Tesla Inc (NASDAQ:TSLA) and SpaceX (Unlisted (US):SPACEX) will jointly build a semiconductor manufacturing facility, dubbed “Terafab,” in Austin, Texas, as founder Elon Musk pushes to secure chip supply for artificial intelligence, robotics and space applications.
Musk said the “advanced technology fab” would address what he described as a widening gap between semiconductor supply and demand, adding that current production rates fall short of what is needed to support rapid advances in AI and computing.
Analysts estimate the project could cost more than $20 billion, placing it among the largest semiconductor investments globally, as companies including Meta Platforms race to secure access to chips amid a prolonged memory shortage.
The TeraFab facility is expected to target production of advanced 2-nanometer chips and aims to manufacture up to 50 times the number of AI chips currently produced annually by major global suppliers, according to Musk.
The plant will produce two types of semiconductors: chips designed for Tesla’s self-driving vehicles, robotaxis and its Optimus humanoid robots, and more specialized chips built to withstand the extreme conditions of space for use in SpaceX systems.
“In order to understand the universe, you must explore the universe,” Musk said when announcing the project. “And that’s the motivation to accelerate humanity’s future in understanding the universe and extending the light of consciousness to the stars.”
Musk outlined an aggressive timeline for the facility, with early production slated to begin as soon as next year and mass production targeted for 2028, faster than the typical three-year timeline required to bring semiconductor fabrication plants online.
The project is also expected to target massive compute output, with a reported goal of producing around one terawatt of compute capacity annually to support AI, autonomous driving, robotics and space-based data systems.