual property licensing; improving operational efficiencies and sales; and exploring other alternatives to reduce our debt, including debt refinancing or restructuring or recycling of existing debt into new debt or other vehicles, which might be done in a structure similar to that of our July 2010 bonds exchange transaction.

In December 2013, we entered into an agreement with Wells Fargo Capital Finance, part of Wells Fargo & Company (“Wells Fargo”), for a five-year secured asset-based revolving credit line in the total amount of up to $70 million maturing in December 2018 (the “Credit Line Agreement”). Loans under the Credit Line Agreement bear interest at a rate equal to, at lender’s option, either the lender’s prime rate plus a margin ranging from 0.50% to 1.0% or the LIBOR rate plus a margin ranging from 1.75% to 2.25% per annum. The outstanding borrowing availability varies from time to time based on the levels of the Company's eligible accounts receivable, eligible equipment, eligible inventories and other terms and conditions described in the Credit Line Agreement. The Credit Line Agreement is secured by the assets of the Company. The Loan Agreement contains customary covenants and other terms, including covenants, as well as customary events of default and a requirement to provide assurance in a form satisfactory to Wells Fargo for the ability of the Company to address its approximately $94 million notes due June 2015 prior to its maturity. If we will not provide the required assurance in relation to the $93.6 million notes due June 2015 in a form satisfactory to Wells Fargo prior to the notes maturity date, as stipulated in the Wells Fargo credit line amendment, or if we default on payment of the notes at maturity, such default would trigger a cross default under the Wells Fargo line of credit, which would permit the lenders to accelerate the obligations thereunder, potentially requiring us to repay or refinance the Wells Fargo credit line. There is no assurance that we will be able to refinance the bonds and/or obtain sufficient funding from the financing sources detailed above or other sources in a timely manner to allow us to fully or partially repay our debt.

A default by us on any of our debt contract could have a material adverse effect on our operations and the interests of our creditors, and may affect our ability to fulfill our debt obligations and other liabilities.

If we are unable to manage fluctuations in cash flow, our business, operating results and financial condition may be materially adversely affected.

Our working capital requirements and cash flows are subject to quarterly and yearly fluctuations, depending on a number of factors. If we are unable to manage fluctuations in cash flow, our business, operating results and financial condition may be materially adversely affected. Factors which could lead us to suffer cash flow fluctuations include:

· fluctuations in the level of revenues from our operating activities;

· fluctuations in the collection of receivables;

· the timing and size of capital expenditures; and

· the repayment schedules of our debt service obligations under our short-term and long-term liabilities.

In addition, we may need to devote a significant portion of our operating cash flow to pay principal and interest on our debt. The use of cash to finance our debt could leave us with insufficient funds to adequately finance our operating activities and capital expenditures, which could adversely affect our business.

A global recession, unfavorable economic conditions and/or a credit crisis may adversely affect our results.

A downturn or a weakness in the semiconductor industry and/or in the global economy and/or in the Company's customer base and/ or customers' products base, may adversely affect the Company’s ability to maintain its customers' existing demand for products, attract new customers and new business to its current fabs, increase the utilization rates in its manufacturing facilities and maintain them at a high level that would suffice to cover its fixed costs, maintain commercial relationships with its customers, suppliers, and creditors, including its lenders, continue its capacity growth, and improve the Company’s future financial results and position, including its ability to raise funds in the capital markets, and to fulfill its debt obligations and other liabilities, including to refinance its debt and liabilities and/ or pay them in a timely manner, comprised mainly of bank’ loans and debentures. There is no assurance that such downturn will not occur. The effects of such a downturn may include global decreased demand, downward price pressure, excess inventory and unutilized capacity worldwide, which may negatively impact consumer and customer demand for the Company’s products and the end products of the Company’s customers.

Our operating results fluctuate from quarter to quarter which makes it difficult to predict our future performance.

Our revenues, expenses and operating results have varied significantly in the past and may fluctuate significantly from quarter to quarter in the future due to a number of factors, many of which are beyond our control. These factors include, among others:

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;

Shifts by integrated device manufacturers and customers between internal and outsourced production;

Inventory and supply chain management of our customers;

The loss of a key customer, 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 or the financial condition of our customers;

The rescheduling or cancellation of planned capital expenditures;

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 with no significant additional costs;

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

Mergers and acquisitions in the semiconductor industry and its 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;

· Environmental events or industrial accidents such as fire or explosions;

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 the qualification of new products;

Increase in the fair value of our bank loans and debentures; and

· Changes in accounting rules and new accounting rules affecting our results.

Furthermore, integrated device manufacturers continue to design and manufacture integrated circuits in their own fabrication facilities. There is a possibility that in certain periods or under certain circumstances such as low demand, they will choose to manufacture their products in their facilities instead of manufacturing products at external foundries. If our customers will choose to manufacture internally rather than manufacture at our facilities, our business may be negatively impacted.

Due to the factors noted above and other risks discussed in this section, many of which are beyond our control, investors should not rely on quarter-to-quarter comparisons to predict our future performance. Unfavorable changes in any of the above factors may seriously harm our Company, including our operating results, financial condition and ability to maintain our operations.

A global recession, unfavorable economic conditions and/or a credit crisis may adversely affect our results.

A downturn or a weakness in the semiconductor industry and/or in the global economy and/or in the Company's customer base and/or customers' products base, may adversely affect the Company’s ability to maintain its customers' existing demand for products, attract new customers and new business, increase the utilization rates in its manufacturing facility and maintain it at a high level that would suffice to cover its substantial fixed costs, maintain commercial relationships with its customers, suppliers, and creditors, including its lenders, continue its capacity growth, and improve the Company’s future financial results and position, including its ability to raise funds in the capital markets, and to fulfill its debt obligations and other liabilities, including to refinance its debt and liabilities and/or pay them in a timely manner, comprised mainly of debentures and the bank credit line. There is no assurance that such downturn will not occur. The effects of such a downturn may include global decreased demand, downward price pressure, excess inventory and unutilized capacity worldwide, which may negatively impact consumer and customer demand for the Company’s products and the end products of the Company’s customers.

If we are unable to manage fluctuations in cash flow, our business, operating results and financial condition may be materially adversely affected.

fluctuations in the level of revenues from our operating activities;

fluctuations in the collection of receivables;

the timing and size of payables;

the timing and size of capital expenditures; and

the repayment schedules of our debt service obligations under our short-term and long-term liabilities.

We have debt which may have significant negative consequences, and there is no assurance that we will be able to obtain sufficient funding sources in a timely manner to allow us to re-finance it and/or repay our debt obligations and other liabilities.

Our debt par value as of December 31, 2014 was approximately $122 million, comprised of approximately $45 million par value of notes originally due June 2015 (the “2010 Notes”) (which were early redeemed in January 2015), $58 million par value of convertible notes due December 2018 (the “2014 Notes”) and $19 million borrowing under the Wells Fargo line of credit which matures in December 2018. Said debt could have significant negative consequences, including:

requiring the use of a substantial portion of our expected cash flow from operations to service our debt rather than investing our cash flows to fund our growth plans, working capital and capital expenditures;

increasing our vulnerability to general 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 to less leveraged competitors and competitors that have better access to capital resources;

enforcement by the lenders under the Wells Fargo line of credit of their liens against our assets in the event of default; and/or

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

To serve our debt and meet our other cash needs, we may need significant amounts of cash, which may not be available to us. We may need to re-finance and/or repay $58 million of 2014 Notes and $19 million borrowed under the Wells Fargo line of credit. Such re-financing and/or repayment amounts may not be available to us in a timely manner or in sufficient amounts to cover our debt and may adversely affect our business and our financial position and may result in higher financing expenses.

Our ability to make payments on, or repay or refinance, our debt and to fund capital expenditures, working capital and other cash needs will depend largely upon our future operating performance, our ability to repay or refinance the notes and our ability to drawdown additional funds, if required, from Wells Fargo. Our future operating performance, to a certain extent, is subject to general economic conditions, financial market, competitive, legislative, regulatory and other factors that are beyond our control. We cannot assure you that our business will generate sufficient cash flow from operations, that future borrowings will be available to us under the Wells Fargo line of credit or from other sources in an amount and on terms and conditions sufficient to enable us to make payments on our debt or to fund our other liquidity needs. In order to finance our debt and other liabilities and obligations, we continue to explore measures to obtain funds from sources in addition to cash on hand and expected cash flow from our ongoing operations, including sales of assets; issuance of new securities; intellectual property licensing; improving operational efficiencies and sales; and exploring other alternatives to reduce our debt, including debt refinancing or restructuring or recycling of existing debt into new debt or other vehicles.

A default by us on any of our debt contracts could have a material adverse effect on our operations and the interests of our creditors, and may affect our ability to fulfill our debt obligations and other liabilities.

The lack of a significant backlog resulting from our customers not placing purchase orders far in advance makes it difficult for us to forecast our revenues in future periods.

Our customers generally do not place purchase orders far in advance, partly due to the cyclical nature of the semiconductor industry. As a result, we do not typically operate with any significant backlog. The lack of a significant backlog makes it difficult for us to forecast our revenues in future periods. Moreover, since our expense levels are based in part on our expectations of future revenues, we may be unable to adjust costs in a timely manner to compensate for revenue shortfalls. We expect that in the future our revenues in any quarter will continue to be substantially dependent upon purchase orders received in that quarter and in the immediately preceding quarter. We cannot assure you that any of our customers will continue to place orders with us in the future at the same levels as in prior periods. If orders received from our customers differ adversely from our expectations with respect to the product, volume, price or other items, our operating results and financial condition may be adversely affected.

We occasionally manufacture wafers based on forecasted demand, rather than actual orders from customers. If our forecasted demand exceeds actual demand, we may have obsolete inventory, which could have a negative impact on our results of operations.

We generally do not manufacture wafers unless we receive a customer purchase order. On occasion, we may produce wafers in excess of customer orders based on forecasted customer demand, because we may forecast future excess demand or because of future capacity constraints. If we manufacture more wafers than are actually ordered by customers, we may be left with excess inventory that may ultimately become obsolete and must be scrapped when it cannot be sold. Significant amounts of obsolete inventory could have a negative impact on our results of operations.

WeOur ~~have~~business amay ~~history~~be ofadversely ~~operating~~affected ~~losses~~if ~~and~~we ~~may~~are ~~not~~unable beto ~~able~~operate our facilities at utilization rates that are high enough to ~~achieve~~maintain orrevenue levels that would cover our fixed costs, maintain ~~profitability~~operating onprofits aand ~~consistent~~allow ~~basis~~us to be profitable.

WeAs ~~have~~is ~~incurred~~common ~~net losses~~ in ~~recent~~our ~~quarters~~industry, ~~and~~a welarge ~~may~~portion ~~incur~~of ~~net~~our ~~losses~~total incosts ~~the~~is ~~future.~~comprised ~~Because~~of fixed costs, ~~represent~~associated amainly ~~substantial~~with ~~portion~~our ofmanufacturing ~~the~~facility, ~~operating~~while our variable costs ofare ~~semiconductor~~relatively ~~manufacturing~~small. ~~operations~~Therefore, weduring ~~must~~periods ~~operate~~when our facility manufactures at high utilization rates, inwe ~~order~~are able to ~~reduce~~cover our ~~losses~~costs. However, at times when the utilization rate is low, the reduced revenues may not cover all of the costs since a large portion of them are fixed costs and ~~achieve~~remain constant, irrespective of the fact that fewer wafers were manufactured. In addition, depreciation costs in our industry are high, which has resulted in GAAP operating and/or net ~~income~~loss for certain quarters in the last number of years. If customer demand for our products is not sufficient, or if we doare unable to timely address the increased customer demands, we may not be able to operate our facility consistently at high utilization rates, wewhich ~~will~~may benot ~~unable~~enable us to fully cover all of our costs, achieve and maintain operating profits or achieve net profits. In addition, ~~which~~we ~~could~~may ~~adversely~~be ~~affect~~unable to generate enough cash from operations that would cover our ~~business~~fixed costs, capital expenditures, liabilities and debt payments. We cannot assure ~~you~~ that we will be profitable on a quarterly or annual basis in the future.

Our sales cycles are typically long and orders received may not meet our expectations, which may adversely affect our operating results.

Our sales cycles, which we measure from first contact with a customer to first shipment of a product ordered by the customer, vary substantially and may last as long as two years or more, particularly for new technologies. In addition, even after we make initial shipments of prototype products, it may take several more months to reach full production of the product. As a result of these long sales cycles, we may be required to invest substantial time and incur significant expenses in advance of the receipt of any product order and related revenue. If orders ultimately received differ from our expectations with respect to the product, volume, price or other items, our operating results and financial condition may be adversely affected.

Demand for our foundry services is dependent on the demand in our customers’ end markets.

Our customers generally use the semiconductors produced in our fab in a wide variety of applications. We derive a significant percentage of our operating revenues from customers who use our manufacturing services to make semiconductors for communication devices, consumer electronics, PCs and other computers. Any significant decrease in the demand for communication devices, consumer electronics, PCs or other computers may decrease the demand for our services and products. In addition, if the average selling prices of communication devices, consumer electronics, PCs or other computers decline significantly, we will be pressured to further reduce our selling prices, which may reduce our revenues and, therefore, may reduce our margins significantly. As demonstrated by downturns in demand for high technology products in the past, market conditions can change rapidly, without apparent warning or advance notice. In such instances, our customers will experience inventory buildup and/or difficulties in selling their products and, in turn, will reduce or cancel orders for wafers from us. The timing, severity and recovery of these downturns cannot be predicted accurately or at all. When they occur, our business and profitability may suffer.

In order for demand for our wafer fabrication services to increase, the markets for the end products using these services must develop and expand. Because our services may be used in many new applications, it is difficult to forecast demand. If demand is lower than expected, we may have excess capacity, which may adversely affect our financial results. If demand is higher than expected, we may be unable to fill all of the orders we receive, which may result in the loss of customers and revenue.

Our sales cycles are typically long and orders received may not meet our expectations, which may adversely affect our operating results.

Our sales cycles, which we measure from first contact with a customer to first shipment of a product ordered by the customer, vary substantially and may last as long as two years or more, particularly for new technologies. In addition, even after we make initial shipments of prototype products, it may take several more months to reach full production of the product. As a result of these long sales cycles, we may be required to invest substantial time and incur significant expenses in advance of the receipt of any product order and related revenue. If orders ultimately received differ from our expectations with respect to the product, volume, price or other items, we will have excess capacity that we may not be able to fill within a short period of time, resulting in lower utilization of our facility,which may adversely affect our operating results, financial condition and ability to maintain our operations.

Demand for our foundry services is dependent on the demand in our customers’ end markets. A decrease in demand for, or selling prices of, products that contain semiconductors may decrease the demand for our services and products and reduce our margins.

Our customers generally use the semiconductors produced in our fab in a wide variety of applications. We derive a significant percentage of our operating revenues from customers who use our manufacturing services to make semiconductors for communication devices, consumer electronics, PCs and other electronic devices. Any significant decrease in the demand for communication devices, consumer electronics, PCs or other electronic devices may decrease the demand for our services and products. In addition, if the average selling prices of communication devices, consumer electronics, PCs or other electronic devices decline significantly, we will be pressured to further reduce our selling prices, which may reduce our revenues and, therefore, may reduce our margins significantly. As demonstrated by downturns in demand for high technology products in the past, market conditions can change rapidly, without apparent warning or advance notice. In such instances, our customers will experience inventory buildup and/or difficulties in selling their products and, in turn, will reduce or cancel orders for wafers from us. The timing, severity and recovery of these downturns cannot be predicted accurately or at all. When they occur, our business and profitability may suffer.

In order for demand for our wafer fabrication services to increase, we shall attract new customers or the markets for the end products using these services must develop and expand. Because our services may be used in many new applications, it is difficult to forecast demand. If demand is lower than expected, we may have excess capacity, which may adversely affect our financial results. If demand is higher than expected, we may be unable to fill all of the orders we receive, which may result in the loss of customers and revenue.

The cyclical nature of the semiconductor industry and any resulting periodic overcapacity may lead to erosion of sale prices and make our business and operating results particularly vulnerable to economic downturns, and overcapacity in the semiconductor industry may reduce our revenues, earnings and margins.

The semiconductor industry has historically been highly cyclical and subject to significant and often rapid increases and decreases in product demand. Traditionally, companies in the semiconductor industry have expanded aggressively during periods of decreased demand in order to have the capacity needed to meet expected demand in future upturns, including through acquiring additional manufacturing facilities. If actual demand does not increase or declines, or if companies in the industry expand too aggressively, the industry may experience a period in which industry-wide capacity exceeds demand. This could result in overcapacity and excess inventories, potentially leading to rapid erosion of average sale prices, as well as to underutilization of manufacturing facilities that as a result ~~are~~may be unable to cover their fixed costs and other liabilities, potentially leading to such facilities to cease their operations. The prices that we can charge our customers for our services are significantly related to the overall worldwide supply of integrated circuits and semiconductor products. The overall supply of semiconductor products is based in part on the capacity of other companies, which is outside of our control. In periods of overcapacity, despite the fact that we utilize niche technologies and manufacture specialty products, we may have to lower the prices we charge our customers for our services which may reduce our margins and weaken our financial condition and results of operations. We cannot give an assurance that an increase in the demand for foundry services in the future will not lead to under-capacity, which could result in the loss of customers and materially adversely affect our revenues, earnings and margins. Analysts believe that such patterns may repeat in the future. The overcapacity, under-utilization and downward price pressure characteristic of a downturn in the semiconductor market and/or in the global economy, such as experienced several times in the past, may negatively impact consumer and customer demand for the Company’s products, the end products of the Company’s customers and the financial markets, which may affect our ability to raise funds and/or re-structure and/or re-finance our debt and/or service our other liabilities.

If we do not maintain our current customers and attract additional customers, our business may be adversely affected.

Loss or cancellation of business from, or decreases in the sales volume or sales prices to, our significant customers, or our failure to replace them with other customers, could seriously harm our financial results, revenue and business. Because the sales cycle for our services typically exceeds one year, if our customers order significantly fewer wafers than forecasted or if we lose customers, we will have excess capacity that we may not be able to fill within a short period of time, resulting in lower utilization of our facilities. We may have to reduce prices in order to try to sell more wafers and attract additional customers in order to utilize the excess capacity. In addition to the revenue loss that could result from unused capacity or lower sales prices, we might have difficulty adjusting our costs to reflect the lower revenue in a timely manner, which could harm our financial results.

We are substantially dependent upon our relationships with certain customers, and the termination or non-renewal of our agreements or other arrangements with these customers or reduction in the orders received from these customers, may materially and negatively impact our financial position and financial results.

Collectively, our top ~~two~~four customers accounted for 3053% of our revenues in ~~2013~~2014, with one of our customers that accounted for 33% of our revenue in 2014 and from which we expect revenue to be at approximately the same percentage level in 2015. We expect to continue to receive a significant portion of our revenue from a limited number of customers for the foreseeable future. The loss or reduction in volume of any one of these customers, whether due to insolvency, their unwillingness or inability to perform their obligations under their respective relationships with us, or ifour weinability ~~are~~to ~~not~~produce ~~able~~products at their requested quality, cycle time and/or yield, or our inability to renew on commercially reasonable terms any of their respective arrangements with us, or maintain the high level of orders received from these customers, may materially and negatively impact our overall business and our consolidated financial position and financial results.

If we do not maintain and develop our technology processes and services, we will lose customers and may be unable to attract new ones.

The semiconductor market is characterized by rapid change, including the following:

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.

Our ability to maintain our current customer base and attract new customers is dependent in part on our ability to continuously develop and introduce to production advanced specialized manufacturing process technologies and purchase the appropriate equipment. If we are unable to successfully develop and introduce these processes to production in a timely manner or at all, or if we are unable to purchase the appropriate equipment required for such processes, we may be unable to maintain our current customer base and may be unable to attract new customers.

The semiconductor foundry business is highly competitive; our competitors may have competitive advantages over us.

The semiconductor foundry industry is highly competitive. We compete with more than ten independent dedicated foundries, the majority of which are located in Asia-Pacific, including foundries based in Taiwan, China, Korea and Malaysia, and with over 20 integrated semiconductor and end-product manufacturers that allocate a portion of their manufacturing capacity to foundry operations. The foundries with which we compete benefit from their close proximity to other companies involved in the design and manufacture of integrated circuits, or ICs.

As our competitors continue to increase their manufacturing capacity, there could be an increase in specialty semiconductor capacity during the next several years. As specialty capacity increases there may be more competition and pricing pressure on our services, and underutilization of our capacity may result. Any significant increase in competition or pricing pressure may erode our profit margins, weaken our earnings or increase our losses.

In addition, some semiconductor companies have advanced their CMOS designs to 9045 nanometer, ~~65 nanometer~~ or smaller geometries. These smaller geometries may provide the customer with performance and integration features that may be comparable to, or exceed, features offered by our specialty process technologies, and may be more cost-effective at higher production volumes for certain applications, such as when a large amount of digital content is required in a mixed-signal semiconductor and less analog content is required. Our specialty processes will therefore compete with these processes for customers and some of our potential and existing customers could elect to design these advanced CMOS processes into their next generation products. We are not currently capable, and do not currently plan to become capable, of providing CMOS processes at these smaller geometries. If our potential or existing customers choose to design their products using these advanced CMOS processes, our business may suffer.

