The Largest Chip-Making Plan in History Launches: Why Is Musk's Appetite So Big?

The world’s richest person and Tesla CEO Elon Musk has announced one of his most ambitious visions to date — Terafab.

On March 22, Musk held a launch event for the Terafab project in Austin, Texas, officially launching a joint effort by Tesla, SpaceX, and xAI. The project involves a 2-nanometer wafer factory and is seen as a key move for Musk to break through the global chip supply bottleneck.

This factory, called by Tesla the “largest chip manufacturing plant in history,” aims to produce 1 terawatt (TW) of AI computing power annually, primarily for space deployment. Musk stated that the current global AI computing capacity is about 20 gigawatts, and Terafab’s annual capacity will be 50 times that.

Tesla and SpaceX’s computing demands far exceed current supply

The scale of Terafab is so grand that Musk himself described his plan using words like “crazy” and “physical limits” during his speech.

Behind this is the reality of a global chip capacity gap, as well as Musk’s long-standing goal of deploying space-based computing power and advancing a multi-planetary civilization. His blueprint envisions Terafab first addressing short-term chip shortages to support mass production of Optimus robots and space AI satellite networks; mid-term, leveraging low-cost space computing to expand applications and boost Earth’s economy; and long-term, relying on lunar bases to achieve computing leaps, pushing humanity toward becoming a multi-planet species and a “galactic civilization.”

Two wafer factories, an unprecedented full-process closed-loop production

Why is Musk so determined to build chips himself? He believes current global chip capacity cannot meet his future needs.

Although Musk has stated he will inform existing supply chain companies like Samsung, TSMC, and Micron that he will continue purchasing chips and has expressed gratitude for the current supply chain, these manufacturers’ expansion speeds are far from enough to meet his project’s demands. He bluntly said, “Either we build Terafab, or we will have no chips to use.”

Musk explained that Terafab will have two wafer factories, each focusing on a different type of chip, and will achieve a full-process closed-loop production.

Notably, Terafab will break the current division of labor in global chip manufacturing by consolidating lithography masks, chip fabrication, packaging, and testing within a single facility, creating a rapid iteration cycle of “mask making — chip manufacturing — testing — mask optimization — re-manufacturing.”

Musk revealed that no existing facility worldwide can integrate logic, memory, packaging, testing, and lithography masks all in one, enabling this full-process, high-speed iteration that surpasses conventional production lines by an order of magnitude. This will support extreme process testing and new physics research for computing chips.

“We’re not just producing computing chips in the traditional way. I believe some very interesting new physical directions are feasible. Given time, we will succeed. We will truly push computing chips to their physical limits,” Musk added.

Regarding applications, he explained that the two wafer factories are clearly divided, focusing on mass production of two types of chips tailored to different scenarios.

Musk plans to produce multiple types of chips

The first type is edge inference optimization chips, mainly used in the Optimus humanoid robots and Tesla’s autonomous driving systems, with robots being the core demand. Musk predicts that global annual car production will reach about 100 million vehicles, while humanoid robots could reach 1 to 10 billion units annually—demanding 10 to 100 times that of cars. Tesla aims to capture a significant share of this market, which will also drive increased chip capacity.

The second type is high-power space-specific chips, designed to withstand extreme space environments and deployed in SpaceX’s orbital AI data center network. Space radiation, high-energy ions, photons, and electrons pose challenges, so these chips will have higher resistance to interference, aging, and radiation than ground-based products. To reduce the weight of space radiators, these chips will operate at slightly higher temperatures than typical ground chips, with process parameters and fault tolerance standards specially customized.

Shifting computing deployment to space, costs expected to fall below ground within 2-3 years

Terafab’s focus on space deployment stems from Musk’s belief that Earth’s energy and computing capacity are inherently limited.

He showed data indicating Earth receives only one five-hundred-millionth of the Sun’s total energy. The Sun accounts for 99.8% of the total mass in the solar system. Humanity’s annual electricity output is only about one trillionth of the Sun’s total energy. Even if energy use increases by 1 million times, it would still only reach a millionth of the Sun’s energy, creating an insurmountable ceiling for Earth’s computing capacity.

