Elon Musk is thinking about outsourcing some of Tesla’s chip production to Intel Foundry and even establishing the company’s own chip production operation, he said at the company’s Annual Shareholder Meeting event. Musk is perhaps the first executive of a big company to consider building an entire semiconductor production facility due to the extreme complexities and costs associated with such a project. Jensen Huang, chief executive of Nvidia, already reacted to Musk’s musings, noting that the head of Tesla may be underestimating the challenge.
“I think we may have to do a Tesla TeraFab,” Musk said. “It is like [TSMC’s] Giga[fab] but way bigger.”
TSMC calls its fab complexes with production capacity from 30,000 to 100,000 wafer starts per month ‘Megafabs’, whereas fab complexes with production capacities of over 100,000 WSPM are referred to as ‘Gigafabs.’ A ‘Terafab’ would mean capacity way beyond 100,000 WSPM, which would transform Tesla into one of the industry’s biggest chipmakers. To put the capacity into context: TSMC’s Fab 21 complex in Arizona — which will cost the foundry $165 billion in total — is expected to become a Gigafab with six fabs, two advanced packaging facilities, and an R&D center. Apparently, Musk is eyeing something bigger. But let us decode the whole story first, as it takes more than money to become a chipmaker these days.
“Building advanced chip manufacturing is extremely hard,” Jensen Huang, chief executive of Nvidia, said at a TSMC event on Thursday. “It is not just build the plant, but the engineering, the science, and the artistry of doing what TSMC does for a living is extremely hard.”
3/5 Jensen on Elon Musk’s chip fab plan: “Building advanced chip manufacturing is extremely hard. It’s not just build the plant, but the engineering, the science and the artistry of doing what TSMC does for a living is extremely hard. $NVDA $TSLA $TSMNovember 7, 2025
Tesla needs chips
Being a large maker of cars that also happens to own some of the biggest AI supercomputers in the industry, Tesla needs a steady supply of high-performance processors to drive its artificial intelligence efforts. The company already uses tens of thousands of Nvidia GPUs, and now that its Dojo project has been cancelled, it plans to use its AI5 processors for cars and robots in its data centers as well. To get plenty of these processors, Tesla plans to double-source them from TSMC and Samsung. Musk also mentioned tapping Intel for chip production, though this might be a bit challenging as the company does not have any automotive-grade process technologies.
“One of the things I am trying to figure out is how do we make enough chips,” Musk asked rhetorically during his keynote speech at the Tesla event. “So, I have a lot of respect for the Tesla partners, TSMC and Samsung, you know, maybe we will do something with Intel. We have not signed any deal, but it is probably worth having discussions with Intel.”
However, he believes that his company will need more AI processors in the long term, which will necessitate building its own chipmaking operations, essentially becoming an integrated device manufacturer (IDM), a role that even established chip designers like AMD, Fujitsu, IBM, and Panasonic gave up in recent decades.
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