Tesla CEO Elon Musk has unveiled his plans to build the ambitious Terafab semiconductor project in Austin, Texas, according to a report by Bloomberg. The project will be jointly operated by Telsa and SpaceX along with the support from his AI company xAI. Speaking at the downtown Austin event, Musk revealed that the facility will start as an “advanced technology fab” capable of producing and testing chips from various kinds. Musk also argued that the global semiconductor industry is moving too slowly to meet the demand he anticipates for robotics, autonomic driving and AI. “We either build the Terafab or we don’t have the chips, and we need the chips, so we build the Terafab,” he said.

What is the Terafab

The Terafab is Tesla’s plan to build its own giant chip fabrication facility, which Musk has described as a “gigafactory, but way bigger.” The terafab will be focused on producing AI chips in the vast quantities Tesla believes it will need for the next generation of its vehicles.“Even when we extrapolate the best-case scenario for chip production from our suppliers, it’s still not enough,” Musk said at Tesla’s Annual General Meeting last year, adding, “I think we may have to do a Tesla terafab. It’s like giga but way bigger. I can’t see any other way to get to the volume of chips that we’re looking for. So I think we’re probably going to have to build a gigantic chip fab. It’s got to be done.”Musk also revealed a speculative rendering of a “mini” AI data center satellite, part of a larger vision to launch millions of computing satellites into orbit. He said future satellites could scale from 100 kilowatts to megawatt-level power, supporting complex AI workloads in space.

What chip will Terafab build

The Terafab is being built around Tesla’s fifth-generation AI chip, which is referred to as the AI5. This chip is designed to power Tesla’s autonomous driving systems, including its Full Self-Driving (FSD) software, and AI solutions for robotics. Musk has teased the AI5 chip on multiple occasion.

Challenges ahead of building semiconductor fabs

Building semiconductor fabs is notoriously difficult as the process needs tens of billions of dollars and years to become fully operational. Elon Musk has earlier promised 2-nanometer chip production, though timelines remain unclear. Tesla already collaborates with suppliers like Samsung, TSMC, and Micron, but Musk insists their output cannot meet his companies’ growing needs.He also reiterated his long-term vision of “amazing abundance,” showing animations of satellites launched from the moon via a futuristic mass driver. “The future I want to see: I want us to live long enough to see the mass driver on the moon, because that’s going to be incredibly epic,” Musk said.