Musk Targets 2028 Chip Production at Texas Terafab

Tesla and SpaceX have committed to a highly ambitious timeline for their joint semiconductor venture, targeting the start of volume chip production at their primary facility in Gibbons Creek, Texas, by the third or fourth quarter of 2028. The announcement, made by Elon Musk during a live broadcast of SpaceX’s Q3 2026 earnings call on October 20, highlights a push to bring advanced manufacturing capabilities in-house to support the companies' growing AI and automotive needs. While the timeline is described by Musk as 'highly aspirational' with significant uncertainty, it represents a major step toward reducing reliance on external foundries.

Musk stated that key suppliers, including ASML and other critical equipment manufacturers, have expedited shipments to support this accelerated schedule. He expressed gratitude to these partners for accelerating deliveries, noting that the dates are very aggressive. This coordination is essential for the project’s success, as the facility relies on a complex web of global supply chain partnerships to deliver the necessary machinery on time.

The Terafab project is designed as a vertically integrated chip factory capable of producing 1 terawatt (TW) of AI computing power annually. It will fabricate logic, memory, and advanced packaging in a single location. Musk suggested that once fully operational, the commercial value of this output could rival the GDP of a top 20 global country, specifically comparing it to Switzerland, which has a GDP of approximately $1.14 trillion. This scale implies a massive shift in how high-performance computing hardware is manufactured.

Technologically, the facility will utilize Intel’s 14A manufacturing node technology and traditional extreme ultraviolet (EUV) lithography systems. Intel joined the venture in April 2026 to help co-develop and refactor silicon fabrication technology, providing access to its state-of-the-art process. ASML, the world's sole commercial supplier of the $400 million EUV systems required for leading-edge production, is considered the most critical partner in this effort. Reports indicate the first EUV tool was slated for delivery in mid-2027, though it remains unclear if this aligns with the expedited timeline Musk referenced.

Beyond ASML and Intel, the project involves a wide array of other major suppliers. American equipment makers such as Applied Materials, Lam Research, and KLA Corporation, along with Japan’s Tokyo Electron, are providing front-end processing, metrology, and process control machinery. Additionally, Tesla and SpaceX are in negotiations with approximately 10 South Korean equipment manufacturers, including Hanmi Semiconductor for advanced packaging and HPSP for high-pressure hydrogen annealing, to secure specialized components like piping and valves.

The facility is intended to mitigate future shortfalls in cutting-edge AI processors by supplying chips for Musk’s xAI clusters, self-driving vehicles, Optimus humanoid robots, and SpaceX’s orbital AI data center. This internal production capability is crucial for supporting the broader AI industry and the specific infrastructure needs of Tesla and SpaceX, reducing dependence on external foundries like TSMC.

Musk also outlined near-term AI compute expansions during the broadcast, expecting 2.5 to 3 gigawatts (GW) of capacity to be active by the end of 2026. He expressed high confidence in adding an incremental 10 GW in 2027, aiming for a total of 13 GW of AI compute by the end of that year. To achieve this, SpaceX and xAI are aggressively procuring next-generation NVIDIA architecture, with plans to bring a 440,000-GPU 'Vera Rubin' training cluster online by the end of Q2 2027.

The scale of these ambitions has drawn scrutiny from industry experts. Research firm Gartner estimates the total global AI-optimized data center capacity at roughly 44 GW as of late 2026. In comparison, Terafab’s planned output of 1 TW would be significantly larger, representing a substantial jump from the current global total. While global AI computing capacity has grown rapidly, at a rate of roughly 3.3 to 3.4 times per year since 2022 according to EpochAI, the sheer volume targeted by Terafab remains a significant undertaking.

The project’s first experimental test chip is planned for manufacture at SpaceX’s research fabrication facility in Austin, Texas, around the second quarter of 2027. This early milestone will serve as a critical proof of concept before scaling up to the Gibbons Creek facility. The convergence of these timelines underscores the urgent need for rapid deployment of manufacturing equipment and the deepening integration of technology stacks across Musk’s companies.

As the semiconductor supply chain remains tight, the ability to secure expedited deliveries from major global players will be a determining factor in whether Terafab meets its 2028 target. The success of this megaproject could redefine the landscape of AI hardware manufacturing, potentially establishing a new model for vertically integrated chip production in the United States.