Deploying computing power in space offers significant advantages: no atmospheric attenuation, no day-night or seasonal cycles, satellites constantly facing the Sun, with solar energy collection efficiency over five times that of ground systems, and no need for large-scale energy storage batteries. Space solar panels do not require heavy glass and frames to withstand extreme weather, reducing hardware costs. On Earth, prime deployment sites are becoming scarce and expensive, while space offers virtually unlimited scalability with decreasing unit costs as size increases.

Musk predicts that within 2-3 years, space-based AI computing costs will be lower than on Earth. “Once the cost of getting into orbit drops, putting AI computing into space becomes almost obviously worthwhile. As scale increases, space will become cheaper and easier; on Earth, as more computing is deployed, available space becomes more limited.”

He believes computing resources will be split by scenario: constrained by power supply, Earth will deploy only 100-200 GW annually (about 20% of total capacity), while the remaining TW-level main capacity (about 80%) will be sent into orbit.

“To reach 1 TW of annual computing power, we need to send about 10 million tons of payload into orbit each year, assuming 100 kW per ton. We are confident we can do this without any new physical laws. It’s not an impossible task. I believe SpaceX can deliver 10 million tons into orbit each year,” Musk said.

Beyond 1 TW, lunar bases aim for a thousandfold capacity increase

Terafab is not Musk’s ultimate goal.

He also revealed long-term plans to build electromagnetic mass drivers on the Moon to achieve a thousandfold increase in computing capacity. The Moon’s lack of atmosphere and gravity only one-sixth of Earth’s means no rockets are needed; payloads can be directly accelerated to escape velocity via these drivers. This would boost capacity from 1 TW to 1,000 TW (petawatt level), drastically reducing deep-space deployment costs.

[Image: Musk’s lunar electromagnetic mass driver video screenshot]

“I really hope to witness the construction of the Moon’s mass driver in my lifetime—that would be spectacular,” Musk said.

He sees clear economic and production benefits: once the lunar driver is operational, humanity could utilize a tiny fraction of the Sun’s energy—potentially enabling Earth’s economy to expand by 1 million times. “Then we will continue expanding to other planets and stars, creating the most exciting future I can imagine.”

Musk envisions, “We will fly past the Moon, Mars, and through Saturn’s rings. Imagine if you could buy a ticket to Saturn, or even that in the future, traveling to Saturn might be free. It sounds crazy, but if the economy grows 1 million times, almost all your needs could be met.”

Future human civilization of astonishing abundance

Threatening TSMC? Analysts say there are still many hurdles like yield issues

The emergence of the Terafab project has drawn intense attention in the semiconductor industry, sparking concerns that industry giants like TSMC could face pressure.

However, analysts believe the plan may face significant technical, financial, and structural challenges.

Building a wafer factory from scratch is widely regarded as one of the most challenging engineering feats in modern industry. Morgan Stanley analysts described it as a “monumental task,” estimating costs over $20 billion and several years to complete.

The semiconductor industry is highly specialized, with clear boundaries between fabless design companies like NVIDIA and dedicated foundries. Musk’s proposal to integrate logic, memory, and advanced packaging technologies runs counter to decades of industry specialization.

Chip manufacturing requires not only capital but also years of accumulated process expertise for large-scale production.

Some industry insiders note that entering the semiconductor industry at the 2nm process node is extremely difficult. Building the factory may not be the biggest challenge; achieving high yield is the ultimate hurdle. Yield depends on stable demand and continuous iteration, and even mature companies struggle to maintain very high yields.

Additionally, Terafab faces structural issues, such as equipment supply. Foreign media have pointed out that advanced EUV lithography systems depend on a few suppliers, with long lead times and high costs. Talent is another bottleneck; the US still lags behind Asia in semiconductor engineering talent, wafer fab experience, and supply chain maturity.

However, some analysts believe that if Musk approaches from packaging and supply chain integration, and collaborates with Samsung, Intel, and others, there is long-term potential to reshape the global chip industry landscape.

(Article source: The Paper)