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SpaceX has separately asked the Federal Communications Commission for authorization to launch up to one million satellites into low Earth orbit as part of an orbital data center network. Musk frames Terafab as the chip supply chain for that constellation.
Musk on Saturday announced what he calls the “Terafab,” a semiconductor manufacturing plant to be located in Austin, Texas, that will produce chips for Tesla vehicles, SpaceX spaceships and Optimus humanoid robots.
Elon Musk launches TERAFAB: The $25B Tesla-SpaceXAI chip factory that will rewire the AI industry ... Ives calls Terafab the “first step” toward full operational integration.
I’ve written in detail about how market entertainer Elon Musk has been cannily adding the narrative evolution of ‘AI Space Data Centers’ to bolster his planned June mega-IPO of SpaceX/xAI around his birthday. Now it’s being bolstered with a new layer called ‘Terafab’, which is yet another fantastical tale of whole new ways to make chips in the US.
Now, he’s adding cutting-edge chip fabrication to the list to tie them all together. His new Terafab project between Tesla, SpaceX, and xAI aims to produce 50x the world’s current global compute per year, most of it deployed on AI satellites in orbit — in what Musk called the first step ...
The total cost of the project is estimated at up to $25 billion, with construction planned at Tesla’s Giga Texas site.
SK Hynix plans to spend $7.9 billion on EUV lithography tools from ASML through 2027, one of the largest orders of its kind. Musk’s Terafab has launched a talent war in Taiwan, recruiting senior chip engineers with its 2-nm fab plan targeting TSMC.
Terafab is planned as a 200,000-square-foot facility capable of 12-inch wafer processing at sub-10nm nodes. Key technical elements include: Cleanroom Environment: ISO Class 1 to Class 5 cleanrooms with humidity, temperature, and particle control maintained within ±0.1°C and ±1% RH to ensure process consistency. Process Technology: Advanced EUV lithography machines from ASML targeting 5nm and 3nm logic processes, coupled with deposition and etch modules from Applied Materials and Lam Research.
TSMC’s competitive moat isn’t just their EUV machines, it’s the ten thousand process engineers who have collectively seen every failure mode and built the tacit knowledge base to diagnose them. That institutional knowledge takes years to accumulate and cannot be hired away in bulk. Tesla is starting from zero on this. The early years of Terafab production, if it reaches production at all, will be characterized by poor yields and negative margins.
Yet building a fabrication plant ... challenge. Terafab must not just produce chips; it must become a factory of innovation, scaling to 100–200 billion units annually. A key technological bottleneck is ASML's dominance in extreme ultraviolet (EUV) lithography....
The prospect of a Terafab-driven capital raise — at a time when the stock is already under pressure — is the single biggest near-term fear weighing on TSLA. Building a leading-edge semiconductor fab involves over 2,000 individual manufacturing processes, globally scarce EUV lithography equipment (with 2+ year lead times from ASML), and engineering talent that TSMC has spent 30 years cultivating.
The most visible bottleneck is equipment. EUV lithography tools—dominated by ASML—carry multi-year backlogs, and allocation tends to favor established customers with proven ramp capability. Beyond EUV, a high-volume fab requires a dense ecosystem of deposition, etch, inspection, metrology, and test equipment, each with its own supply constraints and service needs.
SpaceXAI + Tesla TERAFAB Project. Goal is a trillion watts of compute per year. Follow Elon and official company mentions.
Tematica Research CIO Chris Versace joins Yahoo Finance Senior Autos Reporter Pras Subramanian and Market Domination Host Josh Lipton to discuss Tesla (TSLA) and SpaceX's (SPAX.PVT) recently announced project, the "Terafab" chip production plant.
‘Elon Musk has announced the creation of ‘Terafab’ and it is a massive semiconductor manufacturing plant in Austin, Texas. This was revealed on March 23 2026 and this project aims to produce advanced chips for Tesla, SpaceX and humanoid robots.
Terafab is a semiconductor fab project announced in Austin, north of the Giga Texas site.
He said he has urged suppliers including TSMC, Samsung Electronics Co. (005930.KS) and Micron Technology Inc. (MU) to expand as quickly as they can — and promised to take pretty much everything they make. “We will buy all of their chips; I have said these exact words to them,” he said. But semiconductor companies have opted to expand at a more measured rate, one far short of what he thinks necessary for Tesla, SpaceX and xAI. “So we either build the Terafab or we don’t have the chips,” he said.
Through the new Terafab project, Musk will take AI computing into his own hands, with the aim of producing one terawatt of computing power a year, enough to power hundreds of millions of AI chips.
SpaceX and Tesla launch TERAFAB, a $45B-scale initiative to produce over 1 terawatt of compute annually for space and AI.
Send a tip to our reporters · Site feedback: Take our Survey · By Debby Wu and Ian King · March 24, 2026 at 10:32 AM UTC · Save · When Elon Musk took the stage on Saturday to unveil his plans to get into semiconductor production, he didn’t ...