Elon Musk stated that every chip he can buy today only covers about 2% of what his companies actually need. Rather than wait for the rest of the world to catch up, he announced TeraFab on Saturday night, a chip factory in Austin and a joint venture between Tesla and SpaceX.
The announcement came via a livestream broadcast from the old 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’re going to build the TeraFab,” Musk said. The facility will be built on the Tesla campus in eastern Travis County.
Why is this announcement such a big deal?
What makes TeraFab different from existing chip manufacturers is its layout. The entire process, from creating lithography masks and making logic and memory chips to packaging and testing, will all take place under a single roof. Musk claims this doesn’t exist anywhere else in the world right now.
The advantage is a rapid design loop. “I can’t emphasize enough the importance of being able to make a chip, test it, and then change the design, do another one, and have that in a single building,” he said, adding that this approach could make their chip improvement cycle “an order of magnitude better than anything else in the world.”
What chips will the company actually make?
TeraFab will produce two types of chips. The first is optimized for edge inference, designed for Tesla cars and Optimus humanoid robots. On the scale of demand for the first chip alone, Musk was blunt and said, “I expect humanoid robot production to be somewhere between a billion and 10 billion units a year. So that’s a lot.”
The second is hardened for the space environment, built to handle the radiation and high-energy ions that would destroy conventional chips. Musk also confirmed that Tesla, SpaceX, and xAI will continue buying chips from TSMC, Samsung, and Micron, and said he’d like them to expand as fast as they possibly can.
Cool idea, but what’s the timeline??
Honestly, what Musk showed in the livestream is genuinely exciting. The idea of pushing the limits of chip physics, trying unconventional designs, and iterating on them faster than anyone else in the world is the kind of ambition that could change things.
That said, no timeline was given for when TeraFab will begin producing chips. And given that Tesla announced the Roadster over a decade ago and it still hasn’t shipped, I’ll reserve my excitement until the first chip rolls off the line.
