Elon Musk has unveiled an ambitious $20 billion semiconductor initiative called TeraFab, aimed at producing chips, memory, and advanced packaging within a single integrated facility. The project will be a joint venture between Tesla and SpaceX, and is set to be built at Tesla’s campus in eastern Travis County, Austin, Texas.

During a livestream on X, Musk explained that the project is driven by what he sees as a major bottleneck in the global semiconductor industry. According to him, current chip production cannot scale fast enough to meet the growing demands of artificial intelligence, robotics, and space computing. He emphasized that building TeraFab is essential to securing the supply of chips needed for his companies’ future technologies.

The facility is designed to combine multiple stages of semiconductor production—logic, memory, packaging, testing, and lithography mask creation—into one location. Musk claims this level of integration is unprecedented and will significantly speed up development cycles by allowing chips to be designed, tested, and refined without moving materials between different sites.

TeraFab is expected to produce two main categories of chips. The first will focus on edge inference, primarily supporting Tesla’s autonomous vehicles and its Optimus humanoid robots. The second category will consist of high-performance, space-hardened processors designed for use in satellites. These chips, Musk noted, may operate at higher temperatures to reduce the need for bulky cooling systems in space.

Musk also outlined his long-term vision for computing power. He estimates that global AI compute output currently stands at about 20 gigawatts annually—far below what his companies will require. He projects that terrestrial chip production could reach 100 to 200 gigawatts per year, while space-based systems, powered by solar energy and deployed via satellites, could scale up to a terawatt of compute capacity.

Despite the scale of the project, Musk confirmed that his companies—including xAI—will continue sourcing chips from established manufacturers like TSMC, Samsung, and Micron Technology, encouraging them to expand production as well.

No official timeline has been announced for when TeraFab will begin operations or reach full capacity, though Musk has previously hinted at targeting advanced manufacturing nodes such as 2nm.