In addition, many of our competitors may have one or more of the following competitive advantages over us:

greater manufacturing capacity;

multiple and more advanced manufacturing facilities;

more advanced technological capabilities;

a more diverse and established customer base;

greater financial, marketing, distribution and other resources;

a better cost structure; and/or

better operational performance in cycle time and yields.

If we do not compete effectively, our business and results of operations may be adversely affected.

~~Furthermore,~~If ~~integrated~~we ~~device~~experience ~~manufacturers~~difficulty ~~continue to design and manufacture integrated circuits~~ in ~~their~~achieving ~~own~~acceptable ~~fabrication~~device ~~facilities.~~yields, ~~There~~good isquality, ahigh ~~possibility~~product ~~that~~yields, ingood ~~certain~~product ~~periods~~performance orand ~~under~~delivery ~~certain~~times ~~circumstances such~~ as ~~low~~a ~~demand,~~result ~~they will choose to manufacture their products in their facilities instead~~ of manufacturing ~~products~~problems, ~~at external foundries. If~~ our ~~customers~~business ~~will~~and ~~choose~~financial toposition ~~manufacture~~could ~~internally rather than manufacture at our facilities, our business may~~ be ~~negatively~~seriously ~~impacted~~harmed.

IfThe weprocess ~~experience~~technology ~~difficulty~~for the manufacture of semiconductor wafers is highly complex, requires advanced and costly equipment and is constantly being modified in an effort to improve device yields, product performance and delivery times. Microscopic impurities such as dust and other contaminants, difficulties in the production process, defects in the key materials and tools used to manufacture a wafer and other factors can cause wafers to be rejected or individual semiconductors on specific wafers to be non-functional, as well as bottle necks caused in production line due to high demand to certain process flows or machines. We may experience difficulty achieving acceptable device yields, product performance and product delivery times in the future as a result of manufacturing problems,. ~~our~~Any ~~business~~of ~~could~~these beproblems could seriously ~~harmed~~harm our operating results, financial condition and ability to maintain our operations.

~~The~~Although ~~process~~we ~~technology~~have ~~for~~been ~~the~~enhancing ~~manufacture~~our ofmanufacturing ~~semiconductor~~capabilities ~~wafers~~and ~~is highly complex~~efficiency, ~~requires~~from ~~advanced~~time ~~and costly equipment and is constantly being modified in an effort~~ to ~~improve~~time ~~device~~we ~~yields,~~have ~~product~~experienced ~~performance~~production ~~and delivery times. Microscopic impurities such as dust and other contaminants,~~ difficulties inthat ~~the~~have ~~production~~caused ~~process,~~delivery ~~defects~~delays ~~in the key materials~~ and ~~tools~~quality ~~used~~control to manufacture a wafer and other factors can cause wafers to be rejected or individual semiconductors on specific wafers to be non-functional. We may experience difficulty achieving acceptable device yieldsproblems, ~~product~~as ~~performance~~is ~~and~~common ~~product delivery times~~ in the ~~future~~semiconductor ~~as a result of manufacturing problems~~industry. ~~Any~~In ofthe ~~these problems could seriously harm our operating results~~past, ~~financial~~we ~~condition~~have ~~and~~encountered ~~ability~~the tofollowing ~~maintain our operations.~~problems:

Although we have been enhancing our manufacturing capabilities and efficiency, from time to time we have experienced production difficulties that have caused delivery delays and quality control problems, as is common in the semiconductor industry. In the past we have encountered the following problems:

difficulties in upgrading or expanding existing facilities;

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

· ~~changing~~unexpected events, such as an electricity outage or ~~upgrading~~misprocess, ~~our~~affecting ~~process~~the ~~technologies~~manufacturing process;

difficulties in changing or upgrading our process technologies;

raw materials shortages and impurities; and

delays in delivery and shortages of spare parts and in maintenance of our equipment.

Should these problems repeat, we may suffer delays in delivery and/or loss of reputation, business and revenues. Any of these problems could seriously harm our operating results, financial condition and ability to maintain our operations.

If we are unable to purchase equipment and raw materials, we may not be able to manufacture our products in a timely fashion, which may result in a loss of existing and potential new customers.

To increase the production capability of our facility and to maintain the quality of production in our facility, we must procure additional equipment. In periods of high market demand, the lead times from order to delivery of manufacturing equipment could be as long as 12 to 18 months. We also procure used equipment which can take longer to qualify into the manufacturing process, hence we may not be able to manufacture our products in a timely manner. In addition, our manufacturing processes use many raw materials, including silicon wafers, chemicals, gases and various metals, and require large amounts of fresh water and electricity. Manufacturing equipment and raw materials generally are available from several suppliers. In several instances, however, we purchase equipment and raw materials from a single source. Shortages in supplies of manufacturing equipment and raw materials could occur due to an interruption of supply or increased industry demand. Any such shortages could result in production delays that could result in a loss of existing and potential new customers. This may have a material adverse effect on our business and financial condition.

We depend on intellectual property rights of third parties and failure to maintain or acquire licenses could harm our business.

We depend on third party intellectual property in order for us to provide certain foundry and design services to our clients. If problems or delays arise with respect to the timely development, quality and provision of such intellectual property to us, the design and production of our customers’ products could be delayed, resulting in underutilization of our capacity. If any of our third party intellectual property vendors goes out of business, liquidates, merges with, or is acquired by, another company that discontinues the vendor’s previous line of business, or if we fail to maintain or acquire licenses to such intellectual property for any other reason, our business may be adversely affected. In addition, license fees and royalties payable under these agreements may impact our margins and operating results.

Failure to comply with the intellectual property rights of third parties or to defend our intellectual property rights could harm our business.

Our ability to compete successfully depends on our ability to operate without infringing on the proprietary rights of others and defending our intellectual property rights. Because of the complexity of the technologies used and the multitude of patents, copyrights and other overlapping intellectual property rights, it is often difficult for semiconductor companies to determine infringement. Therefore, the semiconductor industry is characterized by frequent litigation regarding patents, trade secrets and other intellectual property rights. We have been subject to intellectual property claims from time to time, some of which have been resolved through license agreements, the terms of which have not had a material effect on our business.

Because of the nature of the industry, we may continue to be a party to infringement claims in the future. In the event any third party were to assert infringement claims against us or our customers, we may have to consider alternatives including, but not limited to:

negotiating cross-license agreements;

seeking to acquire 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 were unable to design around the allegedly infringed patents;

fighting the matter in court and paying substantial monetary damages in the event we lose; or

seeking to develop non-infringing technologies, which may not be feasible.

Any one or several of these alternatives could place substantial financial and administrative burdens on us and hinder our business. Litigation, which could result in substantial costs to us and diversion of our resources, may also be necessary to enforce our patents or other intellectual property rights or to defend us or our customers against claimed infringement of the rights of others. If we fail to obtain certain licenses or if litigation relating to alleged patent infringement or other intellectual property matters occurs, it could prevent us from manufacturing particular products or applying particular technologies, which could reduce our opportunities to generate revenues.

As of December 31, ~~2013~~2014, we had ~~164~~165 patents in force. We intend to continue to file patent applications when appropriate. The process of seeking patent protection may take a long time and be expensive. We cannot assure you that patents will be issued from pending or future applications or that, if patents are issued, they will not be challenged, invalidated or circumvented or that the rights granted under the patents will provide us with meaningful protection or any commercial advantage. In addition, we cannot assure you that other countries in which we market our services and products will protect our intellectual property rights to the same extent as the United States. Further, we cannot assure you that we will at all times enforce our patents or other intellectual property rights or that courts will uphold our intellectual property rights, or enforce the contractual arrangements that we have entered into to protect our proprietary technology, which could reduce our opportunities to generate revenues.

Effective intellectual property enforcement may be unavailable or limited in some foreign countries. It may be difficult for us to protect our intellectual property from misuse or infringement by other companies in these countries. Our inability to enforce our intellectual property rights in some countries may harm our business and results of operations.

We could be seriously harmed by failure to comply with environmental regulations.

Our business is subject to a variety of federal, state and local laws and governmental regulations relating to the use, discharge and disposal of toxic or otherwise hazardous materials used in our production processes. If we fail to use, discharge or dispose of hazardous materials appropriately, or if applicable environmental laws or regulations change in the future, we could be subject to substantial liability or could be required to suspend or adversely modify our manufacturing operations.

We are subject to the risk of loss due to fire because the materials we use in our manufacturing processes are highly flammable.

We use highly flammable materials such as silane and hydrogen in our manufacturing processes and are therefore subject to the risk of loss arising from fires. The risk of fire associated with these materials cannot be completely eliminated. Although we maintain insurance policies to reduce potential losses that may be caused by fire, including business interruption insurance, our insurance coverage may not be sufficient to cover all of our potential losses due to a fire. If our fab were to be damaged or cease operations as a result of a fire, and if our insurance proves to be inadequate, it may reduce our manufacturing capacity and revenues. In addition, a power outage, even of very limited duration, caused by a fire may result in a loss of wafers in production, deterioration in our fab yield and substantial downtime to reset equipment before resuming production.

Possible product returns could harm our business.

Products manufactured by us may be returned within specified periods if they are defective or otherwise fail to meet customers’ prior agreed upon specifications. ~~Product~~Although product returns inhave ~~excess~~historically been less than 1% of revenues, future product returns which exceed our established provisions by significant amounts, if any, may have an adverse effect on our business and financial condition.

We are subject to risks related to our international operations.

We have made substantial revenue from customers located in Asia-Pacific and in Europe. Because of our international operations, we are vulnerable to the following risks:

· we price our products primarily in US dollars; if the Euro, Yen or other currencies weaken relative to the US dollar, our products may be relatively more expensive in these regions, which may affect our ability to be competitive compare to the local manufactures in these regions and could result in a decrease in our revenue;

the burdens and costs 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 tax rules and regulations;

weak protection of our intellectual property rights;

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.

In addition, the United States and foreign countries may implement quotas, duties, taxes or other charges or restrictions upon the importation or exportation of our products, leading to a reduction in sales and profitability in that country. The geographical distance between the United States, Asia and Europe also creates a number of logistical and communication challenges. We cannot assure you that we will not experience any serious harm in connection with our international operations.

Our business could suffer if we are unable to retain and recruit qualified personnel.

We depend on the continued services of our executive officers, senior managers and skilled technical and other personnel. Our business could suffer if we lose the services of some of these personnel because we may not be able to find and adequately integrate replacement personnel into our operations in a timely manner. We seek to recruit highly qualified personnel and there is intense competition for the services of these personnel in the semiconductor industry. Competition for personnel may increase significantly in the future as new fabless semiconductor companies as well as new semiconductor manufacturing facilities are established. Our ability to retain existing personnel and attract new personnel is in part dependent on the compensation packages we offer. As demand for qualified personnel increases, we may be forced to increase the compensation levels and to adjust the cash, equity and other components of compensation we offer our personnel.

Our business plan is premised on the increasing use of outsourced foundry services by both fabless semiconductor companies and integrated device manufacturers for the production of semiconductors using specialty process technologies. Our business may not be successful if this trend does not continue to develop in the manner we expect.

We operate as an independent semiconductor foundry focused primarily on specialty process technologies. Our business model assumes that demand for these processes within the semiconductor industry will grow and will follow the broader trend towards outsourcing foundry operations. Although the use of foundries is established and growing for standard CMOS processes, the use of outsourced foundry services for specialty process technologies is less common and may never develop into a significant part of the semiconductor industry. If fabless companies and vertically integrated device manufacturers choose not to access independent specialty foundry capacity, the manufacture of specialty process technologies may not follow the trend of standard CMOS processes. If the broader trend to outsourced foundry services does not prove applicable to the specialty process technologies that we are focused on, our business, results of operations and cash flow may be harmed.

If we are not able to continue transitioning our product mix from standard CMOS process technologies to specialty process technologies, our business and results of operations may be harmed.

Since Jazz Semiconductor’s separation from Conexant, it has focused its research and development and marketing efforts primarily on specialty process technologies and adding new customers in the specialty field. These specialty process technologies include advanced analog, radio frequency, high voltage, bipolar and silicon germanium bipolar CMOS processes and double-diffused metal oxide semiconductor processes. To be competitive, reduce our dependence on standard process technologies and successfully implement our business plan, we will need to continue to derive a significant percentage of our revenues from specialty process technologies. In order to expand and diversify our customer base, we need to identify and attract customers who will use the specialty process technologies we provide. We cannot assure you that demand for our specialty process technologies will increase or that we will be able to attract customers who use them.

In addition, because we intend to continue to focus on specialty process technologies, we do not plan to invest in the research and development of more advanced standard CMOS processes. As standard CMOS process technologies continue to advance, we will not remain competitive in these process technologies. If Jazz’s current customers switch to another foundry for standard CMOS process technologies and we are unable to increase our revenues from our specialty process technologies, Jazz’s business, results of operations and cash flows may be harmed.

Our historical financial performance may not be indicative of our future results.

Since Jazz Semiconductor’s inception, a large percentage of its revenues ~~have~~has primarily been derived from products manufactured using standard CMOS processes that are no longer the focus of its business. As customers design their next generation products for smaller geometry CMOS processes, they may look to other foundries to provide their requisite manufacturing capacity. As a result, we may not continue to generate the same level of revenues from our standard CMOS processes in the future as it shifts our focus and operations to our more specialized processes: advanced analog, radio frequency, high voltage, bipolar and silicon germanium bipolar CMOS processes and double-diffused metal oxide semiconductor processes. If our potential or existing customers design their products using smaller geometry CMOS processes at other foundries, and we are unable to increase the revenues we derive from our specialty process technologies, our business, results of operations and cash flows may be harmed.

~~Failure~~Our ~~to comply with existing or future governmental regulations by us, our~~ manufacturing suppliers or our customers could reduce our sales or require design modifications due to noncompliance with existing or future governmental regulations.

The semiconductors we produce and the export of technologies used in our manufacturing processes may be subject to U.S. export control and other regulations asimplemented ~~well as various standards established~~ by ~~authorities~~the inU.S. and/or other countries. Failure to comply with existing or evolving U.S. or foreign governmental regulation or to obtain timely domestic or foreign regulatory approvals or certificates could materially harm our business by reducing our sales, ~~requiring modifications to our processes that we license to our foreign manufacturing suppliers,~~ or requiring extensive modifications to our customers’ products. Neither we nor our customers may export products using or incorporating controlled technology without obtaining an export license. In addition, when we face excess demand, we may be dependent on our manufacturing suppliers in China for a significant portion of our planned manufacturing capacity, and export licenses may be required in order for us to transfer technology related to our manufacturing processes to our foreign manufacturing suppliers. These restrictions may make foreign competitors facing less stringent controls on their processes and their customers’ products more competitive in the global market than weus or our customers. The U.S. government may not approve any pending or future export license requests. In addition, the list of products and countries for which export approval is required, and the regulatory policies with respect thereto, could be revised from time to time. ~~Governmental restrictions may make foreign competitors facing less stringent controls on their processes and their customers’ products more competitive in the global market than us or our customers.~~

We could also be adversely impacted by continued instability or negative impact on economic growth resulting from the possibility that U.S. lawmakers may fail to pass legislation to avoid mandatory government spending restrictions and/or raise the federal debt ceiling.16

A significant portion of our workforce is unionized, and our operations may be adversely affected by work stoppages, strikes or other collective actions which may disrupt our production and adversely affect the yield and deliveries of our fab.

A significant portion of our employees at our Newport Beach, California fab are represented by a union and covered by a collective bargaining agreement that is scheduled to expire in May 2015. and is currently being negotiated for renewal We cannot predict the effect that continued union representation or future organizational activities will have on our business. We cannot assure you that we will not experience a material work stoppage, strike or other collective action in the future, which may disrupt our production and adversely affect our ~~customer~~yield ~~relations~~and deliveries of our fab, resulting in negative impacts to our customers, financial position and ~~operational~~financial results.

If we are unable to collaborate successfully with electronic design automation vendors and third-party design service companies to meet our customers’ design needs, our business could be harmed.

We have established relationships with electronic design automation vendors and third-party design service companies. We work together with these vendors to develop complete design kits that our customers can use to meet their design needs using our process technologies. Our ability to meet our customers’ design needs successfully depends on the availability and quality of the relevant services, tools and technologies provided by electronic design automation vendors and design service providers, and on whether Jazz, together with these providers, is able to meet customers’ schedule and budget requirements. Difficulties or delays in these areas may adversely affect our ability to meet our customers’ needs, and thereby harm our business.

If the semiconductor wafers we manufacture are used in defective products, we may be subject to product liability or other claims and our reputation could be harmed.

We provide custom manufacturing to our customers who use the semiconductor wafers we manufacture as components in their products sold to end users. If these products are used in defective or malfunctioning products, we could be sued for damages, especially if the defect or malfunction causes physical harm to people. The occurrence of a problem could result in product liability claims as well as a recall of, or safety alert or advisory notice relating to, the product. We cannot assure you that our insurance policies will cover specific product liability issues or that they will be adequate to satisfy claims made against Jazz in the future. Also, we may be unable to obtain insurance in the future at satisfactory rates, in adequate amounts, or at all. Product liability claims or product recalls in the future, regardless of their ultimate outcome, could have a material adverse effect on our business, reputation, financial condition and on our ability to attract and retain customers.

Our production yields and business could be significantly harmed by natural disasters, particularly earthquakes.

Our Newport Beach, California fab is located in southern California, a region known for seismic activity. Due to the complex and delicate nature of our manufacturing processes, our facilities are particularly sensitive to the effects of vibrations associated with even minor earthquakes. Our business operations depend on our ability to maintain and protect our facilities, computer systems and personnel. We cannot be certain that precautions we have taken to seismically upgrade our fab will be adequate to protect our facilities in the event of a major earthquake, and any resulting damage could seriously disrupt our production and result in reduced revenues. In addition, we have no insurance coverage which may compensate us for losses that may be incurred as a result of earthquakes, and any such losses or damages incurred by us may have a material adverse effect on our business.

Climate change may negatively affect our business.

There is increasing concern that climate change is occurring and may have dramatic effects on human activity without aggressive remediation steps. Public expectations for reductions in greenhouse gas emissions may result in increased energy, transportation and raw material costs.

Scientific examination of, political attention to and rules and regulations on issues surrounding the existence and extent of climate change may result in increased production costs due to increase in the prices of energy and introduction of energy or carbon tax. A variety of regulatory developments have been introduced that focus on restricting or managing emissions of carbon dioxide, methane and other greenhouse gases. Enterprises may need to purchase new equipment at higher costs or raw materials with lower carbon footprints. These developments and further legislation that is likely to be enacted may adversely affect our operations. Changes in environmental regulations, such as those on the use of per fluorinated compounds, may increase our production costs, which may adversely affect our results of operation and financial condition.

In addition, more frequent droughts and floods, extreme weather conditions and rising sea levels may occur due to climate change. For example, transportation suspension caused by extreme weather conditions may harm the distribution of our products. We cannot predict the economic impact, if any, of disasters or climate change.

Compliance with the US Conflict Minerals Law may affect our ability or the ability of our suppliers to purchase raw materials at an effective cost.

Many industries rely on materials which are subject to regulation concerning certain minerals sourced from the Democratic Republic of Congo ("DRC") or adjoining countries, which include Sudan, Uganda, Rwanda, Burundi, United Republic of Tanzania, Zambia, Angola, Congo, and Central African Republic. These minerals are commonly referred to as conflict minerals. Conflict minerals which may be used in our industry or by our suppliers include Columbite-tantalite (derivative of tantalum [Ta]), Cassiterite (derivative of tin [Sn]), gold [Au], Wolframite (derivative of tungsten [W]), and Cobalt [Co]. The SEC adopted annual disclosure and reporting requirements beginning in May 2014 with respect to use of conflict minerals mined from the DRC and adjoining countries in their products. There will be costs associated with complying with these disclosure requirements, including for diligence to determine the sources of conflict minerals used in our products and other potential changes to products, processes or sources of supply as a consequence of such verification activities. Although we expect that we and our vendors will be able to comply with the requirements, there can be no guarantee that we will be able to gather all the information required from our vendors. In addition, there is increasing public sentiment that companies should avoid using conflict materials from the DRC and adjoining countries. Although we believe our suppliers do not rely on such conflict materials, there can be no guarantee that we will continue to be able to obtain adequate supplies of materials needed in our production from supply chains outside the DRC and adjoining countries. A failure to obtain necessary information or to maintain adequate supplies of materials from supply chains outside the DRC and adjoining countries may delay our production, increasing the risk of losing customers and business.

Our production may be interrupted if it cannot maintain sufficient sources of fresh water and electricity.

The semiconductor manufacturing process requires extensive amounts of fresh water and a stable source of electricity. Droughts, pipeline interruptions, power interruptions, electricity shortages or government intervention, particularly in the form of rationing, are factors that could restrict our access to these utilities in the area in which our fab is located. In particular, our Newport Beach, California fab is located in an area that is susceptible to water and electricity shortages. If there is an insufficient supply of fresh water or electricity to satisfy our requirements, itwe may need to limit or delay our production, which could adversely affect our business and operating results. Increases in utility costs would also increase our operating expenses. In addition, a power outage, even of very limited duration, could result in a loss of wafers in production, deterioration in our fab yield and substantial downtime to reset equipment before resuming production.

