1 Terawatt: The Massive Chip Factory Musk Wants to Build by 2028

For consumers and tech investors watching the semiconductor race, the biggest change is a new, aggressive timeline for domestic chip production that could reshape the supply chain. Elon Musk announced that equipment suppliers are moving parts faster to support a massive new manufacturing plant in Texas. This shift aims to reduce reliance on external foundries and accelerate the production of chips for AI, self-driving cars, and space data centers.

The core of this announcement is a target for volume chip production at the Terafab facility in Gibbons Creek, Texas, by the third or fourth quarter of 2028. Musk described this schedule as "highly aspirational" with "big error bars." To support this, SpaceX plans to produce its first experimental test chip at its research fabrication facility in Austin, Texas, around the second quarter of 2027. These dates are significantly earlier than previous industry estimates for similar scale projects.

Musk made these remarks during a live broadcast of SpaceX’s Q3 2026 earnings call on X on October 20, 2026. As CEO of both Tesla and SpaceX, he confirmed that the joint venture is receiving expedited shipments from critical partners. He specifically thanked ASML and other suppliers for accelerating equipment deliveries to meet these aggressive goals. The move signals a coordinated effort to compress the usual multi-year lead times for advanced semiconductor manufacturing.

The financial and industrial stakes are enormous. The Terafab project is a multi-billion-dollar, vertically integrated chip factory designed to manufacture 1 terawatt (TW) of AI computing power per year. Musk stated that once fully operational, the commercial value of the chip output from this single building would place it within the top 20 global country GDPs. For perspective, the 20th-ranked economy is Switzerland, with a GDP of approximately $1.14 trillion. This output is intended to power xAI clusters, Optimus robots, Tesla vehicles, and SpaceX’s orbital AI data center.

The technical foundation of the project relies on collaboration across the supply chain. Terafab will use traditional extreme ultraviolet (EUV) lithography systems based on Intel’s 14A manufacturing node technology. Intel officially joined the venture in April 2026 to help co-develop and refactor silicon fabrication technology. ASML, the world’s sole commercial supplier of the $400 million EUV lithography systems required for leading-edge production, is the most critical partner. Unofficial sources suggested the first EUV tool was slated for mid-2027, though it is unclear if this matches the expedited timeline Musk referenced.

Beyond ASML and Intel, the project involves a wide network of major suppliers. American manufacturers Applied Materials, Lam Research, and KLA Corporation, along with Japan’s Tokyo Electron, are providing front-end processing, metrology, and process control machinery. Tesla and SpaceX are also in talks with approximately 10 South Korean equipment makers. These include Hanmi Semiconductor for advanced packaging and HPSP for high-pressure hydrogen annealing, as well as firms supplying specialized piping and process valves.

Musk’s plans extend beyond Terafab to his AI computing ambitions. He expects his AI companies to have 2.5 to 3 gigawatts (GW) of computing capacity active by the end of 2026. He expressed high confidence in adding an incremental 10 GW in 2027, stating he would be surprised if they did not hit a total of 13 GW of AI compute by year-end. To achieve this, SpaceX and xAI are aggressively procuring next-generation NVIDIA architecture, with plans to bring a 440,000-GPU Nvidia "Vera Rubin" training cluster online by the end of Q2 2027.

These targets dwarf current global capacities. The restructured 10 GW Project Stargate is not expected to reach full capacity until the 2030s, and Meta’s 5 GW Hyperion project has a similar timeline. However, skepticism remains regarding the 1 TW ambition for Terafab. Research firm Gartner estimates the total global AI-optimized data center capacity is roughly 44 GW as of late 2026. This means Terafab’s planned output would exceed current global capacity by a factor of nearly 23, even though global AI computing capacity has grown by roughly 3.3x to 3.4x per year since 2022 according to EpochAI.

The facility is designed to mitigate future shortfalls of cutting-edge AI processors from external foundries like TSMC. By internalizing the fabrication of logic, memory, and advanced packaging, the project aims to secure the supply chain for the broader AI industry. While the timeline is described as aggressive, the coordinated movement of equipment from key suppliers like ASML and Intel suggests a serious push to bring this monumental infrastructure online in the late 2020s.