Tesla plans $119B investment in Terafab chip manufacturing facility

Elon Musk wants to build his own chip factory. Not a small one, either. The project, dubbed “Terafab,” could cost up to $119 billion across all phases, making it one of the most ambitious semiconductor manufacturing proposals in history.

The facility would serve as the hardware backbone for Musk’s expanding empire: Tesla vehicles and robots, xAI’s artificial intelligence servers, SpaceX systems, and even proposed space-based data centers.

What Terafab actually is

Terafab is designed as a vertically integrated semiconductor operation — instead of outsourcing different steps of chipmaking to different companies around the world, this single facility would handle everything from chip design and lithography to wafer fabrication, testing, and packaging, all under one roof.

The initial phase of the project carries an estimated price tag of around $55 billion. If every subsequent phase gets the green light, total investment could reach $119 billion.

At full scale, Musk envisions the facility producing 1 terawatt of chips per year, with a target of 1 million wafers per month.

Grimes County, Texas, is the leading candidate for the site, though multiple locations are reportedly still under consideration.

Before the full Terafab vision materializes, Tesla has more immediate plans. A smaller pilot fab at Giga Texas is expected to cost around $3 billion and would serve as the testing ground for the larger project’s technology and processes.

Why Musk wants to make his own chips

The project’s estimated cost has rapidly escalated from initial projections of $25 billion to a potential $55 billion for the first phase and up to $119 billion overall.

Intel is reportedly being considered as a partner for the project.