Risks relating to construction activities and our fabrication facility lease.

We lease our fabrication facilities and headquarters under lease contracts that ~~may~~we becan ~~extended~~ extend until 2027, through the exercise of options at our sole discretion to extend the lease periods from 2017 to 2022 and from 2022 to 2027. InA ~~2010,~~few ~~the~~years ~~properties~~ago ~~were~~our ~~sold~~landlord bybegan ~~Conexant to Uptown,~~ a ~~joint~~construction ~~venture~~project ~~consisting~~adjacent of a fund controlled by New York-based DRA Advisors LLC and an affiliate of the Shopoff Group, a real estate investment firm based in Irvine, California. In connection with the sale, we negotiated amendments to ~~our operating leases that confirm our ability to remain in~~ the fabrication ~~facilities through 2027 as described above~~facility. ~~In the amendments to our leases, we secured various contractual safeguards designed to limit and mitigate any adverse impact of construction activities on our fabrication operations.~~ Although we do not anticipate a material adverse impact to our operations, it is possible that construction activities adjacent to our fabrication facility could result in temporary reductions or interruptions in the supply of utilities to the property and that a portion or all of the fabrication facility may need to be idled temporarily during development. If construction activities limit or interrupt the supply of water, gas or electricity to our fabrication facility or cause significant vibrations or other disruptions, it could limit or delay our production, which could adversely affect our business and operating results. In addition, an unplanned power outage caused by construction activities, even of very limited duration, could result in a loss of wafers in production, deterioration in our fab yield and substantial downtime to reset equipment before resuming production. In ~~relation~~addition, to the ~~amendment~~recent tolease ~~the~~amendment ~~lease~~set ~~contract, we~~forth ~~may~~certain ~~incur~~obligations ~~substantial~~of ~~costs~~the inCompany ~~order~~and tothe ~~reach~~landlord, ~~required~~including certain noise ~~mitigation~~abatement ~~which~~actions ~~may~~at ~~affect~~the ~~our~~fabrication ~~results~~facility.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

~~Since~~The ~~2002, the~~ Company ~~has~~ leased its fabrication facilities, land and headquarters from Conexant between 2002 and 2010. In December 2010, Conexant sold the Company’s fabrication facilities, land and headquarters. In connection with the sale, the Company negotiated amendments to its operating leases that confirm the Company’s ability to remain in the fabrication facilities through 2027, including the Company's option to extend the lease terms, at its sole discretion from 2017 to 2022 and from 2022 to 2027. Under our amended leases with the new owner, the Company’s rental payments consist of fixed base rent, ~~and~~ fixed management fees and our pro rata share of certain expenses incurred by the landlord in the ownership of these buildings, including property taxes, building insurance and common area maintenance. These lease expenses are included in operating expenses in the accompanying consolidated statements of operations.

InThe ~~regards to an office building lease, the~~ Company’s landlord exercised its right to terminate the previous office building lease, ~~effective~~therefore in January 1, 2014~~. The~~ the Company moved its offices to the fabrication building and to nearby new leased office space. The Company and the landlord signed an additional amendment to the amended lease to reflect termination of the office building lease and certain obligations of the Company and the landlord, including certain noise abatement actions at the fabrication facility. This office building lease termination has no impact whatsoever on the Company’s fabrication buildings, facilities and operations and the Company’s ability to remain in the fabrication facilities at least through 2027 (including by exercising its two consecutive five-year extension periods which it can exercise in its sole discretion).

The following table provides certain information as to Jazz’s principal general offices, manufacturing and warehouse facilities lease:

Property Location		Floor Space
Newport Beach, California		~~320~~336,~~510~~500 square feet

Item 3. Legal ~~Proceedings~~roceedings

From time to time, we may be party to a variety of legal, administrative, regulatory and/or government proceedings, claims and inquiries arising in the normal course of business. While the results of any such proceedings, claims and inquiries cannot be predicted with certainty, management believes that the total liabilities to the Company that may arise as a result of such matters currently pending will not have a material adverse effect on the Company.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Effective September 19, 2008, upon completion of the Merger, the Company’s common stock, warrants and units were delisted from the American Stock Exchange. As a result of the Merger, Tower is now the only registered holder of record of the Company’s common stock.

Dividends

We have not paid any dividends on our common stock to date and do not intend to pay dividends in the near future. It is our board’s current intention to retain all earnings, if any, for use in our business operations and, accordingly, our board does not anticipate declaring any dividends in the foreseeable future. The payment of dividends, if and when paid, will be within the discretion of the board of directors and will be contingent upon our revenues and earnings, if any, capital requirements, the terms of the Credit Line Agreement with Wells Fargo and the indentures underlying our notes, and our general financial condition.

Item 6. Selected Financial Data

Omitted pursuant to General Instruction I (1) (a) and (b) of Form 10-K.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

JAZZ TECHNOLOGIES, INC.

The following discussion and analysis of the financial condition and results of operations of Jazz Technologies, Inc. for the years ended December 31, ~~2013~~2014 and December 31, ~~2012~~2013, should be read in conjunction with the consolidated financial statements and related notes as well as other information contained in this Annual Report on Form 10-K, including the information in the section of this report entitled “Risk Factors” ~~of this report~~.

FORWARD LOOKING STATEMENTS

This report on Form 10-K may contain “forward-looking statements” within the meaning of the federal securities laws made pursuant to the safe harbor provisions of the Private Securities Litigation Report Act of 1995. These statements, which represent our expectations or beliefs concerning various future events, may contain words such as “may,” “will,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” or other words indicating future results. Such statements may include but are not limited to statements concerning the following:

anticipated trends in revenues;

growth opportunities in domestic and international markets;

new and enhanced channels of distribution;

customer acceptance and satisfaction with our products;

expected trends in operating and other expenses;

purchase of raw materials at levels to meet forecasted demand;

anticipated cash and intentions regarding usage of cash;

changes in effective tax rates; and

anticipated product enhancements or releases.

These forward-looking statements are subject to risks and uncertainties, including those risks and uncertainties described in this report on Form 10-K that could cause actual results to differ materially from those anticipated as of the date of this report. We assume no obligation to update any forward-looking statements to reflect events or circumstances arising after the date of this report.

Results of Operations

For the years ended December 31, 2013 and December 31, 2012 we had net loss of $10.8 million and $7.3 million, respectively.

Results of Operations

For the years ended December 31, 2014 and December 31, 2013 we had net loss of $11.3 million and $10.8 million, respectively.

The following table sets forth certain statement of operations data as a percentage of total revenues for the periods indicated.

	Year Ended
	December 31, 2013			December 31, 2012
	December 31, 2014			December 31, 2013
Net revenues		100	%		100	%
Revenue		100	%		100	%
Cost of revenues		81.8			81.8
Cost of revenue		82.2			81.8
Gross profit		1817.28			18.2
Operating expenses:
Research and development		76.01			7.90
Selling, general and administrative		76.5			87.65
Amortization related to a lease agreement early termination		~~4.5~~--			--4.5
Total operating expenses		1912.06			1619.50
Operating income (loss)		(0.8	)		1.8
Operating profit (loss)		5.2			(0.8	)
Financing expense, net		(8.6	)		(8.2	)
Interest expenses, net		(3.8	)		(4.4	)
Other income (expense), net		(0.3	)		0.1
Other financing expense, net		(9.3	)		(4.2	)
Income tax benefit		3.2			1.9
Other expense, net		--			(0.3	)
Net loss		(6.5	)%		(4.5	)%
Income tax benefit		2.9			3.2
Net loss		(5.0	)%		(6.5	)%

Comparison of Years Ended December 31, ~~2013~~2014 and December 31, ~~2012~~2013

~~Revenues~~Revenue

Our net ~~revenues~~revenue for the year ended December 31, ~~2013~~2014 amounted to $~~166~~221.5 million as compared to $~~164~~166.45 million for the year ended December 31, ~~2012~~2013. The ~~approximate 1%~~ revenue increase is mainly attributable to ~~a 1~~27% ~~increase~~higher inquantities ~~the~~sold and 5% higher average selling price on our products ~~recorded~~ during ~~this~~the year ended December 31, 2014.

Cost of ~~Revenues~~Revenue

Our cost of ~~revenues~~revenue amounted to $~~136~~182.21 million for the year ended December 31, ~~2013~~2014 ~~comparing~~as compared to $~~134~~136.42 million for the year ended ~~2012~~December 31, 2013. The increase in cost of ~~revenues~~revenue iswas mainly ~~attributed~~due to higher ~~depreciation~~costs ~~resulted~~associated ~~from~~with ~~Cap-ex~~the ~~investments~~increase wein ~~have~~quantities ~~made~~of ~~during~~wafers ~~2012~~that ~~and~~we ~~2013~~manufactured, toas ~~increase~~described ~~our capacity and capabilities~~above.

Gross Profit

Gross profit iswas $3039.3 million infor the year ended December 31, ~~2013~~2014 as compared to $30.03 million infor the year ended ~~2012~~December 31, 2013, a $09.30 million improvement that resulted from the above components.

Operating Expenses

Operating expenses for the year ended December 31, ~~2013~~2014 amounted to $3127.69 million, as compared to $2731.16 million infor the year ended December 31, ~~2012~~2013. The ~~increase~~decrease in operating expenses for the year ended December 31, ~~2013~~2014 is ~~solely~~ due to $7.5 million amortization related to aan ~~lease agreement~~ early termination of an office building lease agreement in the year ended December 31, 2013 offset by $3.08 million of ~~successful~~increased ~~cost~~other ~~savings~~operating ~~activities~~expenses, which reflected 13% of revenue in 2014 as compared to 15% of revenue in 2013.

Interest Expenses, Net and Other Financing ~~expense~~Expense, ~~net~~Net

~~Financing~~Interest expenses, net and other financing expense, net for the year ended December 31, ~~2013~~2014 amounted to $1429.40 million, as compared to $1314.4 million for the year ended December 31, ~~2012~~2013. ~~Finance~~The ~~expense,~~primary ~~net~~reasons ~~mainly~~for ~~relates~~the toincrease ~~our~~are ~~notes~~(i) $9.8 ~~The~~million non-cash cost resulting from the 2014 exchange agreement; and (ii) $13.0 million ~~increase is attributed~~ mainly to non-cash ~~notes~~costs ~~accretion which~~resulting ~~is increasing~~from ~~gradually towards~~ the ~~maturity~~early redemption of the ~~notes~~2010 Notes, as described in Note 5 to our consolidated financial statements included in this report.

Other Income (Expense), net

Other income (expense), net includes mainly capital loss or gain from sales of fixed assets.

Other Expense, net

Other expense, net was immaterial and included mainly capital loss from sales of fixed assets.

Income Tax Benefit

Income tax benefit amounted to $56.3 million infor the year ended December 31, ~~2013~~2014, as compared to income tax benefit of $35.13 million infor the year ended December 31, ~~2012~~2013. ~~The increase in income tax benefit is due to the increase in the loss before tax. See also Note 6 to our consolidated financial statements included in this report.~~

Net Loss

Net loss for the year ended December 31, ~~2013~~2014 was $1011.83 million as compared to $710.38 million net loss for the year ended December 31, ~~2012~~2013. ~~Such~~The $0.5 million increase in net loss is amainly ~~result~~due ofto ~~the~~approximately $12.8 million increase in non-cash financing expense, net, described above (see items (i) and (ii) above), offset by $7.5 million amortization related to ~~the~~an early termination of an office building lease agreement in ~~2013~~the year ended December 31, ~~offset~~2013 and by improved gross profits of $49.0 million ofin ~~cost~~the ~~savings~~year ~~actions~~ended ~~and~~December ~~tax benefits~~31, as2014 ~~detailed~~that ~~above~~resulted from the increased revenue.

Changes in Financial Condition

Liquidity and Capital Resources

During ~~2013~~2014, we increased our cash and cash equivalents from $4351.34 million as of December 31, ~~2012~~2013 to $5173.4 million Asas of December 31, ~~2013~~2014. During the year ended December 31, ~~2013~~2014 we generated approximately $3641 million from operating activities, ~~excluding~~invested $8in ~~million~~fixed ofassets, ~~interest~~net, ~~payments~~approximately $25 million, and ~~invested~~received inapproximately ~~fixed~~$5 ~~assets~~million, net, ~~approximately~~from ~~$20~~the ~~million~~issuance of debentures (net of debenture pre-payments).

As of December 31, ~~2013~~2014 our debt par value was approximately $~~112.7~~122 million, comprised of approximately (i) $~~93.6~~45 million par value of notes originally due June 2015 ~~and approximately $19.1 million borrowing under~~ (the ~~Wells~~“2010 ~~Fargo~~Notes”, ~~line~~as ofdefined ~~credit~~in ~~due~~Note ~~December~~5 ~~2018.~~to Inour ~~December~~consolidated ~~2013,~~financial westatements ~~signed~~included anin ~~amendment~~this toreport) ~~our~~(which ~~Wells~~were ~~Fargo~~early ~~credit~~redeemed ~~line~~in ~~agreement~~January ~~which,~~2015); ~~among~~(ii) ~~other~~$58 ~~terms, extended~~million ~~the~~par ~~final~~value ~~payment~~of ~~date~~8% ofconvertible ~~the~~senior ~~loans~~notes todue December 2018, ~~subject~~(the to“2014 ~~certain~~Notes”, ~~conditions~~as ~~stipulated~~defined in ~~the~~Note ~~amendment,~~5 ~~including~~to aour ~~requirement~~consolidated tofinancial ~~provide~~statements ~~assurance~~included in athis ~~form~~report); ~~satisfactory~~and to(iii) ~~Wells~~$19 ~~Fargo~~million ~~for~~borrowing under the ~~ability~~Wells ofFargo ~~Jazz~~line ~~to address at least a portion~~ of itcredit ~~$93.6 million notes~~ due ~~June~~December ~~2015 prior to its maturity~~2018. We will need a significant amount of cash to satisfy our ~~long-term and short-term~~ debt and meet our other cash needs, which may not be available to us. Our ability to make payments on, or repay or refinance, our debt and to fund capital expenditures, working capital and other cash needs will depend largely upon our future operating performance, our ability to comply with borrowing base requirements to drawdown additional funds, if required, from the Wells Fargo credit line, our ability to extend or renew the credit line from the bank and our ability to pay or refinance the ~~notes~~2014 ~~due 2015~~Notes. Our future operating performance, to a certain extent, is subject to general economic conditions, financial markets, competitive, legislative, regulatory and other factors that are beyond our control. We cannot assure you that our business will generate sufficient cash flow from operations, that we will be able to repay or refinance the notes and that future borrowings will be available to us under the credit facilities or from other sources in an amount and on terms and conditions sufficient to enable us to make payments on our debt or to fund our other liquidity needs. In order to finance our ~~short and long-term~~ debt and other liabilities and obligations, we continue to explore measures to obtain funds from sources in addition to cash on hand and expected cash flow from our ongoing operations, including sales of assets; issuance of new securities; intellectual property licensing; improving operational efficiencies and sales; and exploring other alternatives to reduce our debt, including debt refinancing or restructuring or recycling of existing debt into new debt or other vehicles~~, which might be done in a structure similar to that of our July 2010 bonds exchange transaction~~. ~~The~~ Wells Fargo line of credit imposes certain limitations on our ability to repay or refinance the notes and/or to incur additional debt without Wells Fargo’s consent. IfAny wedefault ~~will~~on ~~not~~payment ~~provide~~of the ~~required assurance to Wells Fargo in relation to the $93.6 million~~ notes ~~due June 2015 in a form satisfactory to Wells Fargo prior to the notes maturity date, as stipulated in the Wells Fargo credit line amendment,~~ or ifany we default on ~~payment~~a permitted refinancing of the notes ~~at maturity, such default~~ would trigger a cross default under the Wells Fargo line of credit, which would permit the lenders to accelerate the obligations thereunder, potentially requiring us to repay or refinance the Wells Fargo credit line. There is no assurance that we will be able to obtain sufficient funding from the financing sources detailed above or other sources in a timely manner to allow us to fully or partially repay our debt. A default by us on any of our debt could have a material adverse effect on our operations and the interests of our creditors, and may affect our ability to fulfill our debt obligations and other liabilities.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

In the normal course of business, we are exposed to market risk from changes in interest rates, certain foreign currency exchange rate fluctuations, and certain commodity prices. Our exposure to market risk results primarily from fluctuations in interest rates that affect our variable-rate borrowings. Our sales and expenses are primarily denominated in U.S. dollars, and our exposure to foreign currency rate fluctuations is not significant to our financial condition and results of operations. We have not used derivative financial instruments to manage foreign currency exchange risk exposure or interest rate exposure.

We estimate that a 1.0% increase in interest rates would have an insignificant impact on our financial statements due to the structure of our investment portfolio.

As of December 31, ~~2013~~2014 and December 31, ~~2012~~2013, we did not have any relationships with unconsolidated entities or financial partners, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, we are not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

Item 8. Financial Statements and supplementary data

INDEX

JAZZ TECHNOLOGIES, INC.

	Page
Report of Independent Registered Public Accounting Firm	2425
Consolidated Balance Sheets	2526
Consolidated Statements of Operations	2627
Consolidated Statements of Comprehensive Income (Loss)	2728
Consolidated Statement of Stockholder’s Equity	28
Consolidated Statement of Stockholders' Equity	29
Consolidated Statements of Cash Flows	2930
Notes to Consolidated Financial Statements	3031-46

2324

Brightman Almagor Zohar

1 Azrieli Center

Tel Aviv 67021

P.O.B. 16593, Tel Aviv 61164

Israel

Tel: +972 (3) 608 5555

Fax: +972 (3) 609 4022

info@deloitte.co.il

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholder of

Jazz Technologies, Inc.

Newport Beach, CA

We have audited the accompanying consolidated balance sheets of Jazz Technologies, Inc. and subsidiaries, (the "Company) (a wholly owned subsidiary of Tower Semiconductor Ltd.) as of December 31,~~2013~~ 2014 and ~~2012~~2013 and the related consolidated statements of operations, comprehensive loss, shareholder's equity, and cash flows for each of the three years in the period ended December 31, ~~2013~~2014. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement .The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amount and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Jazz Technologies, Inc. and subsidiaries as of December 31, ~~2013~~2014 and ~~2012~~2013 and the results of their operations and their cash flows for each of the three years in the period ended December 31, ~~2013~~2014 in conformity with accounting principles generally accepted in the United States of America.

Brightman Almagor Zohar & Co.

Certified public accountants

A Member Firm of Deloitte Touche Tohmatsu

Tel Aviv, Israel

~~February~~March 274, ~~2014~~2015

2425

Jazz Technologies, Inc. (Aand ~~Wholly Owned Subsidiary of~~ Subsidiaries

Tower Semiconductor, Ltd.) and Subsidiaries

Consolidated Balance Sheets

(in thousands)

	December 31, 2013			December 31, 2012
	December 31, 2014			December 31, 2013
ASSETS
Current assets:
Cash and cash equivalents	$	5173,~~351~~387		$	4351,~~306~~351
Receivables:
Trade receivables, net of allowance for doubtful accounts of $0 and $67 at December 31, 2013 and December 31, 2012, respectively		20,426			20,056
Trade receivables, net of allowance for doubtful accounts of $0 at December 31, 2014 and December 31, 2013		30,351			20,426
Other receivables		93,~~835~~301			19,~~727~~835
Inventories		2630,~~297~~794			2426,~~020~~297
Deferred tax asset		34,~~846~~951			43,~~207~~846
Other current assets		1,~~303~~245			21,~~896~~303
Total current assets		~~113~~144,~~058~~029			96113,~~212~~058
Long-term investments		~~778~~--			--778
Property, plant and equipment, net		7871,~~345~~527			9178,~~464~~345
Intangible assets, net		2824,~~302~~097			3928,~~126~~302
Goodwill		7,000			7,000
Other assets – related parties		1,686			4,055
Other assets		3,945			3,333
Other assets – others		1,647			1,903
Total assets	$	250,598		$	230,816
Total assets	$	230,816		$	239,760
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term bank debt	$	--		$	19,100
Current maturities of debentures	$	45,577		$	--
Accounts payable		1525,~~290~~485			1615,~~113~~290
Accrued compensation and benefits		56,~~985~~350			65,~~325~~985
Deferred revenues		2,~~492~~220			~~573~~2,492
Other current liabilities		59,~~205~~031			45,~~633~~205
Total current liabilities		2888,~~972~~663			4628,~~744~~972
Long term liabilities:
Long-term debt from banks		19,100			--19,100
Notes		8142,~~181~~889			7481,~~584~~181
Deferred tax liability		~~2,429~~--			62,~~089~~429
Employee related liabilities		24,~~551~~387			72,~~592~~551
Other long-term liabilities		1214,~~780~~842			12,~~602~~780
Total liabilities		~~147~~169,~~013~~881			147,~~611~~013
Stockholder’s equity:
Stockholders' equity:
Ordinary shares of $1 par value;
Authorized: 200 shares;
Issued: 100 shares;
Outstanding: 100 shares;
Additional paid-in capital		6374,~~576~~986			63,576
Cumulative stock based compensation		2,~~173~~802			2,~~093~~173
Accumulated other comprehensive earnings		~~3,357~~(503	)		13,~~007~~357
Retained earnings		143,~~697~~432			2514,~~473~~697
Total stockholders' equity		8380,~~803~~717			9283,~~149~~803
Total liabilities and stockholders’ equity	$	230,816		$	239,760
Total liabilities and stockholders' equity	$	250,598		$	230,816

See accompanying notes.

