Elon Musk announces plans to build Terafab, the world’s largest chip factory

Elon Musk has announced plans to build Terafab, the largest semiconductor manufacturing facility ever.

A joint venture between Tesla, SpaceX and xAI, Terafab was announced in a live broadcast on Saturday as “the next step in galactic civilization.” Of course, Musk’s plans for this extend beyond Earth, and will cost $20 to $25 billion to build.

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Initially, Terafab will be a large chip manufacturing facility located near Tesla’s Giga Texas in Austin. Musk said they will be able to make a chip, test it, improve it, and keep replicating it in one building, something that “doesn’t exist anywhere else in the world.” Much remains to be done, but the goal (according to Musk’s comments at Tesla’s shareholder meeting in November last year) is for Terafab to eventually be able to produce one million chip wafers per month using 2-nanometer process technology.

For reference, the world’s largest semiconductor manufacturer currently is Taiwan’s TSMC, and that company plans to reach a monthly output of 140,000 2-nanometer chip wafers per month by the end of 2026.

In terms of actual chips, Musk expects Terafab to produce between 100 and 200 billion AI and memory chips per year, which will be mostly used by Tesla itself, powering cars and robots. According to Musk, Tesla needs chips, and its current suppliers, including Samsung, TSMC, Micron, and others, “have a high price where they are comfortable to expand.”

“That level is much smaller than we would like. So, we build Terafab, even if we don’t have chips,” he said during his presentation.

It’s a lofty goal for a company (well, three companies) that has never made semiconductors before, but it’s becoming even more ambitious.

At full capacity, it will generate 100 to 200 gigawatts of annual computing power on Earth, and one terawatt of computing power in Space (this means the chips produced at Terafab will draw that much power when in use).

For reference, Musk said US electricity demand is 0.5 terawatts. That’s why, Musk argued, 80% of Terafab’s computing output will actually reside in space, on SpaceX’s solar-powered AI satellites. Solar irradiance (the amount of energy received from the Sun per unit area) is 5x higher in space than on Earth, while heat rejection in the vacuum of space makes it easier to cool all those chips.

Also, for reference, the amount of computing running in low earth orbit is currently negligible, and is largely limited to on-board processing in satellites.

What Musk describes still exists, and China’s “Three-Body Computing Constellation” is the most prominent example. It is a 12-satellite constellation using AI models with chips capable of computing a capacity of 5 peta operations per second (POPS), with plans to expand to 2,800 satellites capable of 1,000 POPS. While I couldn’t find the total energy consumption for that particular project, it’s likely in kilowatts – orders of magnitude lower than what Musk is planning.

Even by Musk’s standards, these goals are very ambitious. TSMC is the main reason why there are many political conflicts in Taiwan; if it were easy to build advanced bases that produce chip wafers on the scale that TSMC does, the US would not be so concerned about China controlling Taiwan. Building a large data center in space is an equally complex problem, although here SpaceX is uniquely positioned as the world’s most advanced aerospace company.

That’s not all, as Musk eventually plans to one day build an “awesome” “super driver” on the moon that will push computing output from terawatts to petawatts, although the details of how this happens are unclear at the moment.

Musk’s timeline for all and any of these is unclear. The company’s next AI chip, the AI5, should reach volume production in 2027, but that won’t be built at Terafab, which could take years to build. To check the truth, it is worth remembering the promises of Musk’s intentions to be prominent in the Tesla Battery Day in 2020, almost nothing is true now, it is long past the first time.