TSMC is considering becoming a partner in Musk’s semiconductor manufacturing plan Terafab. The Taiwanese company can help the project enterprise operate or build its own factory, and Terafab will become its main customer. Discussions are at a preliminary stage.
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Former Bloomberg columnist and founder of independent media Culpium Tim Culpan informed about this possible cooperation. Various plans are being considered: TSMC could own and operate the factory, and Musk’s company could participate in financing and guaranteeing orders. Another option is to be controlled by Musk’s company, with TSMC participating in capital and providing technology and operational experience.
The Terafab project is supported by Tesla and SpaceX. Musk plans to build an AI infrastructure chip with an annual output of about 1TW of computing power – we are talking about the computing power of the device, not an indicator of computing performance. The chips are suitable for autonomous vehicles, humanoid robots and SpaceX’s orbital data center.
A large production site has been selected in Grimes County, Texas. The initial investment is expected to be US$16.8 billion, and the total investment in subsequent stages may reach US$119 billion. It plans to create at least 3,000 jobs and integrate chip design and production (including memory) with advanced packaging and testing.
Intel has joined the project. Tesla has previously announced its intention to use its 14A process technology, but details of role allocation among partners have not yet been determined. The possible participation of TSMC adds another option for organizing production.
Musk attributed Terafab’s demand to an expected chip shortage and the risk of supply disruptions in Taiwan. In his view, with the large-scale development of artificial intelligence, the current production capacity is no longer enough: “TSMC simply cannot produce that many chips. If they could, we wouldn’t have to.At the same time, Tesla and SpaceX intend to remain key customers of existing suppliers, while Terafab intends to serve the needs of Musk’s companies.
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Ignoring those discussions, TSMC is considering building a new manufacturing facility in Texas to complement its Arizona operations. According to Bloomberg, the project could include several factories, each costing at least $20 billion. These plans are in their early stages and depend in part on the extension of U.S. advanced manufacturing tax credits. The company has announced a $265 billion investment in Arizona.
Texas is attractive because of its mature semiconductor industry, with Samsung and Texas Instruments both operating here. Another motivating factor is demand from U.S. chip developers. North American customers account for more than three-quarters of TSMC’s wafer revenue, and Nvidia and AMD need more capacity to produce AI accelerators.
For TSMC, taking a stake in Terafab can provide a major customer, but it also increases the new company’s dependence on Musk’s project progress, the company’s financial status and the actual demand for chips. Bernstein analysts estimate that it would cost $5 trillion to $13 trillion to build capacity to produce 1 TW of equipment per year, well above the required investment in the Texas plant.
The parties have not announced the agreement. Musk’s company has yet to determine Terafab’s final implementation plan, timeline, milestones and capital costs. Therefore, TSMC’s possible participation remains one of the options discussed rather than an approved plan.
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