Tesla (TSLA) CEO Elon Musk recently revealed that the company plans to invest approximately $3 billion to build a research-and-development chip factory in Texas. The R&D center will be located within Tesla’s existing Gigafactory campus in Texas, with a monthly production capacity of only a few thousand wafers, primarily serving as a testing ground for new technologies and processes. Musk stated that the Terafab project will adopt Intel’s (INTC) most advanced 14A process technology, a move that could make Tesla the first major customer for this cutting-edge technology.
Musk’s SpaceX will be responsible for the early-phase work of the Terafab project, while Intel will serve as a partner, providing expertise in chip design, manufacturing, and packaging. Musk said, “Our current plan is for Tesla to be responsible for the R&D fab. SpaceX will handle the initial phase of the large-scale Terafab project, with subsequent parts yet to be further planned.” The Terafab project brings together teams from Tesla, SpaceX, and the artificial intelligence company xAI, aiming to secure enough chips to meet their corporate needs, as foundries such as TSMC and Samsung Electronics are currently unable to fulfill this demand.
The $3 billion budget is roughly equivalent to only about one-tenth of the investment required for a leading chip company to build and equip a state-of-the-art advanced fab. A single machine purchased from ASML could cost hundreds of millions of dollars. In the industry’s history, some semiconductor manufacturers have built pilot production lines to test new designs and processes, verifying whether they are ready for mass production. The advantage lies in validating new technologies at a relatively low cost.
Musk plans to use Intel’s most advanced 14A process technology, though Intel has not yet finalized any customers for this process. His remarks drove Intel’s stock up about 3% in after-hours trading on Wednesday. Musk did not explicitly state whether he plans to use Intel’s existing fabs or obtain a license for its production technology. He said, “We plan to adopt Intel’s 14A process, which is currently the most advanced process but not yet fully mature. However, considering that by the time Terafab reaches large-scale production, the 14A process may already be quite mature or ready for use, this seems like the right choice.” Any collaboration between the companies would require approval from the boards of SpaceX and Tesla, as well as a conflict-of-interest review process.
