Elon Musk's Terafab chip factory in Texas could cost up to $119 billion, filing shows

Elon Musk is setting his sights on a groundbreaking chip manufacturing facility in East Texas, with initial phase costs projected to start at $55 billion. Should the entire project be completed, expenses could soar to an astounding $119 billion. These financial estimates were revealed during a recent public hearing notice in Grimes County, Texas, where the factory is planned to be located. SpaceX, under Musk's leadership, is actively pursuing a property tax abatement agreement with Grimes County, which will hold a public hearing on June 3 to discuss these proposed tax incentives. Musk, who also heads Tesla, envisions Terafab as an unprecedented chip manufacturing initiative that integrates logic, memory, and advanced packaging all under one roof. This vision was articulated in a post on X last month by SpaceX, which now oversees the artificial intelligence company, xAI. The project's official launch took place in March. Situated near Austin, the chip complex aims to produce chips for SpaceX, xAI, and Tesla, with collaborative efforts from these companies. In a significant development, Intel announced its involvement in the Terafab project, pledging to assist in designing, fabricating, and packaging ultra-high-performance chips at scale. This collaboration marks the first major external commitment to the capital-intensive foundry operations of Intel, which has traditionally focused on manufacturing chips exclusively for its own products. During Tesla's first-quarter earnings call, Musk indicated plans for Tesla to utilize Intel's upcoming 14A process for chip production at the new facility. Following this announcement, Intel's stock surged, experiencing its most successful month in April, more than doubling in value. The company stands to gain significantly from the current AI boom as chip manufacturing capacity becomes increasingly limited at Taiwan Semiconductor Manufacturing Company, where major players like Nvidia and Apple have secured their chipmaking resources for years ahead. Chip analyst Ben Bajarin from Creative Strategies commented on Musk's long-term strategy, noting that it will take approximately 15 years to establish a controlled supply chain for his companies, especially given the difficulties of securing priority at TSMC. "You don’t just wake up one day and say, ‘I’m going to be a foundry,’" Bajarin stated, emphasizing the complexity of the manufacturing process. In earlier discussions, Musk lamented that key chip suppliers could not meet Tesla's demands, highlighting the necessity of the Terafab to shield the company from geopolitical risks. More recently, he updated on the earnings call that Tesla is still finalizing the specifics of the Terafab project and is also setting up a research fab at its Austin factory, expected to cost around $3 billion and capable of producing a few thousand wafers monthly. Musk added, "SpaceX will oversee the initial phase of the scaled-up Terafab." As SpaceX prepares for a public offering in the near future, following its merger with xAI, which valued the combined entity at $1.75 trillion, the financial details of the company are increasingly coming to light. Tesla and SpaceX have not yet responded to requests for further comments on this ambitious venture.