SpaceX has submitted plans for a substantial new semiconductor manufacturing facility in Grimes County, Texas, with an initial investment of $55 billion. The project, named "Terafab," could see its total investment grow to $119 billion if subsequent phases are constructed. This initiative, detailed in a public notice filed with Grimes County, seeks tax incentives and signals a significant move by the company into chip production.
The Terafab facility is described as a "multi-phase, next-generation, vertically integrated semiconductor manufacturing and advanced computing fabrication facility." Its primary purpose is to supply chips for artificial intelligence, robotics, and space data centers, serving both SpaceX and Tesla. Elon Musk, founder of SpaceX and Tesla, has stated that these chips are essential for the companies' growing demands in AI, autonomous driving, and space ventures. Musk has projected that the plant could eventually support one terawatt of computing output annually.
The proposed site for Terafab is near the Gibbons Creek Reservoir in rural Texas, approximately 90 miles northeast of Austin. This location was previously a coal-fired power station. A public hearing is scheduled for June 3 in Grimes County to consider a property tax abatement agreement for the project.
Intel has been named as a partner in the Terafab project, with plans to utilize its next-generation 14A manufacturing process. Intel stated its capabilities in designing, manufacturing, and packaging high-performance chips will help accelerate Terafab's goals. This collaboration aims to advance future AI and robotics technologies. However, some reports indicate that while Intel is involved, the extent of its partnership in manufacturing processes or chip-packaging technology for the facility is not fully confirmed in all available materials.
The scale of the proposed investment significantly exceeds earlier projections. When Musk first announced the Terafab project in March, it was associated with a $20 billion price tag. More recently, analyst estimates from Morgan Stanley suggested a cost of $34 billion to $45 billion for a factory of this scale. The current $55 billion initial investment alone would make the Grimes County project one of the largest single semiconductor investments ever proposed in the U.S.
SpaceX's filings also indicate substantial capital expenditures planned for chip production. The company has acknowledged risks related to supply contracts for chips, as it has not secured durable agreements with most suppliers. Building a vertically integrated fabrication facility of this nature involves complex supply chains for equipment and typically requires multi-year timelines.
In addition to the large-scale facility in Grimes County, Tesla is also developing a smaller research production facility at its Giga Texas campus in Austin. This pilot line is expected to cost approximately $3 billion and is intended for small-batch production and testing ideas.
The Terafab initiative is also linked to SpaceX's broader financial strategies, including its preparation for a potential initial public offering. SpaceX merged with Musk's AI startup xAI earlier this year, with the combined entity valued at $1.75 trillion. This move into chip manufacturing is seen as a strategic step to control a critical part of the supply chain for its diverse AI, robotics, and space ventures.