Musk's Terafab Megafab Gets a Home: $16.8B First Phase, 100 Million Square Feet, and Intel's 14A Inside

SpaceX and Tesla confirmed on Thursday that their joint chipmaking project, Terafab, will rise on a SpaceX-owned site in Grimes County, Texas, about an hour from Houston — and that the first phase alone carries a $16.8 billion price tag. Elon Musk, who runs both companies, called it "the largest and most valuable building on Earth by far." The full campus is planned to hold more than 100 million square feet of manufacturing space, which would blow past every fab complex in existence.

The announcement ends months of site speculation and sets up one of the biggest industrial bets in US history: a vertically integrated semiconductor factory owned by a rocket company and a car company, with Intel providing the process know-how. Musk first floated the project in March, warning that the world's fabs simply can't produce enough chips for Tesla's robots, its autonomous vehicles, and SpaceX's plans for orbital data centers.

One terawatt of compute demand

The scale of the bet is hard to overstate. SpaceX and Tesla say their combined chip appetite will eventually top one terawatt of compute per year — a figure that currently exceeds the entire world's annual production. During the March unveiling, Musk put the gap in plain terms: Earth's existing fabrication plants produce roughly two percent of what his companies will need. "We either build the Terafab, or we don't have the chips, and we need the chips, so we build the Terafab," he said.

SpaceX filings from May sketch a total program cost of up to $119 billion across multiple phases, though the company did not mention Terafab on its first earnings call earlier this week. The initial $16.8 billion represents the first-phase commitment, with tax abatements from Grimes County already locked in back in June.

The facility is expected to employ at least 3,000 people, and SpaceX says 60 to 80 percent of them will be hired from Grimes and neighboring Brazos County. Water comes from the Gibbons Creek Reservoir, the site of a retired coal plant, instead of local groundwater, with on-site wastewater treatment plus recycling and conservation measures attached.

Intel's 14A process powers the plan

The process technology sits at the heart of the project's feasibility. Musk confirmed in April that Terafab will use Intel's 14A node — the 1.4-nanometer process Intel is developing as its flagship comeback node — with Intel contributing manufacturing expertise to the venture. By the time Terafab ramps, Musk reasoned, 14A "will be probably fairly mature or ready for prime time."

That linkage explains the four-way deal structure: Tesla, SpaceX, xAI, and Intel. Terafab is meant to produce AI inference processors for Tesla's Optimus humanoid robot and Cybercab robotaxis, plus high-power chips designed to run SpaceX's space-based data centers. The companies describe these as "chips optimized for edge computing and inference," which is why the factory layout breaks with conventional semiconductor industry practice.

Normally, logic chips and memory chips come from different fabs using different process technologies, and packaging plus testing happens at yet more facilities. Terafab intends to put the manufacturing, packaging, and testing of both advanced logic and memory devices in one campus. SpaceX argues that consolidating everything shortens the production cycle and cuts time-to-yield by allowing faster iteration. Tom's Hardware notes the venture is already slated for Intel 14A for the first stage, an approach built around AI inference chips, with "high-power" parts for space.

The biggest building yet planned

Size comparisons help here. Giga Texas, where Tesla builds the Model Y and Cybertruck, covers more than 10 million square feet of factory floor; Terafab's planned manufacturing space is ten times that. The Pentagon runs 6.6 million square feet. Samsung's entire Pyeongtaek campus, the largest semiconductor site in the world today, spans about 31 million square feet. Terafab would pass the quoted figure of 110 million square feet when fully built out.

One caveat worth flagging: the "100 million square feet of manufacturing space" wording does not mean 100 million square feet of cleanroom. Tom's Hardware reports that the rendering shows four massive buildings, though it remains unclear whether they represent phases or separate roles for logic, memory, packaging, and test. The full buildout would need well over the initial $16.8 billion.

Company officials point to an unusually fast schedule. Tesla broke ground in April on a research fabrication facility (the "precursor fab") at Giga Austin's North Campus, where the goal is to iterate chip designs quickly under one roof. Early output targets for that pilot line were floating around 100,000 wafer starts per month before Musk dialed them back to "maybe a few thousand wafers per month, but it's really intended to try out ideas." Small-batch production of Tesla's AI5 chip is expected in 2026, with volume starting next year.

County politics and the tax deal

The dry details of industrial policy are getting airtime. In June, Grimes County commissioners approved a full property tax abatement package for the project. The Wednesday before the announcement, hundreds of county residents packed a board meeting to voice concerns about millions in tax breaks and what they called a lack of transparency about what exactly was coming.

Texas Governor Greg Abbott's office welcomed the news through a statement, and the local Anderson-Shiro school district superintendent called the agreement "a defining moment" for the district, promising that the coming opportunities "are managed wisely, transparently, and always with students at the center of every decision."

For the industry, though, the bigger question is whether a consumer of chips can also become a producer. Steve Putna, director of the Texas A&M University Semiconductor Institute, said in a June article that the message Musk is sending is "I can make more chips than pretty much any other company could possibly comprehend making." Industry watchdogs note that Terafab's actual output will hinge on Intel's 14A ramp and whether the economics of a megafab hold at that scale.

What happens next

The site in Grimes County now moves into detailed engineering while Tesla's Austin pilot line keeps producing test wafers. The pair will raise the partnership's first big capital outlays this year, with civil construction expected to follow quickly. No delivery date has been announced. Musk has said the eventual goal is 1 million wafer starts per month and between 100 and 200 billion custom AI and memory chips per year at full capacity.

Analysts have already started mapping which suppliers benefit if Terafab becomes real; stocks in chip equipment makers and industrial construction names have been rotating on the news all week. For now the headline is the size — a single chip campus that would be the largest building in the US by an order of magnitude, built mid-2020s at a time when the industry still struggles to keep IBM node production on schedule.

The broader signal for the sector, though, matters as much as the concrete: a chipmaker that owns no fabs (Tesla is the largest buyer of Nvidia devices in the country, with xAI as a close second) decided that the answer to AI compute demand is to become a chipmaker. If Terafab reaches scale, the supply picture for AI inference could look different by 2029, and so could the competitive balance around advanced packaging and memory — areas where TSMC is strong. Including Texas, the US has recently attracted more fabs than at any time since the 1990s.

More stories on the chip world: our Semiconductors coverage has it. The original paper is: SpaceX and Tesla confirm Terafab's $16.8B first phase in Grimes County.