Elon Musk’s ambitious plan to bring advanced semiconductor manufacturing closer to his artificial intelligence, robotics and space businesses is moving towards a major milestone, with the Terafab project targeting large-scale chip production in the third quarter of 2028.
The proposed chip manufacturing venture, being developed by SpaceX and Tesla, is intended to address the growing demand for computing hardware across Musk’s businesses. However, Musk has cautioned that the schedule remains uncertain, describing the proposed timeline as highly ambitious rather than a firm commitment.
The announcement highlights Musk’s broader strategy of gaining greater control over the technology infrastructure required to develop artificial intelligence systems, autonomous vehicles, humanoid robots and future space-based computing facilities.
Terafab’s Production Target: What Musk Has Revealed
During a SpaceX conference call on Tuesday, Musk outlined the internal schedule for Terafab, including an initial chip-testing milestone followed by the planned transition to volume production.
The company aims to have its first functional test chip ready around May or June 2027 at its research facility in Austin, Texas. The initial component is expected to use static random-access memory, commonly known as SRAM, which can help engineers evaluate and refine semiconductor manufacturing processes.
The next major objective is to begin volume production at Terafab’s main facility in the third quarter of 2028. Musk acknowledged that the target could change as the project progresses, leaving open the possibility that production may take longer than currently planned.
The distinction between a working test chip and volume manufacturing is significant. Producing a functioning chip is an important technical milestone, but commercial-scale output requires reliable manufacturing processes, specialised equipment, consistent yields and extensive quality control.
Why SpaceX and Tesla Want Their Own Chip Manufacturing Capacity
Semiconductors have become essential to the development of artificial intelligence, autonomous systems and advanced robotics. As these technologies become more sophisticated, companies increasingly need processors and memory components designed around their specific workloads.
For Tesla, access to specialised chips could support the development of autonomous driving technology, in-vehicle computing and the company’s Optimus humanoid robot programme. These applications require hardware capable of processing large volumes of information while meeting demanding requirements for efficiency, reliability and performance.
SpaceX has a different but related set of requirements. Its long-term ambitions in artificial intelligence and space-based computing could create demand for specialised processors capable of supporting large-scale computational workloads.
Terafab is intended to help address these needs by bringing chip design, fabrication, packaging and testing into a more integrated manufacturing operation. This approach could allow engineers to move more quickly between designing a processor, testing it and incorporating lessons from manufacturing into subsequent versions.
The project is also intended to reduce the risk that future growth in AI computing will be constrained by limited access to suitable hardware.
Aiming for One Terawatt of Computing Capacity Annually
One of the most ambitious elements of the Terafab plan is its long-term production objective: supporting approximately one terawatt of computing power annually.
This target illustrates the scale of the computing infrastructure Musk believes will be needed as artificial intelligence and robotics expand. Rather than focusing exclusively on chips for conventional consumer electronics, the project is designed around the anticipated requirements of large AI systems and specialised computing applications.
The proposed facility is expected to bring advanced logic chips and memory manufacturing together with packaging and testing capabilities. Combining these functions could make it easier to optimise components for particular uses and identify manufacturing problems earlier in the development process.
However, the one-terawatt objective should be understood as a long-term ambition, not evidence that the facility will immediately achieve that level of output when production begins. Actual manufacturing capacity will depend on equipment availability, production efficiency, chip designs and the time required to expand operations.
Advanced Manufacturing Equipment Could Be a Major Hurdle
Building a semiconductor facility capable of producing advanced chips involves much more than constructing a factory. Manufacturers must obtain specialised equipment, establish precise production processes and maintain extremely demanding quality standards.
Extreme ultraviolet lithography, or EUV, is one of the technologies used to manufacture some of the world’s most advanced processors. The equipment is highly complex and is supplied by a limited number of manufacturers, including Dutch company ASML.
During the SpaceX call, Musk was asked about the project’s arrangements for EUV lithography equipment. He did not provide a direct confirmation of specific machine orders, but acknowledged the importance of suppliers accelerating equipment deliveries to support Terafab’s schedule.
The project may also require equipment and process technologies from suppliers such as Applied Materials and KLA, which provide semiconductor manufacturing and inspection systems.
Securing machinery on time is only one part of the challenge. Equipment must also be installed, calibrated and integrated into a functioning production line. Engineers then need to demonstrate that the manufacturing process can repeatedly deliver chips that meet performance and reliability requirements.
These steps are among the reasons the 2028 production target remains uncertain.
Intel Partnership and Potential Cooperation With TSMC
Terafab’s development also involves collaboration with established players in the semiconductor industry. Intel announced its involvement in the project in April 2026, although the companies have not publicly detailed every aspect of the partnership.
The collaboration could help Terafab draw on expertise from an industry in which manufacturing knowledge and production experience are particularly important. Nevertheless, the precise division of responsibilities between the partners remains unclear.
Musk has also discussed potential cooperation with Taiwan Semiconductor Manufacturing Company, the world’s largest contract chipmaker. However, he has said that SpaceX and Tesla intend to build and operate the Terafab facilities themselves, while leaving open the possibility of other arrangements involving the complex.
These discussions demonstrate the project’s connection to the wider semiconductor industry, even as Musk seeks greater control over manufacturing. The extent of any external participation and the responsibilities of individual partners will be important details to watch as development advances.
What the Project Could Mean for the Semiconductor Industry
If Terafab reaches large-scale production, it could represent a significant expansion of Musk’s influence beyond electric vehicles, satellite communications and rocket development.
A more integrated chip supply chain could give Tesla and SpaceX greater flexibility in designing hardware around their own products. It could also allow the companies to coordinate processor development with the software and computing systems that depend on it.
At the same time, entering advanced semiconductor manufacturing presents substantial financial and technical risks. Established chipmakers have spent decades developing production expertise, supplier relationships and manufacturing infrastructure. Matching their capabilities requires considerable investment and sustained engineering effort.
Terafab will therefore need to demonstrate not only that it can manufacture functional chips, but also that it can produce them reliably and at a scale that makes commercial sense.
The initiative also comes as demand for AI computing continues to drive investment in semiconductor capacity worldwide. The project’s progress could offer insight into whether major technology companies can successfully bring more of their chip production in-house rather than relying primarily on established suppliers.
What Happens Next?
The first important milestone is the planned functional test chip in May or June 2027. Progress at the Austin research facility could provide an early indication of whether Terafab is moving towards its proposed manufacturing schedule.
After that, attention will turn to equipment installation, production readiness and the transition from testing to commercial-scale manufacturing at the main Texas facility.
For now, the third quarter of 2028 remains an ambitious target rather than a confirmed launch date. Musk’s own comments underline the uncertainty surrounding the plan.
The bottom line: Terafab reflects a broader effort by SpaceX and Tesla to secure the computing hardware needed for their future ambitions. If the project succeeds, it could strengthen their control over chip development and supply. But manufacturing complexity, equipment availability and the challenge of scaling production will determine whether the 2028 goal becomes reality.
Disclaimer: This report is for informational purposes only and does not constitute investment advice.
