Elon Musk confirms discussions with TSMC on Terafab chipmaking collaboration – Intel is the only other partner named, Terafab to exclusively supply Tesla, SpaceX and xAI
TSMC and Elon Musk’s Terafab semiconductor manufacturing initiative are discussing a potential collaboration under which TSMC would build and operate a facility that would exclusively serve Elon Musk’s Tesla, SpaceX, and xAI companies, according to Tim Culpan’s Culpium newsletter on Friday. Elon Musk confirmed the discussions early on Saturday, but did not comment.
“Just discussions, but something may come of it,” Musk wrote in an X post, while TSMC has remained tight-lipped so far.
Under the arrangement Culpan considers most likely, TSMC would own and operate the new semiconductor production facility, while SpaceX/Terafab could invest in the venture, commit to buying a guaranteed volume of chips or combine both approaches. However, the exact ownership structure remains under discussion. Another option would put SpaceX in control of the venture with the majority ownership; TSMC would invest less but still provide “operational expertise” in process technologies. Perhaps, an interesting background detail from Culpium is that TSMC’s rumored intentions to build a factory complex in Texas are related to the foundry’s effort to support Terafab.
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The proposed ‘Plan A’ arrangement could resemble TSMC’s JASM and ESMC joint ventures in Japan and Germany, where local partners provide capital and demand, while TSMC contributes process technology and operates the fabs. The proposed “Plan B” structure – under which SpaceX would hold the majority of Terafab, while TSMC would operate the facility and bring its own process technology – would be completely new for the world’s No.1 contract chipmaker, however.
The development certainly raises questions about Intel’s role in Terafab. For now, Intel is said to supply its 1.4nm-class 14A process technology to Terafab, which produces chips for Elon Musk’s SpaceX, Tesla, and xAI. If TSMC is involved, then the Intel 14A could drop out of the game because TSMC will bring its own node.
Since nothing is official at this point, both ‘Plan A’ and ‘Plan B’ should be considered speculation rather than the two options currently on the table, as there could be ‘Plan C’, ‘Plan D’ and even ‘Plan E’.
TSMC is a leading advanced packaging supplier, so Musk’s Terafab could be interested in making chips in Texas (presumably using Intel’s 14A process technology) and then packaging them in Texas, which is where TSMC can come into play. Another thing to consider is that while Intel has a broad cross-patent licensing agreement with TSMC, Terafab does not, so producing chips with an Intel-developed node could infringe one of TSMC’s patents, which could become a problem. That’s why Musk needs to keep an eye on TSMC, perhaps to the point of buying into Terafab.
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One thing to keep in mind for sure is that Elon Musk hardly wants Terafab to become a foundry that competes against Intel Foundry, Samsung Foundry or TSMC. What he needs is an uninterrupted and excess supply of custom silicon for SpaceX, Tesla, and xAI to power their AI, automotive, and space vehicles. With the rather broad strategic goal, Musk is likely to be very flexible when it comes to tactics and strategy.
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