TECH NEWS – Elon Musk, the owner of Tesla, Twitter, xAI, and SpaceX, is so ambitious that he believes TeraFab will surpass all previous chip manufacturers in scale.

Elon Musk explained how TeraFab will operate. Based on the details he revealed, the planned facility’s production capacity will be unlike anything we’ve seen before. TSMC, Samsung, and Intel will likely seem like minor players in comparison. The factory is expected to produce 1 terawatt of annual computing power, including logic chips, memory, and advanced packaging technologies. TeraFab will reportedly focus on 2-nanometer manufacturing, enabling the factory to begin operations with the most advanced technology available. The factory will also integrate rapid, recursive development, in which chip design, manufacturing, testing, packaging, and masking will take place on a single production line. This will enable TeraFab to develop on site and iterate quickly.

The facility will be built at Tesla’s headquarters in Austin, Texas, and will be the result of a joint effort by all of Musk’s companies. Due to the massive scale, 80% of the computing capacity will be placed in space. Musk believes that Earth’s energy supply limitations make deployment virtually impossible. Musk believes that by utilizing Starship’s transport channels and solar energy, he could deploy terawatts of computing capacity into space. This is why he argues that TeraFab is essential for achieving a galactic civilization.

TeraFab’s first major product is the AI5 chip, which will be used in Tesla’s Full Self-Driving (FSD) system, Robotaxi, and Optimus robots. The AI5 chip will handle 20% of on-ground processing, while the recently unveiled D3 chips will handle the remaining 80% of in-space computations. These units are specifically designed for AI satellites in orbit and are engineered to withstand harsh environmental conditions. They are also likely capable of overcoming temperature limitations when operating in space. Since the AI5 is Tesla’s current priority, TeraFab will focus on bringing these chip production lines online. Regarding TSMC and other chip manufacturing partners, Musk expressed gratitude for their contributions, but noted that their current production volumes are insignificant compared to TeraFab’s ambitious goals.

“To the best of my knowledge, there is nowhere else in the world where you have everything necessary to build logic and memory, do packaging and testing, create masks, improve the masks, and repeat the process. In a single building, we can create a mask, make the chip, test the chip, make another mask, and have an incredibly fast, recursive loop for improving chip design. We’re grateful to our existing supply chain – to Samsung, TSMC, Micron, and others – but they have a maximum rate at which they’re comfortable expanding. That rate is much lower than we would like, and we need the chips, so we’re going to build TeraFab. Even if you add up all the fabs on Earth, they only produce about 2% of what TeraFab will produce,” Musk said.

TeraFab is based on the premise that Musk has previously achieved seemingly impossible feats. However, many experts argue that the inherent constraints of semiconductor projects make achieving the scale Musk is planning nearly impossible, at least within the specified timeframe. Considering the limitations on the production pace of ASML’s lithography equipment and global demand, it’s clear that TeraFab would need to vertically integrate multiple manufacturing elements to reach its goal.

What kind of nodes are we talking about? Rumor has it that Tesla might sign a licensing agreement with Samsung for 2-nanometer manufacturing, but that’s still a long way off.

Source: WCCFTech

Announcing TERAFAB: the next step towards becoming a galactic civilization https://t.co/IDKey07mJa

— Tesla (@Tesla) March 22, 2026