Elon Musk Confirms Talks with TSMC on Terafab Chipmaking Project for Tesla, SpaceX, and xAI

Details of the Potential Partnership

According to Tim Culpan’s Culpium newsletter, the discussions center on a possible partnership where TSMC would build and operate a semiconductor fabrication facility dedicated to Musk’s companies. The goal is to secure a steady supply of custom chips for advanced technologies in AI, autonomous vehicles, and space systems.

Ownership and Operational Models Under Consideration

In the most likely scenario outlined by Culpan, TSMC would own and operate the new fab, while SpaceX or Terafab teams could contribute through direct investment, guaranteed chip purchase volumes, or a combination. The exact ownership and control structure remains undefined and is still under negotiation.

Connection to TSMC’s Texas Expansion Plans

An alternative model mentioned in the report suggests SpaceX could hold a majority stake in the venture, with TSMC providing technological expertise and operating the facility in exchange for a smaller equity share. Under this setup, TSMC would continue to offer access to its advanced manufacturing processes and proprietary technologies without managing daily operations.

Role of Intel and Process Technology

Culpan highlighted that TSMC’s prior plans to build a fabrication complex in Texas may be linked to the Terafab initiative. Efforts to establish a facility in the state could be motivated, in part, by the desire to support this project, indicating a strategic alignment between TSMC’s geographic ambitions and Musk’s need for production near key operational centers.

Implications for Intel’s Role

Intel is currently named as the designated technology partner to supply Terafab with its 1.4nm-class process technology, known as 14A. This node would enable production of ultra-advanced chips for high-performance AI, rocket control systems, and autonomous driving platforms. However, if TSMC becomes the primary technology provider, the use of Intel’s 14A node could be dropped in favor of a TSMC proprietary process, fundamentally altering the project’s technical direction.

This development raises questions about Intel’s future role in the Terafab initiative. While Intel appears included in current plans, TSMC’s potential involvement could lead to a complete reconfiguration of the technical supply chain, possibly affecting Intel’s strategy in advanced chip foundry services.

Legal and Patent Considerations

Although Intel and TSMC have a broad cross-licensing patent agreement, no such agreement exists between Terafab and TSMC. This absence could create legal risks if Terafab uses an Intel-developed process node without explicit permission, potentially leading to patent infringement claims by TSMC. Some analyses suggest Musk may seek a close collaboration with TSMC—possibly including equity acquisition—to avoid legal obstacles and secure access to necessary technologies.

Speculative Nature of the Plans

The discussed plans—informally referred to as „Plan A” and „Plan B”—are based on known joint venture models, such as TSMC’s partnerships with local entities in Japan and Germany. However, authors note these remain speculative. No official confirmation exists, and the possibility of other variants—„Plan C,” „Plan D,” or even „Plan E”—cannot be ruled out, especially in the absence of a signed agreement or press release.

Conclusion

Although neither party has publicly confirmed a firm collaboration, the talks between Elon Musk and TSMC regarding Terafab reflect a broader strategy to gain direct control over the supply of critical chips for the technological future of Musk’s companies. The need for a continuous and oversupply of custom chips for AI, automotive, and space exploration makes this a high-priority strategic goal. Musk’s flexibility in both tactics and strategy could allow rapid adaptation to any future developments in the negotiations.