Musk’s Tesla & SpaceX: New Chip Factories & $20B Terafab Project in Austin
AUSTIN, TEXAS – Tesla and SpaceX jointly announced plans Saturday for “Terafab,” a $25 billion semiconductor fabrication facility to be built in Austin, Texas, aiming to produce one terawatt of computing power annually. The announcement, made by Elon Musk at an event near Tesla’s Gigafactory, signals a dramatic escalation in the companies’ ambitions to control their supply chain for artificial intelligence and robotics development.
The facility, planned for the North Campus of Giga Texas, is designed to consolidate all stages of semiconductor production – from chip design and lithography to fabrication, memory production, advanced packaging, and testing – under one roof. Tesla is targeting 2-nanometer process technology, a leading edge currently being ramped up by TSMC after decades of investment, according to reports.
Musk stated the impetus for Terafab stems from the inability of existing semiconductor manufacturers to meet the growing demand for chips required by Tesla’s Full Self-Driving software, the Cybercab robotaxi program, and the Optimus humanoid robot line. “We either build the Terafab, or we don’t have the chips, and we need the chips, so we build the Terafab,” Musk said, as reported by TechCrunch.
The scale of the project is unprecedented. Terafab is designed for an initial output of 100,000 wafer starts per month, with plans to scale to 1 million wafer starts per month at full capacity. This full-scale target would represent approximately 70% of TSMC’s entire current global output, a staggering ambition for companies with no prior chip fabrication experience, according to Electrek.
The venture integrates efforts under the SpaceX/xAI umbrella with Tesla’s existing silicon development. Musk described Terafab as a pivotal step toward humanity becoming a galactic civilization, accompanied by conceptual imagery of prototype 100 kW “AI Mini Sat” during a live SpaceX broadcast on X. The project also aims to address the need for specialized semiconductors required for orbital AI infrastructure.
Initial prototype fab operations are to be focused in Austin, with the full-scale Terafab to be built at a yet-to-be-determined location. The total cost is expected to be around $20 billion, though the Electrek report cites the announced figure as $25 billion. Tesla plans to build an advanced technology fabrication facility at the existing Giga Texas site capable of performing all parts of chip manufacturing in a single facility to accelerate iteration and testing of modern chips.
Musk acknowledged his companies’ lack of experience in semiconductor manufacturing but emphasized the necessity of the project. Bloomberg reported Musk’s comments that the facility would produce between 100 and 200 billion custom AI and memory chips per year.