2526

Jazz Technologies, Inc. (Aand ~~Wholly Owned Subsidiary of~~ Subsidiaries

Tower Semiconductor, Ltd.) and Subsidiaries

Consolidated Statements of Operations

(in thousands)

	Year ended December 31,
	2013			2012			2011
	2014			2013			2012
Revenues	$	~~166~~221,~~485~~469		$	~~164~~166,~~395~~485		$	~~168~~164,~~511~~395
Cost of revenues		~~136~~182,~~200~~120			~~134~~136,~~393~~200			~~130~~134,~~352~~393
Gross profit		3039,~~285~~349			30,~~002~~285			3830,~~159~~002
Operating expenses:
Research and development		1113,~~662~~481			1211,~~930~~662			1112,~~936~~930
Selling, general and administrative		1214,~~485~~418			1412,~~166~~485			1614,~~026~~166
Amortization related to a lease agreement early termination		~~7,464~~--			--7,464			--
Total operating expenses		3127,~~611~~899			2731,~~096~~611			27,~~962~~096
Operating profit (loss)		(111,~~326~~450	)		2(1,~~906~~326	)		102,~~197~~906
Financing expense, net		(14,363	)		(13,438	)		(16,380	)
Interest expenses, net		(8,334	)		(7,330	)		(7,666	)
Other income (expense), net		(433	)		159			13,708
Other financing expense, net		(20,706	)		(7,033	)		(5,772	)
Profit (loss) before income taxes		(16,122	)		(10,373	)		7,525
Other income (expense), net		--			(433	)		159
Income tax benefit (expense)		5,346			3,052			(3,125	)
Loss before income tax benefit		(17,590	)		(16,122	)		(10,373	)
Net income (loss)	$	(10,776	)	$	(7,321	)	$	4,400
Income tax benefit		6,325			5,346			3,052
Net loss	$	(11,265	)	$	(10,776	)	$	(7,321	)

See accompanying notes.

2627

Jazz Technologies, Inc. (Aand ~~Wholly Owned Subsidiary of~~Subsidiaries

~~Tower~~Consolidated ~~Semiconductor,~~Statements ~~Ltd.)~~of ~~and~~Comprehensive ~~Subsidiaries~~Loss

Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

	Year ended December 31,
	2013			2012			2011
	2014			2013			2012
Net income (loss)	$	(10,776	)	$	(7,321	)	$	4,400
Net loss	$	(11,265	)	$	(10,776	)	$	(7,321	)
Change in employees plan assets and benefit obligations , net of taxes $1,268, $1,591 and $174 for the years ended December 31, 2013, 2012 and 2011, respectively		2,350			2,440			518
Change in employees plan assets and benefit obligations ,net of taxes $1,774, $1,268 and $1,591 for the years ended December 31, 2014, 2013 and 2012, respectively		(3,860	)		2,350			2,440
Foreign currency translation adjustment		--			--			(48	)
Comprehensive loss	$	(15,125	)	$	(8,426	)	$	(4,881	)
Comprehensive income (loss)	$	(8,426	)	$	(4,881	)	$	4,870

See accompanying notes.

Jazz Technologies, Inc. (A Wholly Owned Subsidiary of

Tower Semiconductor, Ltd.) and Subsidiaries

Consolidated Statements of Stockholder’s Equity

(in thousands, except share data)

	Common Stock
	Shares		Amount		Additional paid-in capital and cumulative stock based compensation			Accumulated other comprehensive income (loss)			Accumulated deficit			Total stockholder’s equity
Balance at December 31, 2010		100	$	--	$	64,418		$	(1,903	)	$	28,394		$	90,909
Stock compensation expense		--		--		652			--			--			652
Tax benefit relating to stock based compensation		--		--		45			--			--			45
Comprehensive loss:
Other comprehensive loss		--		--		--			470			--			470
Net profit		--		--		--			--			4,400			4,400
Balance at December 31, 2011		100	$	--	$	65,115		$	(1,433	)	$	32,794		$	96,476
Stock compensation expense		--		--		554			--			--			554
Other comprehensive loss		--		--		--			2,440			--			2,440
Net Loss		--		--		--			--			(7,321	)		(7,321	)
Balance at December 31, 2012		100	$	--	$	65,669		$	1,007		$	25,473		$	92,149
Stock compensation expense		--		--		261			--			--			261
Tax benefit relating to stock based compensation		--		--		(181	)		--			--			(181	)
Other comprehensive loss		--		--		--			2,350			--			2,350
Net Loss		--		--		--			--			(10,776	)		(10,776	)
Balance at December 31, 2013		100	$	--	$	65,749		$	3,357		$	14,697		$	83,803

Jazz Technologies, Inc. (Aand ~~Wholly Owned Subsidiary of~~ Subsidiaries

~~Tower~~Consolidated ~~Semiconductor,~~Statements ~~Ltd.)~~of ~~and~~Stockholders' ~~Subsidiaries~~Equity

(in thousands, except share data)

	Common Stock
	Shares		Amount		Additional paid-in capital and cumulative stock based compensation			Accumulated other comprehensive income (loss)			Accumulated deficit			Total stockholders' equity
Balance at December 31, 2011		100	$	--	$	65,115		$	(1,433	)	$	32,794		$	96,476
Stock compensation expense		--		--		554			--			--			554
Comprehensive loss:
Other comprehensive income		--		--		--			2,440			--			2,440
Net Loss		--		--		--			--			(7,321	)		(7,321	)
Balance at December 31, 2012		100	$	--	$	65,669		$	1,007		$	25,473		$	92,149
Stock compensation expense		--		--		261			--			--			261
Tax benefit relating to stock based compensation		--		--		(181	)		--			--			(181	)
Other comprehensive income		--		--		--			2,350			--			2,350
Net Loss		--		--		--			--			(10,776	)		(10,776	)
Balance at December 31, 2013		100	$	--	$	65,749		$	3,357		$	14,697		$	83,803
Stock compensation expense		--		--		671			--			--			671
Tax benefit relating to stock based compensation		--		--		(42	)		--			--			(42	)
Equity component, net relating to the 2014 notes exchange agreement		--		--		11,410			--			--			11,410
Other comprehensive loss		--		--		--			(3,860	)		--			(3,860	)
Net Loss		--		--		--			--			(11,265	)		(11,265	)
Balance at December 31, 2014		100	$	--	$	77,788		$	(503	)	$	3,432		$	80,717

Jazz Technologies, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(in thousands)

	Year ended December 31,
	2013			2012			2011
	2014			2013			2012
Operating activities:
Net income (loss)	$	(10,776	)	$	(7,321	)	$	4,400
Net loss	$	(11,265	)	$	(10,776	)	$	(7,321	)
Adjustments to reconcile net income (loss) for the period to net cash provided by operating activities:
Adjustments to reconcile net loss for the period to net cash provided by operating activities:
Depreciation and amortization of intangible assets		47,720			35,883			33,247
Financing charges resulting from 2014 notes exchange agreement		9,817			--			--
Notes accretion and amortization of deferred financing costs		6,931			5,865			6,992
Depreciation and amortization of intangible assets		44,783			47,720			35,883
Stock based compensation expense		261			554			652
Notes accretion and amortization of deferred financing costs and financing charges with respect to 2010 notes early redemption		11,007			6,931			5,865
Other income, net		433			(159	)		(13,708	)
Stock based compensation expense		671			261			554
Other income, net		--			433			(159	)
Changes in operating assets and liabilities:
Trade receivables		(~~688~~9,925	)		(~~3,596~~688	)		13(3,~~545~~596	)
Inventories		(24,~~277~~497	)		1(2,~~356~~277	)		(61,~~280~~356	)
Other receivables and other current assets		(43,~~522~~514	)		1(4,~~251~~522	)		~~(379~~1,251	)
Accounts payable		(2,~~598~~372	)		1(2,~~947~~598	)		(61,~~440~~947	)
Due to related parties, net		(24,~~021~~899	)		(12,~~668~~021	)		(21,~~748~~668	)
Accrued compensation and benefits		~~(340~~365	)		~~911~~(340	)		~~(285~~911	)
Deferred revenue		~~1,919~~98			(21,~~024~~919	)		~~763~~(2,024	)
Other current liabilities		~~480~~(782	)		~~(1,375~~480	)		(41,~~553~~375	)
Deferred tax liability, net		(48,~~550~~316	)		(14,~~074~~550	)		(31,~~783~~074	)
Employee related liabilities and long-term liabilities		(1,~~945~~190	)		(31,~~367~~945	)		9(3,~~996~~367	)
Net cash provided by operating activities		2841,~~027~~551			2728,~~183~~027			3127,~~419~~183
Investing activities:
Purchases of property and equipment		(2125,~~314~~296	)		(21,~~178~~314	)		(2821,~~011~~178	)
Proceeds related to property and equipment		~~1,332~~817			141,~~030~~332			614,~~115~~030
Proceeds from investment realization		--			--			31,400
Net cash used in investing activities		(24,479	)		(19,982	)		(7,148	)
Net cash provided by (used in) investing activities		(19,982	)		(7,148	)		9,504
Financing activities:
Debt repayment		--			--			(43,735	)
Proceeds from issuance of notes, net		9,214			--			--
Short-term debt from bank		--			3,800			(6,700	)
Debt repayment		(4,250	)		--			--
Net cash provided by (used in) financing activities		--			3,800			(50,435	)
Short-term debt from bank		--			--			3,800
Effect of foreign exchange rate change		--			--			(48	)
Net cash provided by financing activities		4,964			--			3,800
Net increase (decrease) in cash and cash equivalents		8,045			23,835			(9,560	)
Net increase in cash and cash equivalents		22,036			8,045			23,835
Cash and cash equivalents at beginning of the period		4351,~~306~~351			1943,~~471~~306			2919,~~031~~471
Cash and cash equivalents at end of the period	$	5173,~~351~~387		$	4351,~~306~~351		$	1943,~~471~~306

Non-cash activities:

	Year ended December 31,
	2013		2012		2011
	2014		2013		2012
Investments in property, plant and equipment	$	610,~~304~~852	$	46,~~049~~304	$	34,~~443~~049
Equity increase arising from exchange of straight to convertible debt	$	9,609	$	--	$	--

Supplemental disclosure of cash flow information:

	Year ended December 31,
	2013			2012		2011
	2014			2013		2012
Cash paid during the period for interest	$	79,~~500~~929		$	7,~~734~~500	$	117,~~965~~734
Cash paid during the period for income taxes	$	--		$	852	$	(97	)
Cash paid (received) during the period for income taxes	$	(1,539	)	$	--	$	852

See accompanying notes.

2930

Jazz Technologies, Inc. (Aand ~~Wholly Owned Subsidiary of~~ Subsidiaries

Tower Semiconductor, Ltd.) and Subsidiaries

Notes to Consolidated Financial Statements

Note 1: Business and Formation

Unless specifically noted otherwise, as used throughout these notes to the consolidated financial statements, “Jazz”, “Company” refers to the business of Jazz Technologies, Inc. and “Jazz Semiconductor” refers only to the business of Jazz Semiconductor, Inc.

The Company

Since the merger with Tower in 2008, the Company is a 100%-owned subsidiary of Tower.

The Company is based in Newport Beach, California and is an independent semiconductor foundry focused on specialty process technologies for the manufacture of analog intensive mixed-signal semiconductor devices. The Company’s specialty process technologies include advanced analog, radio frequency, high voltage, bipolar and silicon germanium bipolar complementary metal oxide (“SiGe”) semiconductor processes, for the manufacture of analog and mixed-signal semiconductors. Its customers' analog and mixed-signal semiconductor devices are used in cellular phones, wireless local area networking devices, digital TVs, set-top boxes, gaming devices, switches, routers and broadband modems.

Note 2: Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. They contain all accruals and adjustments that, in the opinion of management, are necessary to present fairly the Company’s consolidated financial position at December 31, ~~2013~~2014 and December 31, ~~2012~~2013, and the consolidated results of its operations and cash flows for the years ended December 31, ~~2013~~2014, December 31, ~~2012~~2013 and December 31, ~~2011~~2012. All intercompany accounts and transactions have been eliminated.

Reclassifications

Certain amounts in prior years’ financial statements have been reclassified in order to conform to the ~~2013~~2014 presentation.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“US GAAP”) requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ materially from those estimates.

Revenue Recognition

The Company’s net revenues are generated principally from sales of semiconductor wafers. The Company also derives revenues from engineering and design support and other technical and support services. ~~The majority of the Company’s sales are achieved through the efforts of its direct sales force.~~

In accordance with ASC Topic 605 “Revenue Recognition”, the Company recognizes revenues from sale of products when the following fundamental criteria are met: (i) persuasive evidence of an arrangement exists; (ii) delivery has occurred or services have been rendered, (iii) the price to the customer is fixed or determinable; and (iv) collection of the resulting receivable is reasonably assured. These criteria are usually met at the time of product shipment. Revenues are recognized when the acceptance criteria are satisfied, based on performing electronic, functional and quality tests on the products prior to shipment. Such Company testing reliably demonstrates that the products meet all of the specified criteria prior to formal customer acceptance.

The Company provides for sales returns and allowances relating to specified yield or quality commitments as a reduction of revenues at the time of shipment based on historical experience and specific identification of events necessitating an allowance.

Revenues for engineering, design and other support services are recognized ratably over the contract term or as services are performed.

Advances received from customers towards future engineering services and/or product purchases are deferred until services are rendered or products are shipped to the customer.

Cash and Cash Equivalents

Cash and cash equivalents consist of banks deposits and short-term investments (with original maturities of three months or less).

Allowance for Doubtful Accounts

The allowance for doubtful accounts is computed mainly on the specific identification basis for accounts whose collectability, in the Company’s estimation, is uncertain.

Fair Value of Financial Instruments

The Company measures its financial assets and liabilities in accordance with US GAAP. For financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, the carrying amounts approximate fair value due to their short maturities.

~~Foreign~~Functional Currency ~~Translation~~

The Company uses the U.S. dollar as its functional currency. All of the Company’s sales and a substantial majority of its costs are transacted in U.S. dollars.

Inventories

Inventories are stated at the lower of cost or market. Cost is determined for raw materials and supplies mainly on the basis of the weighted average moving price per unit. Cost is determined for work in process and finished goods on the basis of actual production costs.

Property, Plant and Equipment

Property and equipment are presented at cost, including capitalizable costs. Capitalizable costs include only costs that are identifiable with, and related to, the property and equipment and are incurred prior to its initial operation. Identifiable incremental, direct costs include costs associated with constructing, establishing and installing property and equipment, and costs directly related to pre-production test runs of property and equipment that are necessary to get it ready for its intended use.

Maintenance and repairs are charged to expense as incurred.

Cost is presented net of accumulated depreciation and amortization. Depreciation is calculated based on the straight-line method over the estimated economic lives commonly used in the industry of the assets or terms of the related leases, and range from 3 to 14 years. Leasehold improvements are amortized over the life of the asset or term of the lease, whichever is shorter. For impairment of assets tests see below.

~~Investment~~ Intangible Assets

InIntangible ~~connection~~assets ~~with~~include mainly the ~~acquisition~~valuation ofamount ~~Jazz~~attributed ~~Semiconductor~~to ~~in February 2007,~~ the ~~Company~~intangible ~~acquired~~assets anas ~~investment~~part ~~in Hua Hong Semiconductor Ltd (“HHSL”), which owns 100%~~ of ~~Shanghai~~the ~~Hua~~Merger ~~Hong~~with ~~NEC Electronics Company Ltd (also known as “HHNEC”)~~Tower. The ~~investment~~amounts ~~represented~~attributed ato ~~minority~~intangible ~~interest~~assets ofare ~~approximately~~amortized ~~10%~~over ~~in HHSL, hence~~ the ~~investment~~expected inestimated ~~HHSL~~economic ~~was~~life ~~recorded at fair value as~~ of the ~~date~~intangible ofassets ~~the Merger with Tower~~ and ~~subsequently carried using the cost method of accounting for investments,~~ as ~~the~~commonly ~~Company~~used ~~did~~in ~~not have~~ the ~~ability to exercise significant influence~~industry.

During 2011, the Company sold its 10% holdings in “HHSL”, in an HHSL buyback transaction for gross amount of approximately $32 million in cash, before tax and other payments and recorded a gross gain of approximately $15 million from this transaction which is included in the Statements of Operations in Other Income, Net for the year ended December 31, 2011.

Impairment of Assets

The Company reviews long-lived assets and intangible assets on a periodic basis, as well as when such a review is required based upon relevant circumstances, to determine whether events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Impairment loss, if required is recognized based upon the difference between the carrying amount and the fair value of such assets, in accordance with ASC 360-10, “Property, Plant and Equipment”.

3132

Impairment of Goodwill

Goodwill is subject to an impairment test on an annual basis or upon the occurrence of certain events or circumstances. ~~Goodwill~~The goodwill impairment test is ~~assessed~~performed ~~based~~according onto ~~a comparison of~~ the ~~fair~~following ~~value~~principles: ofAn ~~the~~initial ~~unit,~~qualitative toassessment ~~which~~of the ~~goodwill~~likelihood isof ~~ascribed,~~impairment asmay ~~against~~be ~~the~~performed. ~~underlying~~If ~~carrying~~this ~~value~~step ofdoes ~~its~~not ~~net~~result ~~assets,~~in ~~including~~a ~~goodwill.~~more Iflikely ~~the~~than ~~carrying~~not ~~amount~~indication of ~~the~~impairment, ~~unit~~no ~~exceeds~~further ~~its~~impairment ~~fair~~testing ~~value,~~is ~~the~~required. ~~implied~~If ~~fair~~it ~~value~~does ofresult ~~the~~in ~~Company’s~~a ~~goodwill~~more islikely ~~compared~~than ~~with~~not ~~its~~indication ~~carrying~~of ~~amount~~impairment, ~~to measure~~ the ~~amount of~~ impairment ~~loss,~~test ifis ~~any~~performed.

~~The~~Goodwill ~~Company conducted an~~ impairment ~~analysis~~is asassessed ofbased ~~December~~on ~~31,~~a ~~2013.~~comparison ~~The Company used the income approach methodology~~ of ~~valuation that includes discounted cash flows to determine~~ the fair value of the ~~Company.~~unit, ~~Significant~~to ~~management~~which ~~judgment~~the goodwill is ~~required~~ascribed, inand the ~~forecasts~~underlying ofcarrying ~~future~~value ~~operating~~of ~~results~~its ~~used~~net ~~for~~assets, ~~this~~including ~~methodology~~goodwill. AsIf ~~a result of this analysis,~~ the carrying amount of the ~~Company’s~~unit ~~net~~exceeds ~~assets,~~its ~~including~~fair ~~goodwill~~value, ~~were~~the ~~not~~implied ~~considered~~fair tovalue beof ~~impaired and~~ the Company’s ~~did~~goodwill ~~not~~is ~~recognize~~compared ~~any~~with ~~impairment~~its ofcarrying ~~goodwill~~amount ~~for~~to measure the ~~period~~amount ~~ended~~of ~~December~~impairment 31loss, ~~2013~~if any.

The Company uses the income approach methodology of valuation that includes discounted cash flows to determine the fair value of the unit. Significant management judgment is required in the forecasts of future operating results used for this methodology.

Accounting for Income Taxes

The Company accounts for income taxes in accordance with ASC 740, “Income Taxes”. This topic prescribes the use of the liability method whereby deferred tax asset and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities. Deferred taxes are computed based on the tax rates anticipated (under applicable law as of the balance sheet date) to be in effect when the deferred taxes are expected to be paid or realized.

We evaluate the realizability of our deferred tax assets and establish valuation allowances when it is more likely than not that all or a portion of our deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income. We consider all available positive and negative evidence in making this assessment, including, but not limited to, the scheduled reversal of deferred tax liabilities and projected future taxable income. In circumstances where there is sufficient negative evidence indicating that our deferred tax assets are not more-likely-than-not realizable, we establish a valuation allowance.

The future utilization of the Company’s net operating loss carry forwards to offset future taxable income is subject to an annual limitation as a result of ownership changes that have occurred or that could occur in the future. The Company has had two “change in ownership” events that limit the utilization of net operating loss carry forwards. The second “change in ownership” event occurred on September 19, 2008, the date of the Company’s merger with Tower.

