Tesla Abandons In-House Chip Plant; Intel to Lead Terafab Project

Tesla is not building its own chip fabrication facility. Instead, the "Terafab" project it is involved in will be led and operated by Intel. The initiative, jointly launched by Tesla, SpaceX, and xAI, plans to invest $25 billion in constructing an advanced chip manufacturing plant in Austin, Texas. Intel has confirmed its participation and stated it will leverage its expertise in chip design, manufacturing, and packaging to help achieve the factory’s target output of 1 terawatt of computational power per year. Previously, Elon Musk indicated that Tesla was “forced” to build its own wafer fab because TSMC and Samsung could not meet its demand. However, recent developments reveal that Terafab is essentially a capacity assurance agreement: Tesla, SpaceX, and xAI will provide chip demand and shoulder the majority of capital expenditures, while Intel will supply process technology and manage factory operations. Intel’s 18A process node has already entered volume production, and the company is actively seeking major customers like Tesla to bolster its foundry business. This move also signals that Tesla will not directly control chip manufacturing in the near term, but will instead secure a substantial domestic supply of advanced chips through its partnership with Intel.