Elon Musk has asserted that that the Terafab project slated for Austin, Texas will be the largest chip manufacturing factory of its kind. The project is a joint venture between Tesla, SpaceX and xAI. Musk noted that the facility is the next step towards harnessing the power of the sun and also creating a galactic civilization. The CEO of all three companies announced plans for the Terafab in a livestream session on X.

The aim is to produce a terawatt of computing power each year so that it can match the companies’ growing demand for chips. Though existing supply chain partners such as Samsung, TSMC and Micron are available, Musk notes it is not enough.

Moreover, he noted it adds up to about two percent of what Tesla and SpaceX need in terms of future computing power. “We either build the Terafab or we don’t have the chips,” Musk said during the event. “And we need the chips so we’re going to build the Terafab.” Chip making facilities are becoming fundamental as companies such as Texas Instruments (TI) also seeing the essence of developing these factories. The firm procured a $60 billion investment in 2025 to build or expand seven chip making facilities across three mega-sites in Texas and Utah.

Outlook on the Terafab Project in Texas

The Terafab project in Texas will start with the Advanced Technology Fab in Austin where Tesla is already headquartered. Moreover, the project is estimated to cost $20 billion to fulfill full buildout. Two types of chips will be produced in the Terafab with one being for terrestrial purposes. On the other hand, the second will be for more high-powered durable chips to be used in space. The first chip will be used in Full Self-Driving and also in Optimus robots as noted by Musk.

Other than the Terafab project, the SpaceX CEO also has other plans in the works. For instance, filed an application with the Federal Communications Commission to launch a million satellites to create an “orbital data center” earlier this year.

Despite the hype on the projects, some are skeptical of whether Musk will truly fulfill as promised based on earlier counts. Previously overpromised and under delivered project have been part of Musk’s roster with projects such as the Hyperloop. Moreover, he under delivered on the $40,000 Cybertruck and fully autonomous driving.

Project Factsheet

• Project Type: Chip manufacturing (semiconductor fab)
• Projected Investment: approximately 20 billion dollars.
• Objective: Produce large-scale computing chips for internal demand
• Planned Output: Target of terawatt-scale computing capacity annually

Key Developers

• Tesla
• SpaceX
• xAI

Location

• City: Austin, Texas
• Country: United States
• First Location: High-tech Fab (Tesla HQ base)

Project Scope

Two types of chips:

• Terrestrial chips (e.g., EVs, robotics)
• Space-grade high-durability chips.

Project Status

• Stage: Announced / early planning.
• Timeline: Not disclosed

Strategic Context

• To minimize dependence on external suppliers like Samsung, TSMC, and Micron Technology.
• Funds the increasing chip demand in AI, autonomous systems, and space technologies.