SpaceX and Tesla plan to jointly invest $55 billion in Terafab, the chip factory in Texas that they hope to build in partnership with Intel. Ultimately, the total investment could reach $119 billion.
The size of the financial contribution became clear through an application made public today. The factory, named Terafab, is planned for Grimes County, Texas, within a newly designated redevelopment zone. Local authorities will consider an agreement for a property tax exemption in June.
The project involves a multi-phase complex for chip manufacturing and advanced computing. SpaceX estimates that the total investment could reach $119 billion if all phases are completed. The primary goal is to reduce dependence on chip manufacturers, primarily TSMC, Samsung, and Nvidia.
AI computing power as a bottleneck
Musk has repeatedly warned of shortages in the supply of advanced chips, identifying computing power as the main bottleneck for scaling up AI systems. Terafab is intended to break that dependence. That is easier said than done, especially if the plan is to build proprietary GPUs. Apart from Nvidia and AMD, only Google and AWS have succeeded in building a full-fledged AI chip for training that competes with the usual GPU manufacturers. In both cases, this took years, and when it comes to AWS, there are still doubts about the competitive nature of Trainium versus TPUs and GPUs. That said, a chip manufacturer’s extensive expertise cannot be easily matched, not even through talent acquisition. Taiwan’s TSMC stands alone at the top when it comes to the most advanced processes for manufacturing AI chips.
Musk’s companies are not alone in this endeavor, however. Intel previously announced its participation in Terafab, where logic, memory, and packaging will be more closely integrated. The project focuses on chips for autonomous vehicles and humanoid robots as well as large-scale data centers. This does not always require the most modern or advanced processes. Musk announced back in March that Terafab would be based in Austin, near Tesla’s existing Gigafactory. The roadmap is ambitious and calls for production in 2029, though the intended scale requires significantly more capital than initially announced.
Reducing dependence will take time
For now, the dependence remains. In the middle of last year, Tesla signed a major deal with Samsung worth $16.5 billion for the production of new AI chips in Texas. This was good news for Samsung’s long-struggling Foundry division; for years, it has been losing out to TSMC when it comes to the most lucrative contracts.