Elon Musk claims his companies can make chips better than anyone else.

Elon Musk has set a new target: the semiconductor industry. He said his companies can likely improve chip quality better than anyone else, thanks to equipment they build themselves.

The claim, reported by Bloomberg, comes as Musk pushes Terafab, a chipmaking effort shared by Tesla and SpaceX. The project is designed to reduce his reliance on the outside foundries that currently make the chips he needs.

What Terafab is supposed to do

Terafab is planned as a vertically integrated manufacturing campus in Texas. Its main goal is high-volume production of AI5 chips, specialized chips for AI inference, the work an AI model does when it answers a question or makes a decision.

The ambition is large. Terafab aims to produce 1 terawatt of compute capacity per year. That target describes the total processing power the facility hopes to turn out annually, not the electricity it uses.

The rollout is phased. A pilot chip fabrication facility is under construction near Tesla's Gigafactory in Texas. Larger operations are planned for Grimes County, also in Texas.

The Nvidia comparison

Musk claims the AI5 chip could deliver two to three times better performance per watt than Nvidia products. He also claims it could do so for about 10% of their cost.

Those figures are Musk's claims and projections, not independently verified benchmarks.

Who is helping, and who is still talking

Intel is officially partnered with the project for technology support. That partnership targets Intel's 14A process node.

TSMC, the Taiwanese giant that manufactures chips for much of the industry, is a different story. Discussions with TSMC remain exploratory, with limited operational involvement. Samsung, another major foundry, is one of the external suppliers Terafab is meant to reduce dependence on.

Why Musk wants his own fab

For Musk, that line is long and crowded. Tesla wants chips for self-driving systems and robotics, and SpaceX has its own computing needs. Relying on TSMC and Samsung means competing for capacity with every other tech company chasing the same AI boom.

Building a fab is Musk's answer to that bottleneck. It follows a familiar pattern in his companies: Tesla brought battery production closer to home, and SpaceX built much of its rocket hardware in-house.