We use a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate tax positions taken or expected to be taken in a tax return by assessing whether they are more-likely-than-not sustainable, based solely on their technical merits, upon examination and including resolution of any related appeals or litigation process. The second step is to measure the associated tax benefit of each position as the largest amount that we believe is more-likely-than-not realizable. Differences between the amount of tax benefits taken or expected to be taken in our income tax returns and the amount of tax benefits recognized in our financial statements, represent our unrecognized income tax benefits, which are recorded as a liability. Our policy is to include interest and penalties related to unrecognized income tax benefits as a component of income tax expense.

Comprehensive Income (Loss)

In accordance with ASC Topic 220, “Comprehensive Income”, comprehensive income (loss) represents the change in shareholders’ equity during a reporting period from transactions and other events and circumstances from non-owner sources. It includes all changes in equity during a reporting period except those resulting from investments by owners and distributions to owners. Other comprehensive income (loss) represents gains and losses that are included in comprehensive income but excluded from net income.

Stock Based Compensation

The Company applies the provisions of ASC 718 “Compensation - Stock Compensation”, under which employee share-based equity awards are accounted for under the fair value method. Accordingly, stock-based compensation to employees and directors is measured at the grant date, based on the fair value of the award. The Company estimates stock price volatility based on historical volatility of Tower’s stock price. The Company uses the straight-line attribution method to recognize stock-based compensation costs over the vesting period of the award.

3233

The key assumptions used in the Black-Scholes model in determining the fair value of options granted during the years ended December 31, ~~2013~~2014, ~~2012~~2013 and ~~2011~~2012 are as follows:

	Year ended December 31, 2013			Year ended December 31, 2012			Year ended December 31, 2011
	Year ended December 31, 2014			Year ended December 31, 2013			Year ended December 31, 2012
Expected life in years	4.75 years			4.75 years			4.75 years
Expected annual volatility		~~51.16~~47%-~~64.52~~54	%		~~52.81~~51%-~~55.04~~65	%		~~50.84~~53%-~~54.45~~55	%
Risk-free interest rate		01.774%-1.778	%		0.658%-1.038	%		0.946%-21.30	%
Dividend yield		0.00	%		0.00	%		0.00	%

Concentrations

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash and cash equivalents and trade accounts receivable.

The Company generally does not require collateral for insurance of receivables. An allowance for doubtful accounts is determined with respect to those amounts that were determined to be doubtful of collection. The Company performs ongoing credit evaluations of its customers.

Accounts receivable from significant customers representing 10% or more of the net accounts receivable balance as of December 31, ~~2013~~2014 and December 31, ~~2012~~2013 consists of:

	December 31, 2013			December 31, 2012
	December 31, 2014			December 31, 2013
Customer 1		3644	%		2436	%
Customer 2		12*			*12

Net revenues from significant customers representing 10% or more of net revenues are provided by customers as follows:

	Year ended December 31, 2013			Year ended December 31, 2012			Year ended December 31, 2011
Customer A		23	%		17	%		17	%
Customer B		*			*			10

* Indicates less than 10%.

Net revenues from significant customers representing 10% or more of net revenues are provided by customers as follows:

		Year ended December 31, 2014				Year ended December 31, 2013				Year ended December 31, 2012
Customer A			33	%			23	%			17	%

As a result of the Company’s concentration of its customer base, loss or cancellation of business from, or significant changes in scheduled deliveries of product sold to these customers or a change in their financial position could materially and adversely affect the Company’s consolidated financial position, results of operations and cash flows.

The Company operates a single manufacturing facility located in Newport Beach, California. A major interruption in the manufacturing operations at this facility would have a material adverse affect on the consolidated financial position and results of operations of the Company.

~~Initial~~Recently ~~Adoption~~Issued ofAccounting ~~New~~Pronouncements In May 2014, the Financial Accounting Standards Board ("FASB") amended the existing accounting standards for revenue recognition, ASU 2014-09, “Revenue from Contracts with Customers”. The amendments are based on the principle that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company is required to adopt the amendments in the first quarter of 2017. Early adoption is not permitted. The amendments may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of initial application. The Company is currently evaluating the impact of these amendments and the transition alternatives on its consolidated financial statements.

OnIn ~~January~~August 312014, ~~2013,~~ the FASB issued ~~ASU~~amended ~~2013-01,~~guidance ~~which~~related ~~clarifies~~to ~~the~~disclosure ~~scope~~ of ~~the~~uncertainties ~~offsetting~~about ~~disclosure~~an ~~requirements~~entity’s inability ~~ASU~~to ~~2011-11.~~continue ~~Under~~as ~~ASU~~a ~~2013-01,~~going ~~the~~concern. ~~disclosure~~The ~~requirements~~new ~~would~~guidance ~~apply~~requires management to ~~derivative~~evaluate ~~instruments~~whether ~~accounted~~there ~~for~~is insubstantial ~~accordance~~doubt ~~with~~about ~~ASC~~the ~~815,~~entity’s ~~including~~ability ~~bifurcated~~to ~~embedded~~continue ~~derivatives, repurchase~~as ~~agreements~~a ~~and~~going ~~reverse~~concern ~~repurchase agreements~~and, ~~and~~as ~~securities~~necessary, ~~borrowing~~to ~~and~~provide ~~securities~~related ~~lending~~footnote ~~arrangements~~disclosures. ~~that~~The ~~are~~guidance ~~either~~has ~~offset~~an oneffective ~~the~~date ~~balance~~of ~~sheet~~December or31, ~~subject~~2016. toThe anCompany ~~enforceable~~believes ~~master~~that ~~netting~~the ~~arrangement~~adoption orof ~~similar~~this ~~agreement.~~new ~~The~~standard ~~adoption~~will ofnot ~~ASU~~have ~~2013-01~~a ~~had~~material no impact on ~~the~~its ~~Company’s~~consolidated financial ~~position or results of operations~~statements.

On February 5, 2013, the FASB issued ASU 2013-02, which requires entities to disclose the following additional information about items reclassified out of accumulated other comprehensive income (AOCI):34

• Changes in AOCI balances by component (e.g., unrealized gains or losses on available-for-sale securities or foreign-currency items). Both before-tax and net-of-tax presentations of the information are acceptable as long as an entity presents the income tax benefit or expense attributed to each component of OCI and reclassification adjustments in either the financial statements or the notes to the financial statements.

• Significant items reclassified out of AOCI by component either on the face of the income statement or as a separate footnote to the financial statements.

The ASU does not change the current U.S. GAAP requirements, for either public or nonpublic entities, for financial statement reporting of comprehensive income. That is, a total for comprehensive income must be reported in either (1) a single continuous statement or (2) two separate but consecutive statements. However, public entities would also need to include information about (1) changes in AOCI balances by component and (2) significant items reclassified out of AOCI. ASU 2013-02 is effective for annual and interim reporting periods beginning after December 15, 2012. Adoption of this guidance had no impact on our financial position or results of operations.

In July 2013, the FASB issued ASU No. 2013-11 amending requirements for the presentation of unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. ASU No. 2013-11 requires entities to present in the financial statements an unrecognized tax benefit, or a portion of an unrecognized tax benefit as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward except to the extent such items are not available or not intended to be used at the reporting date to settle any additional income taxes that would result from the disallowance of a tax position. In such instances, the unrecognized tax benefit is required to be presented in the financial statements as a liability and not be combined with deferred tax assets. ASU No. 2013-11 is effective for annual and interim periods beginning after December 15, 2013. The adoption of ASU No. 2013-11 had no impact on the Company’s financial position or results of operations.

Note 3: Other Balance Sheet Details

Inventories

Inventories, net of reserves, consist of the following at December 31, ~~2013~~2014 and December 31, ~~2012~~2013 (in thousands):

	December 31, 2013		December 31, 2012
	December 31, 2014		December 31, 2013
Raw material	$	45,~~434~~493	$	4,~~144~~434
Work in process		1524,~~618~~299		915,~~366~~618
Finished goods		61,~~245~~002		106,~~510~~245
	$	2630,~~297~~794	$	2426,~~020~~297

Property, plant and equipment

Property, plant and equipment consist of the following at December 31, ~~2013~~2014 and December 31, ~~2012~~2013 (in thousands):

	Useful life (In years)		~~December 31, 2013~~	December 31, 2014			~~December 31, 2012~~	December 31, 2013
Building (including facility infrastructure)	~~10-14~~	10-14	$	~~26,809~~$	27,496		$	~~25,237~~$	26,809
Machinery and equipment	~~3-7~~	3-7		~~196,812~~	229,409			~~176,294~~	196,812
				223,621				201,531
					256,905				223,621
Accumulated depreciation				~~(145,276~~	)(185,378	)		~~(110,067~~	)(145,276	)
			$	~~78,345~~$	71,527		$	~~91,464~~$	78,345

Intangible Assets

Intangible assets consist of the following at December 31, 2014 (in thousands):

	Weighted Average Life (years)		Cost		Accumulated Amortization		Net
Technology		4;9	$	3,300	$	2,533	$	767
Patents and other core technology rights		9		15,100		10,547		4,553
In process research and development		--		1,800		1,800		--
Customer relationships		15		2,600		1,090		1,510
Trade name		9		5,200		3,632		1,568
Facilities lease		19		33,500		17,801		15,699
Total identifiable intangible assets			$	61,500	$	37,403	$	24,097

Intangible assets consist of the following at December 31, 2013 (in thousands):

	Weighted Average Life (years)		~~Cost~~	Cost		~~Accumulated Amortization~~	Accumulated Amortization		~~Net~~	Net
Technology	~~4;9~~	4;9	$	~~3,300~~$	3,300	$	~~2,046~~$	2,046	$	~~1,254~~$	1,254
Patents and other core technology rights	9	9		~~15,100~~	15,100		~~8,870~~	8,870		~~6,230~~	6,230
In process research and development	--	--		~~1,800~~	1,800		~~1,800~~	1,800		--	--
Customer relationships	15	15		~~2,600~~	2,600		~~916~~	916		~~1,684~~	1,684
Trade name	9	9		~~5,200~~	5,200		~~3,054~~	3,054		~~2,146~~	2,146
Facilities lease	~~1,19~~	19		~~33,500~~	33,500		~~16,512~~	16,512		~~16,988~~	16,988
Total identifiable intangible assets			$	~~61,500~~$	61,500	$	~~33,198~~$	33,198	$	~~28,302~~$	28,302

Intangible assets consist of the following at December 31, 2012 (in thousands):

	Weighted Average Life (years)	Cost		Accumulated Amortization		Net
Technology	4;9	$	2,300	$	1,400	$	900
Patents and other core technology rights	9		15,100		7,192		7,908
In process research and development	--		1,800		1,800		--
Customer relationships	15		2,600		743		1,857
Trade name	9		5,200		2,477		2,723
Facilities lease	1,19		33,500		7,762		25,738
Total identifiable intangible assets		$	60,500	$	21,374	$	39,126

The amortization related to technology, patents and other core technologies rights, and facilities lease is charged to cost of revenues. The amortization related to customer relationships and trade name is charged to operating expenses.

Note 4: Wells Fargo Asset-Based Revolving Credit Line

In December 2013, the Company entered into an agreement with Wells Fargo Capital Finance, part of Wells Fargo & Company (“Wells Fargo”), for a five-year secured asset-based revolving credit line in the total amount of up to $70 million maturing in December 2018 (the “Credit Line Agreement”). Loans under the Credit Line Agreement bear interest at a rate equal to, at lender’s option, either the lender’s prime rate plus a margin ranging from 0.50% to 1.0% or the LIBOR rate plus a margin ranging from 1.75% to 2.25% per annum.

The outstanding borrowing availability varies from time to time based on the levels of the Company's eligible accounts receivable, eligible equipment, eligible inventories and other terms and conditions described in the Credit Line Agreement. The Credit Line Agreement is secured by the assets of the Company. The Loan Agreement contains customary covenants and other terms, including covenants, as well as customary events of default and a requirement to provide assurance in a form satisfactory to Wells Fargo for the ability of the Company to address its approximately $94 million notes due June 2015 prior to its maturity. If any event of default occurs, Wells Fargo may declare due immediately, all borrowings under the facility and foreclose on the collateral. Furthermore, an event of default under the Loan Agreement would result in an increase in the interest rate on any amounts outstanding.

Borrowing availability under the Credit Line Agreement as of December 31, 2013 was approximately $52 million.

As of December 31, 2013, the Company was in compliance with all the covenants under this facility.

Outstanding borrowing as of December 31, 2013 was approximately $19 million.

Note 5: Notes

In July 2010, the Company issued notes in the principal amount of approximately $94 million due June 2015 (the “2010 Notes”). Interest on the 2010 Notes at a rate of 8% per annum is payable semiannually.

The 2010 Notes constitute unsecured obligations of the Company, rank on parity in right of payment with all other debt of the Company, are effectively subordinated to all secured debt of the Company to the extent of the value of the collateral securing such debt, including debt to Wells Fargo under the Credit Line Agreement, see Note 4. The 2010 Notes are not guaranteed by Tower. The 2010 Notes shall rank senior to all future debt of the Company to the extent the future debt is expressly subordinated to the 2010 Notes. The 2010 Notes are jointly and severally guaranteed on a senior unsecured basis by the Company’s domestic subsidiaries.

Beginning July 1, 2013, the Company may redeem some or all of the 2010 Notes for cash at a redemption price equal to par plus accrued and unpaid interest plus a redemption premium equal to 4% if redemption occurs prior to July 1, 2014 and 2% if redemption occurs between July 1, 2014 and maturity.

The indenture of the 2010 Notes contains certain customary covenants as set forth in the Indenture.

~~Holders~~The outstanding borrowing availability varies from time to time based on the levels of the ~~2010~~Company's ~~Notes~~eligible ~~are~~accounts ~~entitled~~receivable, ~~subject~~eligible toequipment, ~~certain~~eligible ~~conditions~~inventories and ~~restrictions,~~other toterms ~~require~~and conditions described in the ~~Company~~Credit toLine ~~repurchase~~Agreement. The Credit Line Agreement is secured by the ~~2010~~assets ~~Notes~~of atthe ~~par~~Company. ~~plus~~The ~~accrued~~Credit ~~interest~~Line Agreement contains customary covenants and aother 1%terms, as ~~redemption~~well ~~premium~~as incustomary ~~the~~events of default. If any event of ~~certain~~default ~~change~~will occur, Wells Fargo may declare all borrowings under the facility and foreclose on the collateral due immediately. Furthermore, an event of ~~control~~default ~~transactions~~under the Credit Line Agreement would result in an increase in the interest rate on any amounts outstanding. The Company's obligations pursuant to the Credit Line Agreement are not guaranteed by Tower.

IfBorrowing ~~there~~availability isunder anthe ~~event~~Credit ofLine ~~default~~Agreement onas ~~the~~of ~~2010~~December ~~Notes~~31, ~~all~~2014 was approximately $54 million, of ~~the~~which ~~2010~~approximately ~~Notes~~$24 ~~may~~million ~~become~~had ~~immediately~~been ~~due~~utilized ~~and~~as ~~payable,~~of ~~subject~~such todate ~~certain~~(including ~~conditions~~approximately ~~set~~$19 ~~forth~~million inthrough ~~the~~loans ~~Indenture~~and approximately $5 million letters of credit).

~~The~~As ~~Company’s~~of ~~obligations~~December ~~under~~31, ~~the~~2014, ~~2010 Notes are guaranteed by~~ the Company’s ~~wholly~~was ~~owned~~in ~~domestic~~compliance ~~subsidiaries.~~with ~~The~~all Company has not provided condensed consolidated financial information for such subsidiaries because the subsidiaries have no independent assets or operations, the subsidiary guarantees are full and unconditional and joint and several and the subsidiaries of the ~~Company,~~covenants ~~other~~under ~~than~~this ~~the subsidiary guarantors, are minor~~facility.

~~For~~Note ~~disclosure purpose, the 2010~~ 5: Notes fair value of $89 million is determined by taking in consideration (i) the market approach, using the last quotations of the notes and (ii) the income approach utilizing the present value method at discount rate with credit worthiness appropriate for the Company.

Introduction

As of December 31, 2014, the Company had approximately $45 million principal amount of notes outstanding originally due June 2015 (which were early redeemed in January 2015) and approximately $58 million principal amount of notes outstanding due December 2018. Description and composition are as follows:

$45 million Jazz 2010 Notes redeemed during January 2015

In July 2010, the Company issued notes in the principal amount of approximately $94 million due June 2015 (the “2010 Notes”). Interest on the 2010 Notes at a rate of 8% per annum was payable semiannually.

As of December 31, 2014, approximately $45 million, in principal amount of the 2010 Notes were outstanding. As of January 8, 2015 , the 2010 Notes had been fully redeemed through: (i) an early redemption of approximately $45 million outstanding amount, as permitted by the terms of the indenture governing the 2010 Notes, completed in January 2015; and (ii) the 2014 exchange agreement (as defined and discussed below).

As a result, as of January 8, 2015, no outstanding amount is due by the Company towards the aforementioned $45 million 2010 Notes.

$58 million Jazz 2014 Notes due December 2018

In March 2014, the Company, certain of its domestic subsidiaries and Tower entered into an exchange agreement (the “2014 Exchange Agreement”) with certain 2010 Notes holders (the “2014 Participating Holders”) according to which the Company issued new unsecured convertible senior notes due December 2018 (the “2014 Notes”) in exchange for approximately $45 million in aggregate principal amount of 2010 Notes.

In addition, in March 2014, the Company, Tower and certain of the 2014 Participating Holders (the “Purchasers”) entered into a purchase agreement (the “Purchase Agreement”) pursuant to which the Purchasers purchased $10 million aggregate principal amount of 2014 Notes for cash consideration.

Interest on the 2014 Notes at a rate of 8% per annum is payable semiannually. Holders of the 2014 Notes may submit a conversion request with respect to their 2014 Notes to be settled through cash or ordinary shares of Tower, in which event the conversion price is set to $10.07 per share, reflecting a 20 percent premium over the average closing price for Tower’s ordinary shares for the five trading days ending on the day prior to the signing date of the 2014 Exchange Agreement and Purchase Agreement.

The 2014 Notes are unsecured senior obligations of the Company, rank equally with all other existing and future unsecured senior indebtedness of the Company, and are effectively subordinated to all existing and future secured indebtedness of the Company, including the Company’s secured Credit Line Agreement with Wells Fargo (see Note 4 above), to the extent of the value of the collateral securing such indebtedness. The 2014 Notes rank senior to all existing and future subordinated debt. The 2014 Notes are not guaranteed by Tower.

Holders of the 2014 Notes are entitled, subject to certain conditions and restrictions, to require the Company to repurchase the 2014 Notes at par plus accrued interest and a 1% redemption premium in the event of certain change of control transactions as set forth in the Indenture governing the 2014 Notes.

The Indenture contains certain customary covenants, including covenants restricting the Company’s ability and the ability of its subsidiaries to, among other things, incur additional debt, incur additional liens, make specified payments and make certain asset sales.

Jazz’s obligations under the 2014 Notes are guaranteed by Jazz’s wholly owned domestic subsidiaries. The Company has not provided condensed consolidated financial information for such subsidiaries because the subsidiaries have no independent assets or operations, the subsidiary guarantees are full and unconditional and joint and several and the subsidiaries of the Company, other than the subsidiary guarantors, are minor.

As of December 31, 2014, approximately $58 million principal amount of 2014 Notes was outstanding.

The Credit Line Agreement imposes certain limitations on the ability to repay the notes and/or to incur additional indebtedness without Wells Fargo’s consent. Any default on payment of the notes or any default on a permitted refinancing of the notes would trigger a cross default under the Credit Line Agreement, which would permit the lenders to accelerate the obligations thereunder, potentially requiring the Company to repay or refinance the Credit Line Agreement.

The Company concluded that said exchange should not be recognized as a troubled debt restructuring in accordance with the provisions of ASC 470-60 "Troubled Debt Restructurings by Debtors". In accordance with the provisions of ASC 470-50 “Modifications and Extinguishments” the Company concluded that the exchange resulted in an extinguishment of the old debt and the issuance of a new convertible debt to be recorded at fair value. As described above, certain of the 2014 Notes were issued in exchange for certain of the 2010 Notes. Since the 2014 Notes were not traded and no quotes were available, the Company determined the fair value of the 2014 Notes using the present value technique. The 2014 Exchange Agreement resulted in an amount of approximately $9.8 million, which has been recorded in the statement of operations report as non-cash one-time financing expense for the year ended December 31, 2014. The convertible feature has been measured as the difference between the fair value of the liability component and the fair value of the note as a whole, and recorded in equity in accordance with ASC 470-20 “Debt With Conversion and Other Options”.

For disclosure purposes, the fair value of the 2010 Notes and the 2014 Notes as of December 31, 2014 was approximately $126 million. Such fair value is determined by taking in consideration the market approach, using the last quotations of the notes.

