Tesla and SpaceX to Build $16.8B 'Terafab' AI Chip Facility in Texas
Tesla and SpaceX have announced a joint $16.8 billion investment to build "Terafab," an advanced AI chip manufacturing facility in Grimes County, Texas. The project, planned by Elon Musk, aims to bring design, fabrication, and advanced packaging under their direct control to meet the companies' rapidly growing chip demands. This move represents a major push toward vertical integration in AI hardware, reducing reliance on external semiconductor foundries as the companies' combined compute demands are projected to exceed 1 terawatt. It also aligns with broader efforts to bring advanced semiconductor manufacturing back to the United States. The Terafab facility will consolidate logic chips, memory chips, and advanced packaging within a single campus. Tesla has already paved the way for this project by starting construction on an R&D wafer fab at its Texas Gigafactory in April.
## BACKGROUND
Wafer fabrication is the complex, multi-step process of creating integrated circuits on silicon wafers. Traditionally, companies design chips but outsource the fabrication and advanced packaging—which integrates multiple chips into a single high-performance device—to specialized foundries like TSMC.