Musk unveils $20B Terafab chip manufacturing project to produce a terawatt of computing power

Elon Musk unveils chip manufacturing plans for SpaceX and Tesla | TechCrunch

Elon Musk recently outlined ambitious plans for a chip-building collaboration between his companies Tesla and SpaceX. Bloomberg reports that Musk shared his plans on Saturday night at an event in downtown Austin, Texas, with a photo suggesting that what Musk is calling the "Terafab" facility will be built near Tesla's Austin headquarters and "gigafactory." Musk said he's pursuing this project because semiconductor manufacturers aren't making chips quickly enough for his companies' artificial intelligence and robotics needs: "We either build the Terafab or we don't have the chips, and we need the chips, so we build the Terafab." The goal is to manufacture chips that can support 100 to 200 gigawatts of computing power per year on Earth, along with a terawatt in space, Musk said. He did not offer a timeline for these plans. As Bloomberg noted, Musk does not have a background in semiconductor manufacturing, but he does have a history of overpromising on goals and timelines.

Elon Musk unveils $20 billion 'TeraFab' chip project to make chips, memory, and package processors all under one roof -- targets a terawatt of annual compute

The joint Tesla-SpaceX fab will make both terrestrial inference chips and space-hardened processors. Tesla and SpaceX CEO, Elon Musk, announced Saturday night that his TeraFab semiconductor project will be built on the Tesla campus in eastern Travis County, Austin, Texas, as a joint venture between the two companies. In a livestream broadcast via X, Musk stated that the facility exists because the global chip industry cannot expand quickly enough to meet his projected demand across AI, robotics, and space computing. "That rate is much less than we'd like," Musk said from the defunct Seaholm Power Plant in downtown Austin. "We either build the TeraFab, or we don't have the chips, and we need the chips, so we build the TeraFab." The project reportedly carries a $20 billion price tag. The Austin fab will house equipment for logic, memory, packaging, testing, and lithography mask production in a single building. Musk claimed that capability does not exist at any other facility in the world, and that having everything under one roof enables a rapid iteration loop: make a chip, test it, revise the mask, and repeat without shipping wafers between sites. The facility is expected to produce two types of chips. One will be optimized for edge inference, primarily for Tesla's vehicles and Optimus humanoid robots. The other will be a higher-power chip hardened for the space environment, which Musk says will run hotter than "terrestrial" designs to minimize radiator mass on satellites. Musk compared the project to the current global output of global AI compute, which he estimated at roughly 20 gigawatts per year. That figure, he said, represents about 2% of his companies' eventual needs. On the terrestrial side, he projected 100 to 200 gigawatts per year of chip output; the remainder, up to a terawatt, would go to space-based AI compute aboard solar-powered satellites that SpaceX has already petitioned the FCC to launch. "That's why I think it's probably a hundred to two hundred gigawatts a year of terrestrial chips, and probably on the order of a terawatt of chips in space," noted Musk. "Just because of power constraints on the ground." Musk said Tesla, SpaceX, and xAI -- which SpaceX acquired in February -- will continue buying chips from existing suppliers, including TSMC, Samsung, and Micron, adding that he would like them "to expand as quickly as they can." He gave no timeline for when the TeraFab would begin producing chips or reach its target output, and while he has previously referenced 2nm as the target process node, he didn't repeat that figure in the broadcast. Follow Tom's Hardware on Google News, or add us as a preferred source, to get our latest news, analysis, & reviews in your feeds.

Elon Musk launches Terafab to power next-gen AI and hardware boom

Elon Musk has unveiled an ambitious new initiative, the Terafab, aimed at transforming chip manufacturing through a joint effort between Tesla and SpaceX. The project seeks to bring advanced semiconductor production in-house, reducing reliance on external suppliers. Musk outlined a bold target of generating a terawatt -- equivalent to one million megawatts -- of compute capacity annually. The announcement signals a major push to scale AI and hardware capabilities, positioning the venture at the forefront of next-generation computing infrastructure development.

Musk unveils record chip-building plan

Driving the news: Musk said the project will kick off with an advanced technology fab (semiconductor manufacturing facility) in Austin -- headquarters of Tesla and home of its Gigafactory. His Neuralink, Boring, and SpaceX companies also have growing Texas operations. * Musk's ambition is to manufacture his own chips for AI, humanoid robots and space data centers. * Speaking with dramatic lighting at a historic power plant in downtown Austin, Musk said his "existing supply chain" is "much less than we would like. And so we either build the Terafab, or we don't have the chips." Between the lines: Musk "showed an animation of how SpaceX could potentially launch satellites from the surface of the moon," Bloomberg notes, "and reiterated his vision for a future filled with 'amazing abundance' -- something he has been touting in recent months." * For instance, he said anyone who wants to will be able to fly to Saturn.