Note 6: Income Taxes

The Company’s effective tax rate differs from the statutory rate as follows (in thousands):

	Year ended December 31, 2013			Year ended December 31, 2012			Year ended December 31, 2011
	Year ended December 31, 2014			Year ended December 31, 2013			Year ended December 31, 2012
Tax provision (benefit) computed at the federal statutory rate	$	(5,643	)	$	(3,630	)	$	2,634
Tax benefit computed at the federal statutory rate	$	(6,156	)	$	(5,643	)	$	(3,630	)
State tax, net of federal provision (benefit)		~~262~~(577	)		~~100~~262			96100
Research Credits		(~~186~~150	)		--(186	)		~~(201~~--	)
Unrecognized tax benefits		~~298~~412			~~248~~298			~~447~~248
Permanent items & others		~~(77~~146	)		~~230~~(77	)		~~149~~230
Income tax provision (benefit)	$	(5,346	)	$	(3,052	)	$	3,125
Income tax benefit	$	(6,325	)	$	(5,346	)	$	(3,052	)

The Company’s tax provision (benefit) is as follows (in thousands):

	Year ended December 31, 2013			Year ended December 31, 2012			Year ended December 31, 2011
	Year ended December 31, 2014			Year ended December 31, 2013			Year ended December 31, 2012
Current tax expense (benefit):
Federal	$	~~(633~~1,889	)	$	(~~1,948~~633	)	$	6(1,~~687~~948	)
State		41(2	)		~~(51~~41	)		95(51	)
Foreign		123			2112			5921
Total current		~~(580~~1,890	)		(~~1,978~~580	)		6(1,~~841~~978	)
Deferred tax benefit:
Federal		(48,~~766~~215	)		(14,~~074~~766	)		(31,~~716~~074	)
State		--			--			--
Total deferred		(48,~~766~~215	)		(14,~~074~~766	)		(31,~~716~~074	)
Income tax provision (benefit)	$	(5,346	)	$	(3,052	)	$	3,125
Income tax benefit	$	(6,325	)	$	(5,346	)	$	(3,052	)

The Company’s effective tax rate for the year ended December 31, 2013 is lower than the statutory rate primarily due to interest expense on unrecognized tax benefits.

The Company establishes a valuation allowance for deferred tax assets, when it is unable to conclude that it is more likely than not that such deferred tax assets will be realized. In making this determination the Company evaluates both positive and negative evidence. The state deferred tax assets exceed the reversal of taxable temporary differences. Without other significant positive evidence, the Company has determined that the state deferred tax assets are not more likely than not to be realized.

3637

Significant components of the Company’s deferred tax assets and liabilities from federal and state income taxes are as follows (in thousands):

	December 31, 2013			December 31, 2012
	December 31, 2014			December 31, 2013
Deferred tax assets– current:
Deferred tax assets - current:
Net operating loss carryforwards	$	~~2,026~~938		$	~~758~~2,026
Employees benefits and compensation		1,~~520~~452			1,~~566~~520
Accruals, reserves and others		1,757			2,449
Debt discount		1,253			--
Total deferred tax assets		5,303			4,773
Accruals, reserves and others		3,105			1,757
Valuation allowance		(1,457	)		(566	)
Total deferred tax assets		6,748			5,303
Total current deferred tax benefit	$	3,846		$	4,207
Valuation allowance		(1,797	)		(1,457	)
Net deferred tax liability- long-term:
Total current deferred tax assets	$	4,951		$	3,846
Deferred tax assets - long-term:
Deferred tax assets
Net operating loss carry forward	$	1012,~~751~~218		$	1110,~~871~~751
Employees benefits and compensation		2,~~829~~249			32,~~413~~829
Other		--(1	)		~~104~~--
		13,580			15,388
		14,466			13,580
Valuation allowance		(45,~~983~~223	)		(54,~~779~~983	)
		8,597			9,609
		9,243			8,597
Deferred tax liability - property, plant and equipment	$	(1,230	)	$	(2,504	)
Deferred tax asset (liability) - property, plant and equipment		2,137			(1,230	)
Intangible assets		(76,~~253~~318	)		(117,~~063~~253	)
Debt discount		(~~884~~4,200	)		(~~1,203~~884	)
Other		(~~1,659~~557	)		(~~928~~1,659	)
Total deferred tax liabilities		(2,429	)		(6,089	)
Total deferred tax assets (liabilities)		305			(2,429	)
Net deferred taxes	$	1,417		$	(1,882	)
Total deferred taxes	$	5,256		$	1,417

The future utilization of the Company’s net operating loss carry forwards to offset future taxable income is subject to an annual limitation as a result of ownership changes that have occurred. Additional limitations could apply if ownership changes occur in the future. The Company has had two “change in ownership” events that limit the utilization of net operating loss carry forwards. The first “change in ownership” event occurred in February 2007 upon our acquisition of Jazz Semiconductor. The second “change in ownership” event occurred on September 19, 2008, the date of the Company’s Merger with Tower. The Company concluded that the net operating loss limitation for the change in ownership which occurred in September 2008 will be an annual utilization of $2.1 million for the use in its tax return. The Company had at December 31, ~~2013~~2014 federal net operating loss carry forwards of approximately $3631 million that will begin to expire in ~~2021~~2022 unless previously utilized.

At December 31, ~~2013~~2014, the Company had state net operating loss carry forwards of approximately $~~123~~141.95 million. The state tax loss carry forwards ~~will~~is ~~begin~~expected to ~~expire~~start inexpiring ~~2014,~~from ~~unless~~2015 ~~previously utilized~~onwards.

At December 31, ~~2013~~2014, the Company had combined federal and state alternative minimum tax credits of $0.29 million. The alternative minimum tax credits do not expire. At December 31, ~~2013~~2014, the Company had approximately $01.80 million of federal research and development credits that will begin to expire in ~~2014~~2030.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	Unrecognized tax benefits
	(in thousands)
Balance at January 1, 2014	$	19,362
Additions for tax positions of current year		51
Reductions for tax positions of prior years		--
Balance at December 31, 2014	$	19,413

	Unrecognized tax benefits
	(in thousands)
Balance at January 1, 2013	$	19,721
Additions for tax positions of current year		12
Reductions for tax positions of prior years		(371	)
Balance at December 31, 2013	$	19,362

	Unrecognized tax benefits
	(in thousands)
Balance at January 1, 2012	$	23,965
Reductions for tax positions of prior year		(275	)
Settlements		(3,969	)
Balance at December 31, 2012	$	19,721

	Unrecognized tax benefits
	(in thousands)
Balance at January 1, 2012	$	23,965
Reductions for tax positions of prior year		(275	)
Settlements		(3,969	)
Balance at December 31, 2012	$	19,721
	Unrecognized tax benefits
	(in thousands)
Balance at January 1, 2011	$	14,908
Additions for tax positions of current year		50
Additions for tax positions of prior year		9,730
Reductions for tax positions of prior year		(723	)
Balance at December 31, 2011	$	23,965

The Company accounts for its uncertain tax provisions in accordance with ASC 740. The Company’s policy is to recognize interest and penalties that would be assessed in relation to the settlement value of unrecognized tax benefits as a component of income tax expense. At December 31, 2014, the Company had unrecognized tax benefits of $19.4 million. The amount of unrecognized tax benefit that, if recognized and realized, would affect the effective tax rate is $19.1 million as of December 31, 2014.

The ~~Company~~statute ~~accounts~~of ~~for~~limitation ~~its uncertain tax provisions in accordance~~ with ~~ASC~~respect ~~740. The Company’s policy is~~ to ~~recognize~~tax ~~interest~~year ~~and~~2010, ~~penalties~~which ~~that~~is ~~would~~expected ~~be assessed in relation~~ to ~~the~~expire ~~settlement~~during ~~value~~2015, ofwill ~~unrecognized~~result ~~tax~~in, ~~benefits~~if ~~as a component of income tax expense. At December 31~~expired, ~~2013,~~ the ~~Company~~cancelation ~~had unrecognized tax benefits~~ of ~~$19.4~~the ~~million.~~respective ~~The amount of~~ unrecognized tax benefit ~~that,~~for ifsuch ~~recognized and realized~~year, ~~would~~in ~~affect~~ the ~~effective~~amount ~~tax~~of ~~rate~~approximately is $~~19.0~~11 million ~~as of December 31, 2013~~.

InDuring ~~2013~~2014, the ~~U.S.~~Company ~~tax~~was ~~authorities~~updated ~~commenced~~that ~~an audit of~~ the ~~Company’s~~ 2011 federal tax returns, ~~and~~it ~~asked~~has ~~the~~filed ~~Company~~in ~~for~~2012 ~~certain reports~~ and ~~data~~were inaudited ~~connection~~since ~~with~~2013, ~~said~~were ~~year’s~~accepted ~~tax~~as ~~returns.~~filed ~~There~~without ~~is no indication to date whether the Company will be required to pay~~ any ~~additional taxes pursuant to said~~ audit adjustments.

~~During~~The ~~2012,~~Company ~~the~~and ~~Internal~~its ~~Revenue~~subsidiaries ~~Service~~are ~~("IRS")~~subject ~~performed~~to anU.S. ~~audit~~federal ofincome tax as well as income tax in multiple state and foreign jurisdictions. With few exceptions, the Company's ~~2009~~is ~~and~~no ~~2010~~longer subject to U.S. federal income tax ~~returns.~~examinations ~~The~~for ~~audit~~years ~~did~~before ~~not~~2010; ~~materially~~state ~~change~~and ~~the~~local ~~Company's~~income ~~consolidated~~tax ~~statements~~examinations ofbefore ~~operations~~2010; and foreign income tax examinations before 2011. ~~The~~However, ~~change~~to inthe extent allowed by law, the ~~company's~~tax ~~balance~~authorities ~~sheet~~may ~~resulted~~have ~~primarily~~the inright ato ~~classification~~examine ofprior aperiods ~~long~~where ~~term~~net ~~liability~~operating tolosses awere ~~current~~generated ~~liability~~and carried forward, ~~which~~and ~~was~~make ~~partially~~adjustments ~~paid~~up asto the amount of ~~December~~the ~~31,~~net ~~2012.~~operating loss carry forward amount.

The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax in multiple state and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal income tax examinations for years before 2010; state and local income tax examinations before 2009; and foreign income tax examinations before 2010. However, to the extent allowed by law, the tax authorities may have the right to examine prior periods where net operating losses were generated and carried forward, and make adjustments up to the amount of the net operating loss carry forward amount.

The American Taxpayer Relief Act of 2012 (the “Act”) cleared the House of Representatives and the Senate on January 1, 2013, and was signed into law by President Obama on January 2, 2013. Among other things, the Act extended the research tax credit retroactively to 2012 and prospectively through the end of 2013. Had the Act been enacted as of December 31, 2012, the research tax credit would have increased our effective tax rate for the year ended December 31, 2012 by approximately 1.4%.

In September 2013, the U.S. Treasury Department released final income tax regulations on the deduction and capitalization of expenditures related to tangible property. These final regulations apply to tax years beginning on or after January 1, 2014, and may be adopted in earlier years. The Company does not intend to early adopt the tax regulations. The tangible property regulations will require the Company to make additional tax accounting method changes as of January 1, 2014; however, the Company does not anticipate the impact of these changes to be material to the Company’s consolidated financial position, its results of operations and its footnote disclosures.

Note 7: Employee Benefit Plans

The following information provided recognizes the changes in ~~2013~~2014, ~~2012~~2013 and ~~2011~~2012 periodic expenses and benefit obligations due to the bargaining agreement effective December 19, 2009 entered into by the Company with its collective bargaining unit employees.

Postretirement Medical Plan

The components of the net periodic benefit cost and other amounts recognized in other comprehensive income (loss) for the Company’s postretirement medical plan expense are as follows (in thousands, except percentages):

	Year Ended December 31, 2013			Year Ended December 31, 2012			Year Ended December 31, 2011
	Year Ended December 31, 2014			Year Ended December 31, 2013			Year Ended December 31, 2012
Net periodic benefit cost
Service cost	$	3224		$	~~146~~32		$	~~193~~146
Interest cost		~~126~~118			~~399~~126			~~573~~399
Expected return on plan assets		--			--			--
Amortization of transition obligation/(asset)		--			--			--
Amortization of transition obligation (asset)		--			--			--
Amortization of prior service costs		(1,~~703~~737	)		(~~244~~1,703	)		~~114~~(244	)
Amortization of net (gain) or loss		(~~132~~227	)		--(132	)		~~109~~--
Total net periodic benefit cost	$	(1,~~677~~822	)	$	~~301~~(1,677	)	$	~~989~~301
Other changes in plan assets and benefits obligations recognized in other comprehensive income
Prior service cost for the period	$	~~(91~~--	)	$	(~~3,851~~91	)	$	(~~990~~3,851	)
Net (gain) or loss for the period		~~(668~~558	)		(~~1,355~~668	)		(1,~~752~~355	)
Amortization of transition obligation (asset)		--			--			--
Amortization of prior service costs		1,~~703~~737			~~244~~1,703			~~(114~~244	)
Amortization of net gain or (loss)		~~132~~227			--132			~~(109~~--	)
Total recognized in other comprehensive income	$	12,~~076~~522		$	(41,~~962~~076	)	$	(24,~~965~~962	)
Total recognized in net periodic benefit cost and other comprehensive income	$	~~(601~~700	)	$	(~~4,661~~601	)	$	(14,~~976~~661	)
Weighted average assumptions used:
Discount rate		45.3020	%		54.2030	%		5.9020	%
Expected return on plan assets		N/A			N/A			N/A
Rate of compensation increases		N/A			N/A			N/A
Assumed health care cost trend rates:
Health care cost trend rate assumed for current year (Pre-65/Post-65)		87.2575%/3525.00	%		8.25%/5735.00	%		108.0025%/2157.00	%
Ultimate rate (Pre-65/Post-65)		5.00%/5.00	%		5.00%/5.00	%		5.00%/5.00	%
Year the ultimate rate is reached (Pre-65/Post-65)		2022/2022			~~2021~~2022/~~2019~~2022			2021/2019
Measurement date	December 31, ~~2013~~2014			December 31, ~~2012~~2013			December 31, ~~2011~~2012

Impact of one-percentage point change in assumed health care cost trend rates as of December 31, 2013:	Increase		Decrease
Effect on service cost and interest cost		13	$	(10	)
Effect on postretirement benefit obligation		145		(116	)

Impact of one-percentage point change in assumed health care cost trend rates as of December 31, 2014:	Increase		Decrease
Effect on service cost and interest cost	$	10	$	(8	)
Effect on postretirement benefit obligation	$	254	$	(198	)

The components of the change in benefit obligation; change in plan assets and funded status for the Company’s postretirement medical plan are as follows (in thousands):

	Year Ended December 31, 2013			Year Ended December 31, 2012			Year Ended December 31, 2011
	Year Ended December 31, 2014			Year Ended December 31, 2013			Year Ended December 31, 2012
Change in benefit obligation:
Benefit obligation at beginning of period	$	2,~~995~~317		$	72,~~749~~995		$	97,~~811~~749
Service cost		3224			~~146~~32			~~193~~146
Interest cost		~~126~~118			~~399~~126			~~573~~399
Benefits paid		(7740	)		(9377	)		(8693	)
Change in plan provisions		~~(91~~--	)		(~~3,851~~91	)		(~~990~~3,851	)
Actuarial loss (gain)		~~(668~~558	)		(~~1,355~~668	)		(1,~~752~~355	)
Benefit obligation end of period	$	2,~~317~~977		$	2,~~995~~317		$	72,~~749~~995
Change in plan assets:
Fair value of plan assets at beginning of period	$	--		$	--		$	--
Actual return on plan assets		--			--			--
Employer contribution		7740			9377			8693
Benefits paid		(7740	)		(9377	)		(8693	)
Fair value of plan assets at end of period	$	--		$	--		$	--
Funded status	$	(2,~~317~~977	)	$	(2,~~995~~317	)	$	(72,~~749~~995	)
Non-current assets	$	--		$	--		$	--
Current liabilities		(8983	)		(~~132~~89	)		(~~137~~132	)
Non-current liabilities		(2,~~228~~894	)		(2,~~863~~228	)		(72,~~612~~863	)
Net amount recognized	$	(2,~~317~~977	)	$	(2,~~995~~317	)	$	(72,~~749~~995	)
Weighted average assumptions used:
Discount rate		54.2030	%		45.3020	%		54.2030	%
Rate of compensation increases		N/A			N/A			N/A
Assumed health care cost trend rates:
Health care cost trend rate assumed for next year (Pre 65/Post 65)		7.7500%/2520.00	%		87.2575%/3525.00	%		8.25%/5735.00	%
Ultimate rate (Pre 65/ Post 65)		54.0050%/5.00	%		5.00%/5.00	%		5.00%/5.00	%
Year the ultimate rate is reached (Pre 65/ Post 65)		~~2022~~2025/2022			2022/2022			~~2021~~2022/~~2019~~2022

The following benefit payments are expected to be paid in each of the next five fiscal years and in the aggregate for the five fiscal years thereafter (in thousands):

Fiscal Year	Other Benefits ($)
2014	$	89
2015	$	83
2015		83
2016		76
2016		82
2017		96
2017		101
2018		114
2018		116
2019		125
2019-2023	$	678
2020-2024	$	699

The Company adopted several changes to the postretirement medical plan in 2012 that cumulatively reduced obligations by approximately $3.9 million. The changes in the plan will be implemented through 2015 and include the phase out of spousal coverage, introduction of an employer-paid cap, and acceleration of increases in retiree contribution rates.

Pension Plan

The Company has a pension plan that provides for monthly pension payments to eligible employees upon retirement. The pension benefits are based on years of service and specified benefit amounts. The Company uses a December 31 measurement date. The Company makes quarterly contributions in accordance with the minimum actuarially determined amounts.

The components of the change in benefit obligation, the change in plan assets and funded status for the Company’s pension plan are as follows (in thousands, except percentages):

	Year Ended December 31, 2013			Year Ended December 31, 2012			Year Ended December 31, 2011
	Year Ended December 31, 2014			Year Ended December 31, 2013			Year Ended December 31, 2012
Net periodic benefit cost
Service cost	$	--		$	--		$	--
Interest cost		~~732~~796			~~761~~732			~~736~~761
Expected return on plan assets		(~~948~~1,257	)		(~~817~~948	)		(~~810~~817	)
Amortization of transition obligation/(asset)		--			--			--
Amortization of prior service costs		--			--			--
Amortization of net (gain) or loss		97			70			--
Total net periodic benefit cost	$	(119	)	$	14		$	(74	)
Prior service cost for the period	$	93		$	--		$	--
Net (gain) or loss for the period		(4,696	)		1,000			2,468
Amortization of transition obligation (asset)		--			--			--
Amortization of prior service costs		--3			--			--
Amortization of net gain or (loss)		(97	)		(70	)		--
Amortization of net (gain) or loss		--			97			70
Total recognized in other comprehensive income	$	(4,700	)	$	930		$	2,468
Total net periodic benefit cost	$	(458	)	$	(119	)	$	14
Total recognized in net periodic benefit cost and other comprehensive income	$	(4,819	)	$	944		$	2,394
Other changes in plan assets and benefits obligations recognized in other comprehensive income
Prior service cost for the period	$	--		$	93		$	--
Net (gain) or loss for the period		3,117			(4,696	)		1,000
Amortization of transition obligation (asset)		--			--			--
Amortization of prior service costs		(3	)		--			--
Amortization of net gain or (loss)		--			(97	)		(70	)
Total recognized in other comprehensive income	$	3,114		$	(4,700	)	$	930
Total recognized in net periodic benefit cost and other comprehensive income	$	2,656		$	(4,819	)	$	944
Weighted average assumptions used:
Discount rate		45.3010	%		54.1030	%		5.7010	%
Expected return on plan assets		7.50	%		7.50	%		7.50	%
Rate of compensation increases		N/A			N/A			N/A
Estimated amounts that will be amortized from accumulated other comprehensive income in the next fiscal year:
Transition obligation (asset)	$	--		$	--		$	--
Prior service cost		3			--3			--
Net actuarial (gain) or loss	$	--31		$	97--		$	--97

The components of the change in benefit obligation; change in plan assets and funded status for the Company’s pension plan are as follows (in thousands, except percentages):

	Year Ended December 31, 2013			Year Ended December 31, 2012			Year Ended December 31, 2011
Change in benefit obligation:
Benefit obligation at beginning of period	$	17,272		$	15,134		$	13,105
Service cost		--			--			--
Interest cost		732			761			736
Benefits paid		(437	)		(293	)		(273	)
Change in plan provisions		93			--			--
Actuarial loss (gain)		(1,787	)		1,670			1,566
Benefit obligation end of period	$	15,873		$	17,272		$	15,134
Change in plan assets
Fair value of plan assets at beginning of period	$	12,543		$	10,842		$	10,742
Actual return on plan assets		3,857			1,488			(92	)
Employer contribution		689			506			465
Benefits paid		(437	)		(293	)		(273	)
Fair value of plan assets at end of period	$	16,652		$	12,543		$	10,842
Funded status	$	779		$	(4,729	)	$	(4,292	)
Accumulated benefit obligation	$	15,873		$	17,272		$	15,134
Non-current assets	$	779		$	--		$	--
Current liabilities		--			--			--
Non-current liabilities		--			(4,729	)		(4,292	)
Net amount recognized	$	779		$	(4,729	)	$	(4,292	)
Weighted average assumptions used
Discount rate		5.10	%		4.30	%		5.10	%
Expected return on plan assets		7.50	%		7.50	%		7.50	%
Rate of compensation increases		N/A			N/A			N/A

