Musk Confirms TSMC Talks on Terafab Chip Factory Partnership
Elon Musk has acknowledged ongoing discussions with Taiwan's leading chipmaker about a potential joint venture to produce semiconductors for his companies under the Terafab initiative.
Discussions between TSMC and Elon Musk's Terafab semiconductor manufacturing initiative have surfaced, with the possibility of TSMC constructing and managing a production facility dedicated to serving Tesla, SpaceX, and xAI, according to reporting from Tim Culpan's Culpium newsletter on Friday. Musk acknowledged the talks on Saturday morning but offered no additional details.
"Just discussions, but something may come of it," Musk stated in a post on X, while TSMC has declined to comment publicly.
The most likely scenario, according to Culpan's analysis, would involve TSMC owning and operating the new chip production facility, with SpaceX/Terafab either investing capital, committing to purchase a set quantity of chips, or pursuing both simultaneously. The precise ownership arrangement, however, remains subject to negotiation. An alternative structure would grant SpaceX majority control of the venture, with TSMC taking a smaller stake while supplying operational knowledge and manufacturing processes. Notably, Culpium reports that TSMC's plans to establish a fabrication complex in Texas may be connected to supporting Terafab's objectives.
Possible structures under discussion
The proposed first arrangement could mirror TSMC's existing JASM and ESMC partnerships in Japan and Germany, where regional partners furnish funding and customer demand while TSMC provides manufacturing expertise and process technology. The alternative framework—with SpaceX holding controlling interest in Terafab while TSMC manages operations and contributes its process technology—would mark uncharted territory for the world's largest independent foundry.
The potential involvement of TSMC raises uncertainty regarding Intel's position in Terafab. Currently, Intel is slated to supply its 1.4nm-class 14A process technology to Terafab for manufacturing chips destined for SpaceX, Tesla, and xAI. Should TSMC join the partnership, Intel's 14A technology could become unnecessary, as TSMC would introduce its own advanced nodes.
Since no formal agreements have been reached, both scenarios should be treated as possibilities rather than confirmed options. Additional arrangements beyond these two could emerge.
Advanced packaging and patent considerations
TSMC maintains a prominent position in advanced packaging technology, suggesting that Terafab could manufacture chips in Texas—presumably using Intel's 14A process—and then utilize TSMC's packaging capabilities, also in Texas. Additionally, while Intel maintains a comprehensive cross-patent licensing arrangement with TSMC, Terafab does not hold such an agreement. Manufacturing chips using Intel-developed technology could potentially violate TSMC patents, creating legal complications. This reality may explain why Musk would benefit from maintaining a close relationship with TSMC, potentially including a financial stake in Terafab itself.
A critical point to recognize is that Musk has expressed little interest in positioning Terafab as a foundry competing with Intel Foundry, Samsung Foundry, or TSMC. His primary objective centers on securing a consistent and abundant supply of specialized silicon for SpaceX, Tesla, and xAI to power their artificial intelligence, automotive, and aerospace initiatives. Given these expansive strategic ambitions, Musk likely maintains considerable flexibility regarding both operational and strategic decisions.