Elon Musk has announced plans for a new chip manufacturing facility called 'Terafab' to be built near Tesla's headquarters in Austin, Texas. According to reports, the billionaire revealed the project on Saturday, March 23, 2026, stating that Tesla and SpaceX will collaborate on the chip factory.
The Terafab facility aims to produce AI chips with an annual capacity of over 1 terawatt of power, which Musk claims is approximately double the amount of power currently generated in the United States per year. The factory is expected to manufacture 100-200 billion chips annually, according to initial reports.
We either build the Terafab, or we don't have the chips, and we need the chips, so we build the Terafab
Musk explained that the facility will technically consist of two separate chip fabrication plants, each producing different chip designs. One will focus on chips for Tesla's vehicles and humanoid Optimus robots, while the other will produce chips for SpaceX and xAI's data centers, including those planned for space deployment.
"We either build the Terafab, or we don't have the chips, and we need the chips, so we build the Terafab," Musk reportedly said during the announcement in Austin. The project is estimated to cost between $20-25 billion, with Musk hoping production could begin at scale sometime in 2027.
The announcement comes as Musk has expressed concerns that the existing chip manufacturing industry cannot supply chips fast enough to meet the needs of his various technology projects.