Israeli contract chipmaker Tower Semiconductor forecast its fourth-quarter revenue above estimates on Wednesday, driven by a recovery in demand for its chips, and said it plans to invest $350 million to expand capacities.

The U.S.-listed shares of the company were up 7.5 per cent in premarket trading.

The company said the investment will expand capacities for its silicon photonics, used in autonomous vehicles, and silicon germanium, used in wireless communication and high-performance computing systems.

However, the company did not disclose the time frame for this investment.

The plan also includes the qualification and ramp-up of 200mm capacity, both in San Antonio and Migdal Haemek, Israel, and in its 300mm facility in Uozu, Japan.

The company makes analog and mixed-signal semiconductors used mainly in automobiles for "fabless" firms, which outsource chip manufacturing.

Slowing growth in demand for electric vehicles has kept inventory levels for chips used in the automotive industry at elevated levels.

However, Texas Instruments - a bellwether for analog chip demand - indicated last month that improving demand from the Chinese automotive market is helping drive down chip inventory levels.

Tower Semiconductor expects to report fourth-quarter revenue of $387 million, with an upward or downward range of 5 per cent, beating analysts' expectations of $379.2 million, data compiled by LSEG shows.

In September, Tower Semiconductor tied up with India's Adani Group to invest 839.47 billion rupees ($10 billion) for a project in India's western state of Maharashtra. The project will initially have a capacity of 40,000 wafers.

It reported third-quarter revenues of $371 million, which was ahead of Wall Street estimates of $370.3 million. Its quarterly profit was 57 cents per share, compared with analysts' estimates of 53 cents per share.