Tower Semiconductors (Nasdaq:TSEM) (TSEM) - Get Report has lowered the estimated cost of building Fab 2, its second foundry in Migdal Ha'emek, from $1.65 billion to $1.5 billion, TheMarker.com has learned.

The Israeli chipmaker has accordingly amended loan agreements dating from January 2001 with Israeli banks Hapoalim and Leumi.

Originally Tower was committed to borrowing $190 million from the banks by year-end 2003, starting with $60 million by the end of this year.

Now Tower will be borrowing $144 million by year-end 2003, and $40 million by the end of this year.

Tower also reduced its credit line from the banks, from $550 million to $500 million.

Israel Corporation, Tower's parent company, reported in its financial statement issued today that the construction of Fab 2 is progressing on schedule. It also said that efforts are being made to reduce the project's costs in compliance with the deterioration of the market situation.

Israel Corporation's report also reveals that SanDisk (Nasdaq:SNDK) waived an option it held to invest $81 million in Tower in exchange for 2.7 million shares.

SanDisk did take part in an offering Tower held yesterday, in which the chipmaker issued 4.214 million ordinary shares to strategic partners in Fab 2. The offering followed an agreement closed in September to convert $53.7 million of credits to make future purchases of wafers into equity.