The components of the change in benefit obligation; change in plan assets and funded status for the Company’s pension plan are as follows (in thousands, except percentages):

	Year Ended December 31, 2014			Year Ended December 31, 2013			Year Ended December 31, 2012
Change in benefit obligation:
Benefit obligation at beginning of period	$	15,873		$	17,272		$	15,134
Service cost		--			--			--
Interest cost		796			732			761
Benefits paid		(532	)		(437	)		(293	)
Change in plan provisions		--			93			--
Actuarial loss (gain)		3,167			(1,787	)		1,670
Benefit obligation end of period	$	19,304		$	15,873		$	17,272
Change in plan assets
Fair value of plan assets at beginning of period	$	16,652		$	12,543		$	10,842
Actual return on plan assets		1,307			3,857			1,488
Employer contribution		707			689			506
Benefits paid		(532	)		(437	)		(293	)
Fair value of plan assets at end of period	$	18,134		$	16,652		$	12,543
Funded status	$	(1,170	)	$	779		$	(4,729	)
Accumulated benefit obligation	$	19,304		$	15,873		$	17,272

Non-current assets	$	--		$	779		$	--
Current liabilities		--			--			--
Non-current liabilities		(1,170	)		--			(4,729	)
Net amount recognized	$	(1,170	)	$	779		$	(4,729	)
Weighted average assumptions used
Discount rate		4.20	%		5.10	%		4.30	%

Rate of compensation increases		N/A			N/A			N/A

The following benefit payments are expected to be paid in each of the next five fiscal years and in the aggregate for the five fiscal years thereafter (in thousands):

Fiscal Year	Other Benefits
2014	$	540
2015	$	600
2015		615
2016		670
2016		684
2017		743
2017		748
2018		809
2018		806
2019		864
2019-2023	$	4,829
2020-2024	$	5,150

The Plan’s assets measured at fair value on a recurring basis consisted of the following as of December 31, 2014:

	Level 1		Level 2		Level 3
Investments in Mutual Funds	$	--	$	18,134	$	--
Total plan assets at fair value	$	--	$	18,134	$	--

The Plan’s assets measured at fair value on a recurring basis consisted of the following as of December 31, 2013:

	Level 1		Level 2		Level 3
Investments in Mutual Funds	$	--	$	16,652	$	--
Total plan assets at fair value	$	--	$	16,652	$	--

The ~~Plan~~Company’s ~~assets~~pension ~~measured~~plan atweighted ~~fair~~average ~~value~~asset onallocations aat ~~recurring~~December ~~basis~~31, ~~consisted~~2014 ofby ~~the~~asset ~~following~~category are as ~~of December 31, 2012~~follows:

	Level 1			Level 2			Level 3
Asset Category:	December 31, 2014			Target allocation 2015
Investments in Mutual Funds	$	--		$	12,543		$	--
Equity securities		60	%		60	%
Total plan assets at fair value	$	--		$	12,543		$	--
Debt securities		40	%		40	%
Real estate		0	%		0	%
Other		0	%		0	%
Total		100	%		100	%

The Company’s ~~pension~~primary policy goals regarding plan ~~weighted~~assets ~~average~~are cost-effective diversification of plan assets, competitive returns on investment, and preservation of capital. Plan assets are currently invested in mutual funds with various debt and equity investment objectives. The target asset ~~allocations~~allocation atfor ~~December~~the 31plan assets is 40% debt, ~~2013~~or fixed income securities, and 60% equity securities. Individual funds are evaluated periodically based on comparisons to benchmark indices and peer group funds and necessary investment decisions are made in accordance with the policy goals of the plan investments by management. Actual allocation to each asset category ~~are~~fluctuate asand ~~follows:~~might be outside the target range due to changes in market conditions.

Asset Category:	December 31, 2013			Target allocation 2014
Equity securities		86	%		65%-75	%
Debt securities		14	%		25%-35	%
Real estate		0	%		0	%
Other		0	%		0	%
Total		100	%		100	%

The estimated expected return on assets of the plan is based on assumptions derived from, among other things, the historical return on assets of the plan, the current and expected investment allocation of assets held by the plan and the current and expected future rates of return in the debt and equity markets for investments held by the plan. The obligations under the plan could differ from the obligation currently recorded if management's estimates are not consistent with actual investment performance.

The Company’s primary policy goals regarding plan assets are cost-effective diversification of plan assets, competitive returns on investment, and preservation of capital. Plan assets are currently invested in mutual funds with various debt and equity investment objectives. The target asset allocation for the plan assets is 25-35% debt, or fixed income securities, and 65-75% equity securities. Individual funds are evaluated periodically based on comparisons to benchmark indices and peer group funds and necessary investment decisions are made in accordance with the policy goals of the plan investments by management. Actual allocation to each asset category fluctuate and might be outside the target range due to changes in market conditions. In 2014 Jazz rebalanced its assets allocation to align with the target asset allocation.

The Company has estimated the expected return on assets of the plan of 7.5% based on assumptions derived from, among other things, the historical return on assets of the plan, the current and expected investment allocation of assets held by the plan and the current and expected future rates of return in the debt and equity markets for investments held by the plan. The obligations under the plan could differ from the obligation currently recorded if management's estimates are not consistent with actual investment performance.

Note 8: Stockholders’ Equity

In August 2012, Tower completed a reverse split of its ordinary shares at a ratio of 1 for 15. Proportional adjustments were made to all of Tower’s outstanding convertible securities.

All numbers of shares and other convertible securities of Tower and Tower's share price in these financial statements reflect the effect of the reverse share split.

Common Stock

As of December 31, ~~2013~~2014 and December 31, ~~2012~~2013, the Company had 200 authorized shares.

The number of outstanding shares of the Company's common stock at December 31, ~~2013~~2014 was 100, all of which are owned by Tower.

Stock Options

~~Pursuant~~Tower’s to2009 Share Incentive Plans (the ~~Merger~~"2009 ~~with~~Plans") ~~Tower~~- In 2009 the Company adopted new share incentive Plans to directors officers, employees and its subsidiaries. The options togranted ~~purchase~~at ~~shares~~an ofexercise price which equals the ~~Company’s~~closing ~~common~~market ~~stock~~price ~~that~~of ~~were~~the ~~outstanding~~ordinary shares immediately prior to the ~~effective~~ date of grant, the ~~Merger~~exercise ~~became~~price will not be lower than the nominal value of the Shares, vest over up to a three, and are not exercisable ~~for~~beyond ~~Tower~~seven ~~ordinary~~years ~~shares~~from the grant date. As of December 31, ~~2013~~2014, 61123,~~325~~604 non-qualified stock options outstanding under ~~those~~the ~~plans~~2009 Plans. No further grants may be made under these plans.

OnTower’s ~~September~~2013 ~~19,~~Share ~~2008,~~Incentive ~~Tower~~Plan ~~awarded~~(the ~~non~~"2013 Plan") -~~statutory~~ ~~stock~~In ~~options~~2013 the Company adopted new share incentive Plan to directors, officers, employees ofand ~~the~~its ~~Company~~subsidiaries. ~~The~~Options ~~stock~~to ~~option~~be ~~grants~~granted ~~vest~~under onthe plan will bear exercise price which equals an average of the ~~second~~closing ~~anniversary~~price ~~from~~in the thirty trading days immediately prior to the date of grant, the exercise price will not be lower than the nominal value of the Shares, vest over up to a three year period and are not exercisable beyond seven years from the grant date. As of December 31, ~~2013~~2014, 9941,~~337~~634 non-qualified stock options are outstanding under ~~this~~the ~~plan~~2013 Plan. NoFurther ~~further~~ grants may be ~~made~~approved ~~under~~in ~~this~~accordance ~~plan~~with the board of directors of the Company’s decision.

Tower’s 2009 Share Incentive Plans (the "2009 Plans") - In 2009 the Company adopted new share incentive Plans to directors officers, employees and its subsidiaries. The options granted at an exercise price which equals the closing market price of the ordinary shares immediately prior to the date of grant, vest over up to a three, and are not exercisable beyond seven years from the grant date. As of December 31, 2013 166,451 non-qualified stock options outstanding under the 2009 Plans. No further grants may be made under these plans43

~~Tower’s~~As ~~2013~~of ~~Share~~December ~~Incentive Plan (the "2013 Plan") -In 2013 the Company adopted new share incentive Plan to directors~~31, ~~officers~~2014, ~~employees~~total ~~and its subsidiaries. Options to be granted under the plan will bear exercise price which equals an average~~ of ~~the closing price in the thirty trading days immediately prior to the date of grant~~1, ~~vest over up to a three year period and are not exercisable beyond seven years from the grant date. As of December 31~~129,823 ~~2013 886,634~~ non-qualified stock options are outstanding under ~~the~~all ~~2013~~Options ~~Plan~~Plans. ~~Further grants may be approved in accordance with the Board of Directors of the Company’s decision.~~

During 2012, Tower awarded 5,001 non-qualified stock options to Company employees that vest over a three year period from the date of grant. The weighted average exercise price was $12.91.

During 2013, Tower awarded 894,634 non-qualified stock options to Company employees that vest over a three year period from the date of grant. The weighted average exercise price was $4.48.

~~The~~During ~~Company recorded $261~~2014,~~000,~~ ~~$553,000~~Tower ~~and~~awarded ~~$652~~125,000 ofnon-qualified ~~compensation~~stock ~~expenses relating to~~ options ~~granted~~ to Company employees, ~~for~~that ~~the~~vest ~~years~~over ~~ended~~a ~~December~~three ~~31,~~year ~~2013,~~period ~~2012~~from ~~and 2011, respectively. Stock-based compensation expense was recognized in~~ the ~~following~~date ~~line~~of ~~items~~grant. inThe ~~the~~weighted ~~statement~~average ofexercise ~~operations~~price ~~(in~~was ~~thousands):~~$10.89.

	Year Ended December 31,
	2013			2012			2011
Component of income (loss) before provision for income taxes:
Cost of revenue	$	190		$	291		$	346
Research and development, net		120			126			153
Selling, general and administrative		(49	)		136			153
Stock-based compensation expense		261			553			652
Income tax benefits related to stock-based compensation (before consideration of valuation allowance)		(92	)		(196	)		(244	)
Stock-based compensation, net of taxes	$	169		$	357		$	408

The Company recorded $671,000, $261,000 and $553,000 of compensation expenses relating to options granted to employees, for the years ended December 31, 2014, 2013 and 2012, respectively. Stock-based compensation expense was recognized in the following line items in the statement of operations (in thousands):

	Year Ended December 31,
	2014			2013			2012
Component of income (loss) before provision for income taxes:
Cost of revenue	$	313		$	190		$	291
Research and development, net		334			120			126
Selling, general and administrative		24			(49	)		136
Stock-based compensation expense		671			261			553
Income tax benefits related to stock-based compensation (before consideration of valuation allowance)		(244	)		(92	)		(196	)
Stock-based compensation, net of taxes	$	427		$	169		$	357

The following table summarizes stock option award activity:

	Number of options			Weighted average exercise price per option
	(in thousands)
Outstanding at December 31, 2013		1,124		$	6.30
Granted		125			10.89
Exercised		(40	)		4.56
Cancelled or expired		(79	)		5.98
Outstanding at December 31, 2014		1,130			6.89
Options exercisable at December 31, 2014		185		$	14.82
	Number of options			Weighted average exercise price per option
	(in thousands)
Outstanding at December 31, 2012		364		$	15.51
Granted		895			4.48
Exercised		(19	)		4.35
Cancelled or expired		(116	)		21.49
Outstanding at December 31, 2013		1,124			6.30
Options exercisable at December 31, 2013		203		$	12.08
	Number of options			Weighted average exercise price per option
	(in thousands)
Outstanding at December 31, 2011		364		$	15.55
Granted		5			12.91
Exercised		(1	)		5.58
Cancelled or expired		(4	)		17.00
Outstanding at December 31, 2012		364			15.51
Options exercisable at December 31, 2012		251		$	13.07

4344

	Number of options			Weighted average exercise price per option
	(in thousands)
Outstanding at December 31, 2011		364		$	15.55
Granted		5			12.91
Exercised		(1	)		5.58
Cancelled or expired		(4	)		17.00
Outstanding at December 31, 2012		364			15.51
Options exercisable at December 31, 2012		251		$	13.07
	Number of options			Weighted average exercise price per option
	(in thousands)
Outstanding at December 31, 2010		299		$	13.14
Granted		101			21.16
Exercised		(16	)		7.03
Cancelled or expired		(20	)		14.54
Outstanding at December 31, 2011		364			15.55
Options exercisable at December 31, 2011		185		$	15.38

The aggregate pretax intrinsic value, weighted average remaining contractual life, and weighted average per share exercise price of options outstanding and of options exercisable as of December 31, 2014 were as follows:

Options Outstanding:

Range of Exercise Prices		Number of Shares (In thousands)		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (In years)
$	4.35-13.2		1,~~027~~038	$	45.6743		65.3564
$	21-28.2		9792	$	23.5152		32.78
			1,124	$	6.30		6.13
			1,130	$	6.89		5.41

Options Exercisable:

Range of Exercise Prices		Number of Shares (In thousands)		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (In years)
$	4.35-13.2		~~133~~93	$	56.6224		32.0730
$	21-28.2		7092	$	2423.3752		32.6378
			203	$	12.08		3.27
			185	$	14.82		2.54

The following table summarizes key data points for exercised options (in thousands):

	Year Ended December 31,
	2013		2012		2011
	2014		2013		2012
The intrinsic value of options exercised	$	31209	$	531	$	~~186~~5
Cash received from the exercise of stock options		82181		482		~~113~~4
The tax benefit realized from stock options exercised		1076		210		632
The fair value of options exercised	$	~~124~~250	$	3124	$	543

Note 9: Related Party Transactions:

	December 31, 2013		December 31, 2012
	December 31, 2014		December 31, 2013
Due from related party (included in the accompanying balance sheets)	$	63,~~406~~828	$	6,~~100~~406
Due to related parties (included in the accompanying balance sheets )	$	146	$	54
Due to related parties (included in the accompanying balance sheets)	$	4,842	$	146

Related party balances are with Tower and are mainly for purchases and payments on behalf of the other party, tools sale, tools lease and service charges. In addition, as described in Note 5 above, the Company issued to its 2014 Participating Holders and Purchasers an aggregate of approximately $58.3 million of Notes, which are convertible into an aggregate of up to approximately 5.8 million ordinary shares of Tower at a conversion price of $10.07 per share. In accordance with fair market value calculations, based on the net present value model of the equity component of the 2014 Notes and the dilution caused to Tower’s shareholders, the value was determined to be approximately $4.5 for each Tower share underlying the 2014 Notes (“Underlying Value”). This value was given by Tower to the Company, enabling the Company to execute the Exchange Agreement with its 2014 Participating Holders which in return agreed to extend the maturity of the Company’s outstanding debt from June 2015 to December 2018. This value is settled through a monetary deposit advance payment on account of future conversions. The advance will mature in one year and may be extended annually for additional one year periods, up to four (4) years, while bearing an interest rate equal to the applicable federal short-term-rate interest published by the Internal Revenue Service. In the event and to the extent of conversion of any 2014 Notes into Tower’s shares, the obligation of Tower to repay the advance payment balance shall be reduced. To date, the Company had deposited majority of such Underlying Value, against which it will apply any amounts for which the Company may become obligated to Tower as a result of any actual conversions of the 2014 Notes.

Note 10: Segment and Geographic Information

ASC Topic 280 “Segment Reporting”, requires the determination of reportable business segments (i.e., the management approach). This approach requires that business segment information used by the chief operating decision maker to assess performance and manage company resources be the source for segment information disclosure. The Company operates in one business segment: the manufacturing and process design of semiconductor wafers.

Revenues are derived principally from customers located within the United States.

Long-lived assets consisting of property, plant and equipment and intangible assets are primarily located within the United States.

Note 11: Commitments and Contingencies

Leases

Since 2002, the Company has leased its fabrication facilities, land and headquarters from Conexant. Inunder ~~December~~lease ~~2010,~~contracts ~~Conexant~~that ~~sold~~we ~~the~~can ~~Company’s~~extend ~~fabrication~~until ~~facilities~~2027, ~~land~~through ~~and~~the ~~headquarters.~~exercise Inof ~~connection~~options ~~with~~at ~~the~~our ~~sale,~~sole ~~the~~discretion ~~Company~~to ~~negotiated~~extend ~~amendments~~the tolease ~~its~~periods ~~operating~~from ~~leases~~2017 ~~that~~to ~~confirm~~2022 ~~the~~and ~~Company’s~~from ~~ability~~2022 to ~~remain~~2027. inIn ~~the~~December ~~fabrication facilities through 2027~~2010, ~~including~~Conexant sold the Company’s ~~options~~fabrication tofacilities, ~~extend~~land ~~the lease term at its sole discretion from 2017 to 2022~~ and ~~from 2022 to 2027~~headquarters. Under our amended leases with the new owner, the Company’s rental payments consist of fixed base rent and fixed management fees and our pro rata share of certain expenses incurred by the landlord in the ownership of these buildings, including property taxes, building insurance and common area maintenance. These lease expenses are included in operating expenses in the accompanying consolidated statements of operations.

InThe ~~regards to an office building lease, the~~ Company’s landlord exercised its right to terminate the previous office building lease, effective January 1, 2014. The Company moved its offices to the fabrication building and to nearby new leased office space. The Company and the landlord signed an additional amendment to the amended lease to reflect termination of the office building lease and certain obligations of the Company and the landlord, including certain noise abatement actions at the fabrication facility. This office building lease termination has no impact whatsoever on the Company’s fabrication buildings, facilities and operations and the Company’s ability to remain in the fabrication facilities through 2027 (including by exercising its two consecutive five-year extension periods which it can exercise in its sole discretion).

Aggregate rental expense under operating leases was approximately $2.6 million for the year ended December 31, 2014 and approximately $2.4 million for each of the years ended ~~December 31,~~ 2013, ~~2012~~ and ~~2011, respectively~~2012.

Future minimum payments under non-cancelable building operating ~~lease~~leases are as follows:

	Payment Obligations by Year (in thousands)
	2014		2015		2016		2017		2018		Thereafter		Total
	2015		2016		2017		2018		2019		Thereafter		Total
Operating leases	$	12,~~898~~665	$	2,~~096~~674	$	~~2,108~~851	$	~~693~~413	$	~~372~~383	$	~~408~~0	$	76,~~575~~986

Environmental Matters

The Company’s operations are regulated under a number of federal, state and local environmental laws and regulations, which govern, among other things, the discharge of hazardous materials into the air and water as well as the handling, storage and disposal of such materials. Compliance with environmental law is a major consideration for all semiconductor manufacturers because hazardous materials are used in the manufacturing process. In addition, because the Company is a generator of hazardous waste, the Company, along with any other person with whom it arranges for the disposal of such waste, may be subject to potential financial exposure for costs associated with an investigation and remediation of sites at which it has arranged for the disposal of hazardous waste, if such sites become contaminated. This is true even if the Company fully complies with applicable environmental laws. In addition, it is possible that in the future, new or more stringent requirements could be imposed. Management believes it has materially complied with all material environmental laws and regulations. There have been no material claims asserted nor is management aware of any material unasserted claims for environmental matters.

Indemnification

The Company has entered into contracts with customers in which the Company provides certain indemnification to the customer in the event of claims of patent or other intellectual property infringement that arise from the Company's manufacturing process. The Company has not recorded a liability for potential obligations under these indemnification provisions and would not record such a liability unless the Company believed that the likelihood of a material obligation was probable and estimable.

Note 12: Valuation Account

Dollars in thousands			Additions
	Balance at the beginning of the period		Charged to costs and expenses			Deductions (A)			Balance at the end of the period
Allowance for doubtful accounts receivable:
Year ended December 31, 2013	$	67	$	(61	)	$	(6	)	$	0
Year ended December 31, 2014	$	--	$	--		$	--		$	--
Year ended December 31, 2013	$	67	$	(61	)	$	(6	)	$	--
Year ended December 31, 2012	$	1,020	$	17		$	(970	)	$	67
Year ended December 31, 2011	$	326	$	1,017		$	(323	)	$	1,020

(A)

Uncollectible accounts receivable written off, net of recoveries

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Based on their evaluation as of the end of the period covered by this report, our principal executive officer and chief financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective as of the end of the period covered by this report.

Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives, and our chief executive officer and our chief financial officer have concluded that these controls and procedures are effective at the “reasonable assurance” level. We believe that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

Management’s Annual Report on Internal Control Over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

There are inherent limitations in the effectiveness of any system of internal control, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even effective internal controls can provide only reasonable assurances with respect to financial statement preparation. Further, because of changes in conditions, the effectiveness of internal control may vary over time.

The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, ~~2013~~2014. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission in Internal Control - Integrated Framework. Based on its assessment using those criteria, management concluded that, as of December 31, ~~2013~~2014, the Company’s internal control over financial reporting is effective.

Changes in internal controls over financial reporting

There were no changes in our internal controls over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

Not Applicable.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

Omitted pursuant to General Instruction I (1) (a) and (b) of Form 10-K.

Item 11. Executive Compensation

Omitted pursuant to General Instruction I (1) (a) and (b) of Form 10-K.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Omitted pursuant to General Instruction I (1) (a) and (b) of Form 10-K.

