- Tesla and SpaceX CEO Elon Musk announced plans for a “Terafab” semiconductor manufacturing facility near Tesla’s Austin headquarters.
- The factory aims to produce chips supporting 100 to 200 gigawatts of computing power per year on Earth and a terawatt in space.
- Musk says existing chip suppliers cannot produce enough semiconductors to meet his companies’ AI and robotics ambitions.
- No timeline was given for the project, and Musk has no background in semiconductor manufacturing.
Musk Says Chip Shortage Leaves Him No Choice
Elon Musk revealed plans for a massive chip manufacturing plant he calls the “Terafab” at an event in downtown Austin, Texas on Saturday night. Bloomberg reports the facility will be built near Tesla’s existing Austin headquarters and gigafactory.
“We either build the Terafab or we don’t have the chips, and we need the chips, so we build the Terafab,” Musk said. Tesla currently relies on contract chipmakers TSMC and Samsung Electronics to produce its custom chip designs, but Musk has repeatedly said their output falls short of what Tesla needs for its AI and robotics roadmap.
The chip shortage complaint is not new. At Tesla’s 2025 shareholder meeting, Musk first floated the idea of a “Tesla terra fab,” saying the company would need initial capacity of 100,000 wafer starts per month, eventually scaling to 1 million. For context, TSMC’s total annual capacity reached 17 million wafers in 2024, or roughly 1.42 million wafer starts per month.
200 Gigawatts on Earth, a Terawatt in Space
The ambition is staggering. Musk said the Terafab would manufacture chips capable of supporting 100 to 200 gigawatts of computing power per year on Earth, plus a terawatt of computing in space through SpaceX. He offered no timeline, no cost estimate, and no details on where the semiconductor expertise would come from.
That gap matters. Building a leading-edge chip fab requires years of construction, billions of dollars, and deep process engineering knowledge that only a handful of companies in the world possess. TechCrunch notes that Musk has a well-documented history of overpromising on timelines. Tesla’s Cybercab, Full Self-Driving, and Optimus robot have all faced repeated delays.
Still, the underlying demand is real. Tesla’s latest-generation AI5 chip is designed in-house but outsourced for production. As Yahoo Finance reports, internalizing chip manufacturing would give Musk control over a critical bottleneck as Tesla leans harder into autonomous driving, humanoid robotics, and AI inference at scale. Whether the Terafab materializes or joins the growing list of Musk moonshots that never ship remains the open question.
