Elon Musk has indicated that TSMC could join Terafab, the U.S. government-backed initiative to build advanced chip manufacturing capacity on American soil.
Elon Musk has confirmed that Taiwan Semiconductor Manufacturing Co. (TSMC) could participate in Terafab, the Texas chipmaking venture being developed by Tesla and SpaceX. The development puts one of the world's biggest semiconductor manufacturers alongside Intel, which was the earliest known chipmaker to back the project, raising a broader question: Is Musk building a chip factory, or an entire semiconductor ecosystem for his companies?
Intel shares fell more than 4% in premarket trading on Monday after the development emerged, while TSMC shares rose in Taiwan and in US trading. The market reaction reflects concerns that TSMC's involvement could dilute Intel's expected role in a project that could become strategically important for Elon Musk's expanding technology businesses.
Terafab is a planned semiconductor manufacturing facility in Grimes County, Texas, backed by Tesla and SpaceX. The companies have announced an initial investment of $16.8 billion and a planned workforce of at least 3,000 people. The chips are expected to support Tesla's Optimus humanoid robots and Cybercabs, as well as SpaceX's ambitions for space-based data centres. Total spending across the project's different phases could eventually reach as much as $119 billion. Intel has acknowledged a role in Terafab, although it has not disclosed precisely what that role will involve.
TSMC's potential entry changes the picture. Instead of relying on one major chipmaker, Musk could be assembling a network of semiconductor expertise around his companies. TSMC brings something Elon Musk cannot easily build from scratch: decades of experience in advanced semiconductor manufacturing. Making cutting-edge chips is not simply about constructing a factory. Process technology, manufacturing yields, advanced packaging and the ability to produce chips consistently at scale are equally important.
Elon Musk's companies can provide enormous demand for chips, while TSMC could contribute manufacturing expertise and Intel could bring US semiconductor infrastructure. Terafab was conceived as a vertically integrated operation covering logic, memory, advanced packaging and testing. Tesla has also been recruiting semiconductor engineers in Taiwan, including people with expertise in advanced nodes and packaging. The emerging model looks less like a conventional chip-supply agreement and more like an attempt to build greater control over the semiconductor chain.
Elon Musk's companies are becoming major consumers of computing power, but their requirements differ. Tesla needs processors for autonomous driving and vehicles. Optimus will require specialised AI and robotics chips. SpaceX has growing computing requirements, including its plans for space-based data centres. Then there is xAI, whose expanding AI infrastructure requires large quantities of advanced computing hardware. Terafab could eventually serve these different businesses, giving Musk a substantial captive customer base for a semiconductor operation, while reducing dependence on a single external chip supplier.
TSMC's potential involvement comes as the Taiwanese chipmaker expands its US footprint. The company has already committed $265 billion towards its Arizona expansion and is considering a separate Texas campus, with each fabrication plant expected to require an investment of at least $20 billion. TSMC already manufactures some chips for Tesla. Tesla has also signed a separate $16.5 billion agreement with Samsung for its next-generation AI6 chip. Tesla is developing relationships with several major chipmakers while simultaneously seeking greater control over its own semiconductor capabilities.
The potential involvement of TSMC comes as semiconductor manufacturing is becoming an increasingly important part of US industrial policy and corporate strategy. TSMC, headquartered in Taiwan, is expanding its manufacturing presence in the US, while Intel is investing in its own domestic foundry operations. ASML, the Dutch company whose extreme ultraviolet lithography machines are used to produce some of the most advanced chips, is another key supplier to both manufacturers. Elon Musk has been seeking support from several parts of that supply chain. Earlier this year, he addressed employees at an ASML technology conference to discuss Terafab, highlighting the equipment the project would require. The precise roles that TSMC and Intel would play at Terafab have not been disclosed, but their potential involvement would give the project links to two of the world's leading chip manufacturers at a time when Tesla and SpaceX are seeking to secure more computing capacity for vehicles, robots, artificial intelligence and space-related applications.