Item 13. Certain Relationships and Related Transactions and Director Independence

Omitted pursuant to General Instruction I (1) (a) and (b) of Form 10-K.

Item 14. Principal Accounting Fees and Services

The following presents aggregate fees billed to us by Deloitte Touche Tohmatsu, our current principal accountants for the years ended December 31, ~~2013~~2014 and December 31, ~~2012~~2013. All of the fees described below were pre-approved by our audit committee.

Audit Fees. Audit fees billed by Brightman Almagor Zohar, a member of Deloitte Touche Tohmatsu were $~~224~~212,~~500~~000 for the year ended December 31, ~~2013~~2014 and $~~287~~224,500 for the year ended December 31, ~~2012~~2013.

Audit-Related Fees. For the years ended December 31, ~~2013~~2014 and December 31, ~~2012~~2013 audit-related fees billed were $~~646~~6,846 and $5646,~~296,~~ respectively, in connection with Sarbanes Oxley compliance.

Tax Fees. Tax fees billed were $4981,~~000~~600 for the year ended December 31, ~~2013~~2014, and $5449,~~679~~000 for the year ended December 31, ~~2012~~2013 also in connection with transfer pricing studies.

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a)	Financial Statements Schedules and Exhibits.

(1)

The following financial statements are included in Item 8:

Jazz Technologies, Inc.

Reports of Independent Registered Public Accounting Firms

Balance Sheets

Statements of Operations

Statements of Comprehensive Income (Loss)

Statement of Stockholder’s Equity

Statements of Cash Flows

Notes to Financial Statements

(2)

Financial Statement Schedules: None

(3)

Listing of Exhibits:

Exhibit No.		Description
3.1		Amended and Restated Certificate of Incorporation — Incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on September 25, 2008.
3.2		Amended and Restated Bylaws — Incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on November 30, 2007.
4.1		Indenture dated July 15, 2010 by and among Jazz Technologies, Jazz Semiconductor, Inc., Newport Fab, LLC and U.S. Bank National Association – Incorporated by reference to Exhibit 4.15 to Jazz Technologies’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2010
4.2		Registration Rights Agreement dated July 15, 2010 by and among Jazz Technologies, Jazz Semiconductor, Inc., Newport Fab, LLC and holders of the Registrant’s 8% Senior Notes due 2015 -- – Incorporated by reference to Exhibit 4.16 to Jazz Technologies’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2010.
4.3		Indenture dated as of March 25, 2014 by and among Jazz Technologies, Inc., Tower Semiconductor, Ltd., Jazz Semiconductor, Inc., Newport Fab, LLC and U.S. Bank National Association — incorporated by reference to Exhibit 4.61 to the Annual Report on Form 20-F of Tower Semiconductor Ltd. For the year ended December 31, 2013.
4.4		Registration Rights Agreement dated as of March 25, 2014 by and among Jazz Technologies, Inc., Jazz Semiconductor, Inc., Newport Fab, LLC and holders of the Jazz Technologies, Inc. 8% Convertible Senior Notes due 2018 — incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, filed on May 16, 2014.
10.1		Agreement and Plan of Merger, dated as of September 26, 2006, by and among Acquicor Technology Inc., Joy Acquisition Corp., Jazz Semiconductor, Inc. and T.C. Group, L.L.C., as the stockholders’ representative — Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on September 29, 2006.
*10.2		2006 Equity Incentive Plan, as amended — Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on February 8, 2007.
*10.3		Form of Option Agreement under the 2006 Equity Incentive Plan — Incorporated by reference to Exhibit 99.2 to the Registrant’s Registration Statement on Form S-8 (Registration No. 333-143022).
*10.4		Form of Restricted Stock Bonus Agreement under the 2006 Equity Incentive Plan — Incorporated by reference to Exhibit 99.2 to the Registrant’s Registration Statement on Form S-8 (Registration No. 333-143022).
10.5		Half Dome Lease Agreement between Specialtysemi, Inc. and Conexant Systems, Inc. dated March 12, 2002 — Incorporated by reference to Exhibit 10.13 to Jazz Semiconductor’s Registration Statement on Form S-1 (Registration No. 333-133485).

10.6	First Amendment to Half Dome Lease Agreement between Newport Fab, LLC and Conexant Systems, Inc. dated May 1, 2004 — Incorporated by reference to Exhibit 10.14 to Jazz Semiconductor’s Registration Statement on Form S-1 (Registration No. 333-133485).
*10.4	Form of Restricted Stock Bonus Agreement under the 2006 Equity Incentive Plan — Incorporated by reference to Exhibit 99.2 to the Registrant’s Registration Statement on Form S-8 (Registration No. 333-143022).
10.7	Second Amendment to Half Dome Lease Agreement between Newport Fab, LLC and Conexant Systems, Inc. dated December 31, 2005 — Incorporated by reference to Exhibit 10.15 to Jazz Semiconductor’s Registration Statement on Form S-1 (Registration No. 333-133485).
10.5	Half Dome Lease Agreement between Specialtysemi, Inc. and Conexant Systems, Inc. dated March 12, 2002 — Incorporated by reference to Exhibit 10.13 to Jazz Semiconductor’s Registration Statement on Form S-1 (Registration No. 333-133485).
10.8	Third Amendment to Half Dome Lease Agreement between Newport Fab, LLC and Conexant Systems, Inc. dated as of September 26, 2006— Incorporated by reference to Exhibit 10.14 to Jazz Technologies’ Current Report on Form 8-K filed on February 23, 2007.
10.6	First Amendment to Half Dome Lease Agreement between Newport Fab, LLC and Conexant Systems, Inc. dated May 1, 2004 — Incorporated by reference to Exhibit 10.14 to Jazz Semiconductor’s Registration Statement on Form S-1 (Registration No. 333-133485).
10.9	Fourth Amendment to Half Dome Lease between Newport Fab, LLC and Conexant Systems, Inc. dated as of June 15, 2009 — Filed as Exhibit 10.21 to the initial filing of the Annual Report to which this Amendment No. 1 relates.
10.7		Second Amendment to Half Dome Lease Agreement between Newport Fab, LLC and Conexant Systems, Inc. dated December 31, 2005 — Incorporated by reference to Exhibit 10.15 to Jazz Semiconductor’s Registration Statement on Form S-1 (Registration No. 333-133485).
10.10	Fifth Amendment to Half Dome Lease between Newport Fab, LLC and Uptown Newport LP dated as of December 8, 2010 — Filed as Exhibit 10.22 to the initial filing of the Annual Report to which this Amendment No. 1 relates.
10.8		Third Amendment to Half Dome Lease Agreement between Newport Fab, LLC and Conexant Systems, Inc. dated as of September 26, 2006— Incorporated by reference to Exhibit 10.14 to Jazz Technologies’ Current Report on Form 8-K filed on February 23, 2007.
10.11	Sublease between Newport Fab, LLC and Conexant Systems dated as of December 22, 2010 — Filed as Exhibit 10.23 to the initial filing of the Annual Report to which this Amendment No. 1 relates.
10.9		Fourth Amendment to Half Dome Lease between Newport Fab, LLC and Conexant Systems, Inc. dated as of June 15, 2009 — Incorporated by reference to Exhibit 10.21 to Jazz Technologies’ Annual Report on Form 10-K for the year ended December 31, 2010.
10.12	El Capitan Lease Agreement between Specialtysemi, Inc. and Conexant Systems, Inc. dated March 12, 2002 — Incorporated by reference to Exhibit 10.16 to Jazz Semiconductor’s Registration Statement on Form S-1 (Registration No. 333-133485).
10.10		Fifth Amendment to Half Dome Lease between Newport Fab, LLC and Uptown Newport LP dated as of December 8, 2010 — Incorporated by reference to Exhibit 10.22 to Jazz Technologies’ Annual Report on Form 10-K for the year ended December 31, 2010.
10.13	First Amendment to El Capitan Lease Agreement between Newport Fab, LLC and Conexant Systems, Inc. dated October 1, 2004 — Incorporated by reference to Exhibit 10.17 to Jazz Semiconductor’s Registration Statement on Form S-1 (Registration No. 333-133485).
10.11		Sublease between Newport Fab, LLC and Conexant Systems dated as of December 22, 2010 — Incorporated by reference to Exhibit 10.23 to Jazz Technologies’ Annual Report on Form 10-K for the year ended December 31, 2010.
10.14	Second Amendment to El Capitan Lease Agreement between Newport Fab, LLC and Conexant Systems, Inc. dated November 31, 2005 — Incorporated by reference to Exhibit 10.18 to Jazz Semiconductor’s Registration Statement on Form S-1 (Registration No. 333-133485).
*10.12		Form of Indemnity Agreement entered into between the Registrant and certain of its officers and directors — Incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 29, 2007.
10.15	Third Amendment to El Capitan Lease Agreement between Newport Fab, LLC and Conexant Systems, Inc. dated September 1, 2006 — Incorporated by reference to Exhibit 10.18 to Jazz Technologies’ Current Report on Form 8-K filed on February 23, 2007.
10.13		Second Amended and Restated Loan and Security Agreement by and among Jazz Technologies, Jazz Semiconductor, Inc., Newport Fab, LLC, Wachovia Capital Markets, LLC, Wachovia Capital Finance Corporation (Western) and the lenders from time to time party thereto, dated as of September 19, 2008 — Incorporated by reference to Exhibit 3.1 to Jazz Technologies’ Current Report on Form 8-K filed on September 25, 2008.
10.16	Fourth Amendment to El Capitan Lease Agreement between Newport Fab, LLC and Conexant Systems, Inc. dated September 26, 2006— Incorporated by reference to Exhibit 10.19 to Jazz Technologies’ Current Report on Form 8-K filed on February 23, 2007.
10.14		First Amendment dated March 17, 2009 to the Second Amended and Restated Loan and Security Agreement by and among Jazz Technologies, Jazz Semiconductor, Inc., Newport Fab, LLC, Wachovia Capital Markets, LLC, Wachovia Capital Finance Corporation (Western) and the lenders from time to time party thereto, dated as of September 19, 2008 – Incorporated by reference to Exhibit 10.1 to Jazz Technologies’ Quarterly Report on Form 10-Q for the quarter ended March 31, 2009
10.17	Fifth Amendment to El Capitan Lease Agreement between Newport Fab, LLC and Conexant Systems, Inc. dated as of June 5, 2010 — Filed as Exhibit 10.29 to the initial filing of the Annual Report to which this Amendment No. 1 relates.
10.15		Second Amendment dated July 16, 2009 to the Second Amended and Restated Loan and Security Agreement by and among Jazz Technologies, Jazz Semiconductor, Inc., Newport Fab, LLC, Wachovia Capital Markets, LLC, Wachovia Capital Finance Corporation (Western) and the lenders from time to time party thereto, dated as of September 19, 2008 – Incorporated by reference to Exhibit 10.1 to Jazz Technologies’ Quarterly Report on Form 10-Q for the quarter ended September 30, 2009
10.18	Sixth Amendment to El Capitan Lease Agreement between Newport Fab, LLC and Uptown Newport LP dated as of December 22, 201 — Filed as Exhibit 10.30 to the initial filing of the Annual Report to which this Amendment No. 1 relates 0.
*10.19	Form of Indemnity Agreement entered into between the Registrant and certain of its officers and directors — Incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 29, 2007.

10.20	Second Amended and Restated Loan and Security Agreement by and among Jazz Technologies, Jazz Semiconductor, Inc., Newport Fab, LLC, Wachovia Capital Markets, LLC, Wachovia Capital Finance Corporation (Western) and the lenders from time to time party thereto, dated as of September 19, 2008 — Incorporated by reference to Exhibit 3.1 to Jazz Technologies’ Current Report on Form 8-K filed on September 25, 2008.
10.16		Third Amendment dated as of April 21, 2010 to the Second Amended and Restated Loan and Security Agreement by and among Jazz Technologies, Jazz Semiconductor, Inc., Newport Fab, LLC, Wachovia Capital Markets, LLC, Wachovia Capital Finance Corporation (Western) and the lenders from time to time party thereto, dated as of September 19, 2008 – Incorporated by reference to Exhibit 10.46 to Jazz Technologies’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2010
10.21	First Amendment dated March 17, 2009 to the Second Amended and Restated Loan and Security Agreement by and among Jazz Technologies, Jazz Semiconductor, Inc., Newport Fab, LLC, Wachovia Capital Markets, LLC, Wachovia Capital Finance Corporation (Western) and the lenders from time to time party thereto, dated as of September 19, 2008 – Incorporated by reference to Exhibit 10.1 to Jazz Technologies’ Quarterly Report on Form 10-Q for the quarter ended March 31, 2009
10.17		Fourth Amendment dated as of June 29, 2010 to the Second Amended and Restated Loan and Security Agreement by and among Jazz Technologies, Jazz Semiconductor, Inc., Newport Fab, LLC, Wachovia Capital Markets, LLC, Wachovia Capital Finance Corporation (Western) and the lenders from time to time party thereto, dated as of September 19, 2008 – Incorporated by reference to Exhibit 10.47 to Jazz Technologies’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2010
10.22	Second Amendment dated July 16, 2009 to the Second Amended and Restated Loan and Security Agreement by and among Jazz Technologies, Jazz Semiconductor, Inc., Newport Fab, LLC, Wachovia Capital Markets, LLC, Wachovia Capital Finance Corporation (Western) and the lenders from time to time party thereto, dated as of September 19, 2008 – Incorporated by reference to Exhibit 10.1 to Jazz Technologies’ Quarterly Report on Form 10-Q for the quarter ended September 30, 2009
10.18		Fifth Amendment dated as of July 19, 2010 to the Second Amended and Restated Loan and Security Agreement by and among Jazz Technologies, Jazz Semiconductor, Inc., Newport Fab, LLC, Wachovia Capital Markets, LLC, Wachovia Capital Finance Corporation (Western) and the lenders from time to time party thereto, dated as of September 19, 2008 — Incorporated by reference to Exhibit 10.52 to Jazz Technologies’ Annual Report on Form 10-K for the year ended December 31, 2010.
10.23	Third Amendment dated as of April 21, 2010 to the Second Amended and Restated Loan and Security Agreement by and among Jazz Technologies, Jazz Semiconductor, Inc., Newport Fab, LLC, Wachovia Capital Markets, LLC, Wachovia Capital Finance Corporation (Western) and the lenders from time to time party thereto, dated as of September 19, 2008 – Incorporated by reference to Exhibit 10.46 to Jazz Technologies’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2010
10.19		Sixth Amendment dated as of June 14, 2011 to the Second Amended and Restated Loan and Security Agreement by and among Jazz Technologies, Jazz Semiconductor, Inc., Newport Fab, LLC, Wachovia Capital Markets, LLC, Wachovia Capital Finance Corporation (Western) and the lenders from time to time party thereto, dated as of September 19, 2008 — Incorporated by reference to Exhibit 10.55 to Jazz Technologies’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2011.
10.24	Fourth Amendment dated as of June 29, 2010 to the Second Amended and Restated Loan and Security Agreement by and among Jazz Technologies, Jazz Semiconductor, Inc., Newport Fab, LLC, Wachovia Capital Markets, LLC, Wachovia Capital Finance Corporation (Western) and the lenders from time to time party thereto, dated as of September 19, 2008 – Incorporated by reference to Exhibit 10.47 to Jazz Technologies’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2010
10.20		Agreement and Plan of Merger and Reorganization by and among Tower Semiconductor Ltd., Armstrong Acquisition Corp. and Jazz Technologies, dated as of May 19, 2008 — Incorporated by reference to Exhibit 2.1 to Jazz Technologies’ Current Report on Form 8-K filed on May 20, 2008.
10.25	Fifth Amendment dated as of July 19, 2010 to the Second Amended and Restated Loan and Security Agreement by and among Jazz Technologies, Jazz Semiconductor, Inc., Newport Fab, LLC, Wachovia Capital Markets, LLC, Wachovia Capital Finance Corporation (Western) and the lenders from time to time party thereto, dated as of September 19, 2008 — Filed as Exhibit 10.52 to the initial filing of the Annual Report to which this Amendment No. 1 relates.
10.21		Exchange Agreement dated July 9, 2010 by and among Jazz Technologies, Inc., Tower Semiconductor, Ltd., Jazz Semiconductor, Inc., Newport Fab, LLC, Zazove Associates, LLC and certain holders of the Registrant’s 8% Senior Notes due 2011 – Incorporated by reference to Exhibit 10.48 to Jazz Technologies’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2010
10.26	Sixth Amendment dated as of June 14, 2011 to the Second Amended and Restated Loan and Security Agreement by and among Jazz Technologies, Jazz Semiconductor, Inc., Newport Fab, LLC, Wachovia Capital Markets, LLC, Wachovia Capital Finance Corporation (Western) and the lenders from time to time party thereto, dated as of September 19, 2008 — Incorporated by reference to Exhibit 10.55 to Jazz Technologies’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2011.
10.22		Eighth Amendment dated as of December 17, 2013 to the Second Amended and Restated Loan and Security Agreement by and among Jazz Technologies, Jazz Semiconductor, Inc., Newport Fab, LLC, Wachovia Capital Markets, LLC, Wachovia Capital Finance Corporation (Western) and the lenders from time to time party thereto, dated as of September 19, 2008 — Incorporated by reference to Exhibit 10.29 to Jazz Technologies’ Annual Report on Form 10-K for the year ended December 31, 2013.
10.27	Agreement and Plan of Merger and Reorganization by and among Tower Semiconductor Ltd., Armstrong Acquisition Corp. and Jazz Technologies, dated as of May 19, 2008 — Incorporated by reference to Exhibit 2.1 to Jazz Technologies’ Current Report on Form 8-K filed on May 20, 2008.
10.23		Exchange Agreement dated as of March 19, 2014 by and among Jazz Technologies, Inc., Tower Semiconductor, Ltd., Jazz Semiconductor, Inc., Newport Fab, LLC and certain holders of the Jazz Technologies, Inc. 8% Senior Notes due 2015 — incorporated by reference to Exhibit 4.59 to the Annual Report on Form 20-F of Tower Semiconductor Ltd. For the year ended December 31, 2013.
10.28	Exchange Agreement dated July 9, 2010 by and among Jazz Technologies, Inc., Tower Semiconductor, Ltd., Jazz Semiconductor, Inc., Newport Fab, LLC, Zazove Associates, LLC and certain holders of the Registrant’s 8% Senior Notes due 2011 – Incorporated by reference to Exhibit 10.48 to Jazz Technologies’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2010
10.24		Purchase Agreement dated as of March 19, 2014 by and among Jazz Technologies, Inc., Tower Semiconductor, Ltd., Jazz Semiconductor, Inc., Newport Fab, LLC and certain holders of the Jazz Technologies, Inc. 8% Senior Notes due 2015 — incorporated by reference to Exhibit 4.60 to the Annual Report on Form 20-F of Tower Semiconductor Ltd. For the year ended December 31, 2013.
10.29	Eighth Amendment dated as of December 17, 2013 to the Second Amended and Restated Loan and Security Agreement by and among Jazz Technologies, Jazz Semiconductor, Inc., Newport Fab, LLC, Wachovia Capital Markets, LLC, Wachovia Capital Finance Corporation (Western) and the lenders from time to time party thereto, dated as of September 19, 2008.
24.1		Power of Attorney (included on the signature pages hereto)
24.1	Power of Attorney (included on the signature pages hereto)
31.1		Principal Executive Officer Certification required by Rule 13a-14(a) or Rule 15d-14(a).
31.1	Principal Executive Officer Certification required by Rule 13a-14(a) or Rule 15d-14(a).
31.2		CFO Certification required by Rule 13a-14(a) or Rule 15d-14(a).
31.2	CFO Certification required by Rule 13a-14(a) or Rule 15d-14(a).
32.1		Section 1350 Certification
32.1	Section 1350 Certification
32.2		Section 1350 Certification
32.2	Section 1350 Certification

101.1 Financial information from the registrant’s Annual Report on Form 10-K for the year ended December 31, ~~2013~~2014, formatted in XBRL.

*	Denotes a management compensatory plan or arrangement.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	JAZZ TECHNOLOGIES, INC.
	By:	/s/ ~~NABIL~~MARCO ~~ALALI~~RACANELLI
		Nabil Alali
		Marco Racanelli
		Principal Executive Officer
		Date: March 3, 2014
	Date: April 10, 2015

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of ~~Nabil~~Marco ~~Alali~~Racanelli and Ronit Vardi his or her attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign any amendments to this Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or substitute or substitutes may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

Signatures	Title	~~Title~~Date	~~Date~~
/s/ NABIL ALALI		General Manager and Site Manager	March 3, 2014
/s/ MARCO RACANELLI	Senior Vice President and Site General Manager	April 10, 2015
Nabil Alali		(Principal Executive Officer)
Marco Racanelli	(Principal Executive Officer)
/s/ RONIT VARDI	Chief Financial Officer	~~Chief~~April ~~Financial~~10, ~~Officer~~2015	~~March 3, 2014~~
Ronit Vardi	(Principal Financial and Accounting Officer)	~~(Principal Financial and Accounting Officer)~~

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