TSMC Discusses Joining Musk’s Texas Terafab as Intel Keeps Its Existing Role

TSMC is discussing a possible role in Elon Musk’s Terafab semiconductor project in Texas, expanding a venture originally associated with Intel. Musk confirmed the talks on X on Oct. 3 after a report from Tim Culpan’s Culpium newsletter described negotiations over a dedicated facility for Tesla, SpaceX and xAI.

The discussions remain preliminary. TSMC has not publicly committed to building or operating the plant, and the reported structure is still being worked out. Bloomberg described the proposal as a possible chipmaking partnership, while Tom’s Hardware and TechPowerUp reported that TSMC could help develop manufacturing capacity serving Musk’s companies exclusively.

Terafab is designed to give Musk’s companies a dedicated source of advanced semiconductors for vehicles, spacecraft, artificial intelligence systems and other computing projects. The facility would support Tesla, SpaceX and xAI, linking demand from automotive production, satellite and launch operations, and large-scale AI infrastructure under one manufacturing plan.

The project’s reported scale has varied. An April account described a $20 billion to $25 billion initial venture, while other coverage has referred to a much larger long-term build-out and a 1-terawatt annual compute target. Those figures describe different stages or ambitions associated with Terafab rather than a settled final budget. Tech-Insider also said construction in Grimes County could run from December 2026 through the end of 2028, though that account has a lower reliability rating than the newer coverage.

Intel remains Terafab’s first named chipmaking partner and is continuing to work on the venture, according to an account citing Intel Chief Executive Lip-Bu Tan. TSMC’s entry into discussions therefore adds a second major foundry name rather than automatically replacing Intel.

The development has created uncertainty around Intel’s position. Quartz reported that Intel shares fell 4% as investors assessed the prospect of TSMC joining the project, while The Motley Fool framed the talks as a challenge to Intel’s status as Terafab’s sole named chip partner. Intel’s continued involvement indicates that the project may divide responsibilities across design, process technology, plant operations or different production phases.

TSMC would bring deep experience in operating high-volume semiconductor fabs, a capability that Musk’s companies would need to turn Terafab from a construction project into a functioning manufacturing business. A partnership could also connect Terafab to the world’s largest contract chipmaker while keeping production geographically close to Tesla, SpaceX and xAI operations in the United States.

The proposal fits a broader push to expand advanced chip production on American soil, but it also carries difficult execution demands. A modern fab requires enormous capital, specialized equipment, reliable power and water supplies, strict process control, and a large technical workforce. TSMC’s possible participation would address some operational gaps, but it would not remove the cost and scheduling pressure attached to the project. TSMC stock reached a record high after Musk confirmed the talks, according to Yahoo Finance.

A dedicated Terafab could give Tesla, SpaceX and xAI greater control over chip supply and product-specific designs. Tesla needs processors for vehicles and autonomy systems, SpaceX requires computing hardware for spacecraft and network infrastructure, and xAI is building demand for AI accelerators and data-center capacity. Shared manufacturing plans could let the companies coordinate orders and chip architectures across those businesses.

The strategy also concentrates substantial technical and financial risk in a project serving companies with different production cycles. Automotive chips, communications hardware and advanced AI processors impose distinct design and manufacturing requirements. Terafab’s success will depend on whether those demands can be combined efficiently while maintaining access to commercial foundries during the transition.

The immediate milestone is a formal agreement defining TSMC’s role, ownership structure, technology responsibilities and construction timetable. Musk’s confirmation establishes that discussions exist, but it does not establish a joint venture, a completed financing package or a production date. TSMC’s public position and Intel’s detailed responsibilities will be central to determining whether Terafab becomes a dual-partner project.

Investors and chip customers will also watch whether the Texas plan supplements existing foundry capacity or attempts to replace outside suppliers. The next disclosures should clarify the plant’s scale, process technology, customer commitments and relationship between Intel and TSMC. Until those terms are set, Terafab remains an ambitious semiconductor expansion backed by early-stage negotiations.