Tesla and SpaceX announce $25B 'Terafab' chip factory -- here's why it reeks of desperation

Tesla and SpaceX have unveiled "Terafab," a joint $25 billion chip fabrication facility in Austin, Texas, that Elon Musk claims will produce 1 terawatt of computing power annually. It would be the largest semiconductor fab ever built -- by an absurd margin. Musk took the stage at the defunct Seaholm Power Plant in Austin on March 21 to officially launch the project, calling it "the most epic chip building exercise in history by far." Terafab is a joint venture between Tesla, SpaceX, and xAI -- the AI company that SpaceX recently acquired in an all-stock deal. The facility is planned for the North Campus of Giga Texas and is designed to consolidate every stage of semiconductor production under one roof: chip design, lithography, fabrication, memory production, advanced packaging, and testing. Tesla says it is targeting 2-nanometer process technology -- the most advanced node currently entering commercial production. TSMC is only now beginning to ramp its own 2nm output, and it has spent decades and hundreds of billions of dollars building that capability. The production targets are staggering. Terafab is designed for an initial output of 100,000 wafer starts per month, with ambitions to scale to 1 million wafer starts per month at full capacity. For context, that full-scale target would represent roughly 70% of TSMC's entire current global output -- from a single facility operated by companies that have never fabricated a chip. Musk said the facility would produce between 100 and 200 billion custom AI and memory chips per year, powering Tesla's "Full Self-Driving" software, the Cybercab robotaxi program, and the Optimus humanoid robot line. He also said millions of Optimus robots would help build and operate the facility. Regarding why Tesla needs to do this in-house, Musk acknowledged his current suppliers: "We're very grateful to our existing supply chain, to Samsung, TSMC, Micron and others," but added, "there's a maximum rate at which they're comfortable expanding. That rate is much less than we would like... and we need the chips, so we're going to build the Terafab." He claimed all the current fabrication facilities on Earth produce only about 2% of what he would need across all of his projects. Terafab will produce two categories of chips: inference chips for Tesla vehicles and Optimus robots (such as Tesla's current AI4), and D3 chips custom-designed for orbital AI satellites. Small-batch production of the AI5 is expected in 2026 with volume production projected for 2027 -- though it's worth noting that Tesla already delayed the AI5 to mid-2027 before this announcement, and the AI6 chip has been delayed roughly six months due to Samsung's 2nm production slipping. The most eyebrow-raising part of the presentation was the space computing vision. Musk said 80% of Terafab's compute output would be directed toward space-based orbital AI satellites, with only 20% for ground-based applications. He argued that solar irradiance in space is roughly 5x greater than at Earth's surface, and that heat rejection in vacuum makes thermal scaling viable. His conclusion: orbital AI compute could become cheaper than terrestrial alternatives within 2-3 years. "We're starting a galactic civilization," Musk declared. Tesla's CFO acknowledged that the full Terafab cost -- estimated at $20-25 billion -- is not yet incorporated into Tesla's record capital expenditure plan for 2026, which already exceeds $20 billion. This is Tesla's Battery Day on steroids. And if you've been following how that turned out, you should be very skeptical. In September 2020, Musk stood on a stage and promised a revolution in battery manufacturing with the 4680 cell. Tesla was going to ramp to 10 GWh within a year and eventually reach 3 TWh by 2030 -- enough for 20 million cars annually. The dry electrode process was going to cut costs by 50%. Five and a half years later, the 4680 program has been a disappointment. Tesla's own top battery supplier said Elon doesn't know how to make battery cells. The dry electrode process needed six or seven revisions. It took years longer than promised, and the 3 TWh target is a distant fantasy. Tesla is estimated to be at only about 2% of its original cell manufacturing volume goal. Now Musk wants us to believe he's going to build a chip fab. Not just any chip fab -- the biggest in the world, at 2nm, producing 70% of TSMC's total output from a single building. Battery cell manufacturing is difficult. Chip fabrication at the leading edge is on another planet of difficulty. TSMC spent $165 billion over years to build six fabs in Arizona, and those won't reach 2nm production until 2029. A single 2nm fab with 50,000 wafer starts per month costs roughly $28 billion, and it takes about 38 months just to build in the U.S. Tesla has zero semiconductor manufacturing experience. The timing tells the real story. Tesla's auto business is in freefall -- sales declined for the second consecutive year in 2025, with a bloodbath in Europe and its first-ever annual decline in China. SpaceX, by contrast, is about to IPO at a potential $1.5-1.75 trillion valuation. This announcement is clearly designed to attach Tesla, a business in decline, and SpaceX, a business about to go public, to the AI hyperscaler narrative, a boat Musk has already missed with xAI, which he admitted "was not built right" and had to be bailed out by SpaceX. And the cherry on top, or in space, rather, is the plan to put 80% of this compute in orbit. Data centers in space. Powered by solar panels. Launched by Starship. This is the kind of vision that sounds impressive on stage but has essentially zero connection to any near-term business reality, or any possible reality at all, according to most credible experts. The whole thing reeks of desperation. Musk is hyping an 8th-gen AI chip while he still hasn't delivered on the promises made with the 3rd generation. He's promising to do in a couple of years what TSMC has spent decades and hundreds of billions of dollars building. We've seen this movie before with battery cells, and we know how it ends.