Tesla and SpaceX will invest .8B to start building ‘Terafab’ chip factory in Texas
Tesla and SpaceX revealed on Thursday that they will construct “Terafab,” an advanced semiconductor factory, in Grimes County, Texas, near Houston, with an initial investment of $16.8 billion. Elon Musk, CEO of both companies, described the facility as poised to become “the largest and most valuable building on Earth by far.” SpaceX detailed plans for the plant to encompass over 100 million square feet of manufacturing space.
The proposed factory is expected to employ at least 3,000 workers from Grimes and the neighboring Brazos County. According to information from SpaceX, Terafab aims to serve as a sophisticated semiconductor fabrication plant, designed to bridge the gap between the current global chip supply and the anticipated future computing demands.
The motivation behind Terafab stems from Musk’s futuristic vision, which includes widespread automation with millions of robots replacing human labor, robotaxis handling transportation, and satellites functioning as data centers for AI training and inference—an evolution necessitating computing power far beyond what existing production rates can provide. SpaceX’s filings suggest the company could invest up to $119 billion in the project over several construction phases, although the factory itself was not mentioned during SpaceX’s recent earnings call.
Intel has indicated participation in the Terafab project but has been reticent about specifying its contributions. SpaceX emphasizes that the facility will be monumental both in mission and scale, featuring vertical integration and facilities for manufacturing, packaging, and testing of advanced logic and memory chips, all within the expansive 100 million square feet of planned manufacturing space.
The integration of these production stages in one location is expected to enable rapid, iterative enhancements and accelerate the deployment of new computing capabilities. Terafab will produce chips tailored for edge computing and inference tasks vital for hardware such as Tesla’s Optimus robots and self-driving Cybercabs, in addition to high-power chips intended for SpaceX’s space-based data centers.
SpaceX also revealed a commitment to sourcing water for the plant from the Gibbons Creek Reservoir rather than relying on local groundwater supplies. This announcement came after a well-attended county meeting where residents expressed concerns around the significant tax incentives granted for the project and issues of transparency.
Dr. Sarah Borowicz, Superintendent of the Anderson-Shiro Consolidated Independent School District, conveyed optimism about the development in a statement issued by the Texas Governor’s office, highlighting the opportunity to strengthen the district and prepare students for the future. She underlined the importance of managing new opportunities transparently and with students as the primary focus, marking this as a pivotal moment for the school district.
