Elon Musk is putting his money where his mouth is, unveiling plans for Tesla and SpaceX to invest $16.8 billion to build a massive semiconductor manufacturing complex in Texas,
Called Terafab, the facility will be built in Grimes County, Texas just outside of Houston. When completed, it will be the largest building in the world at more than 100 million square feet. “Terafab Texas will be the largest and most valuable building on Earth by far,” owner Elon Musk wrote on X last week. “And it will be stunningly beautiful.”
For contrast, the Pentagon is the current largest building in the U.S. at 6.6 million square feet. Terafab will be 15 times that size. China’s New Century Global Center in Chengdu, is the world’s largest building at 18.9 million square feet.
Terafab is designed to give Tesla and SpaceX greater control over the semiconductor supply they need to support their growing artificial intelligence operations. The companies say the project will ultimately be capable of producing enough computing hardware to support more than one terawatt of computing capacity.
The initial investment represents only the first phase of what could become a substantially larger project. SpaceX has indicated that future expansion could bring total investment in Terafab to roughly $119 billion.
The facility is planned as a vertically integrated semiconductor complex spanning approximately 100 million square feet. Rather than relying on separate facilities for different stages of production, Terafab is expected to bring chip manufacturing, packaging and testing together at a single site. Even TSMC doesn’t do this.
Conventional semiconductor manufacturing frequently involves a geographically distributed supply chain in which wafer fabrication, advanced packaging, testing and other processes take place at different facilities and sometimes in different countries. Terafab is intended to consolidate many of those operations.
The four-building complex will house manufacturing and other semiconductor production activities on the same campus. The approach could give Tesla and SpaceX greater control over production schedules and chip supply while reducing their exposure to bottlenecks elsewhere in the semiconductor industry.
The primary motivation behind Terafab is the rapidly growing computing requirements of Musk’s companies. Tesla is developing increasingly sophisticated AI systems for not only its cars but also its Optimus humanoid robots, while SpaceX is pursuing plans for space-based data centers.
Both projects require large amounts of advanced processors, and Musk has increasingly emphasized the need to secure semiconductor production rather than depend entirely on outside suppliers. So Terafab’s primary customers will be Musk’s companies.
The project also reflects a broader push by Musk to integrate the computing requirements of his various businesses. SpaceX, Tesla and xAI are increasingly interconnected around AI infrastructure, autonomous systems and large-scale computing.
SpaceX has also partnered with Intel on the project, although the details and scope of Intel’s involvement has not been fully disclosed.
Tesla has also been developing a smaller semiconductor research and manufacturing facility at its Texas operations, which appears to have served as an early step toward the much larger Terafab project.
If fully expanded, Terafab’s potential price tag of $119 billion would make the project one of the most ambitious semiconductor manufacturing investments ever contemplated.
