Musk to Invest $3B in Terafab Chip R&D Using Intel Tech

According to Elon Musk, Tesla plans to invest approximately $3 billion in a semiconductor R&D facility in Texas, marking an early step in its broader push into advanced chip manufacturing.

Speaking during a Wednesday earnings call, Musk stated that the new facility will be located within Tesla’s existing Gigafactory Texas campus. The site is expected to operate at a relatively small scale, with a monthly capacity of only a few thousand wafers, primarily dedicated to testing and validating new semiconductor technologies and process nodes.

Musk also revealed that SpaceX will take a leading role in the initial phase of a larger initiative known as “Terafab.” Meanwhile, Intel has joined the effort as a strategic partner, contributing expertise in chip design, fabrication, and advanced packaging.

“At this stage, Tesla is focused on operating a development-oriented wafer fab,” Musk said. “SpaceX will lead the early phase of Terafab, while the remaining structure of the project will be defined over time.”

The Terafab initiative represents Musk’s long-term ambition to establish vertically integrated semiconductor capabilities across his ecosystem, including Tesla, SpaceX, and xAI. The goal is to secure a stable and scalable chip supply to meet growing internal demand, which Musk suggested cannot be fully satisfied by existing foundry leaders such as TSMC and Samsung Electronics.

The proposed $3 billion investment is modest compared to leading-edge fab construction costs, which can exceed $30 billion. For example, advanced lithography systems from ASML can cost hundreds of millions of dollars per unit, underscoring the capital intensity of state-of-the-art semiconductor manufacturing.

Historically, semiconductor manufacturers have deployed pilot lines to validate new device architectures and process technologies before scaling to high-volume production. These facilities typically require lower capital expenditure and play a critical role in de-risking advanced node transitions, though they lack the scale needed for cost-efficient mass production.

Musk noted that any cross-company collaboration under the Terafab initiative would require formal approval from the boards of both Tesla and SpaceX, along with conflict-of-interest reviews.

During the call, Musk also addressed Intel’s potential technical contribution, indicating that Tesla intends to adopt Intel’s most advanced process node, 14A—an emerging technology that has not yet secured external customers. The announcement contributed to a roughly 3% increase in Intel’s stock price in after-hours trading on Wednesday.

However, Musk did not clarify whether Tesla plans to utilize Intel’s existing fabrication facilities or license its process technology. “We are planning to adopt Intel’s 14A process, which is highly advanced but still maturing,” he said. “By the time Terafab reaches scale, the process is expected to be production-ready, making it a reasonable choice.”