While merger rumors remain unconfirmed, the Terafab initiative is already merging the chip, talent, and manufacturing systems of Tesla and SpaceX.
Elon Musk is assembling a semiconductor manufacturing team named Terafab within Tesla. According to a recent report, the Terafab project aims to provide crucial chip manufacturing capabilities for the autonomous driving, humanoid robotics, and data center needs of both Tesla and SpaceX. The two companies have agreed to an initial joint investment of $55 billion, with the total future investment potentially rising to $119 billion.
Terafab is dominated by SpaceX personnel. The project's core leader, John Federspiel, reports directly to Musk and manages a team of 34 engineers and managers, with only a few coming from Tesla. The project has also brought in personnel from Intel. Musk has previously stated that his companies plan to use Intel's manufacturing processes to produce chips.
This massive capital expenditure plan comes at a critical time following SpaceX's successful initial public offering (IPO). SpaceX's share price is currently up approximately 25% from its IPO price, giving it a market valuation of around $2.25 trillion. The deep financial and technological entanglement between the two companies is directly impacting investor sentiment.
SpaceX Executives Lead the Chip Project
The composition of the Terafab team underscores the dominant role of SpaceX in the initiative. The team is led by SpaceX executive John Federspiel, who reports directly to Musk and oversees a group of 34 engineers and managers.
According to his LinkedIn profile, Federspiel concurrently holds the roles of Senior Director at Terafab and Senior Director of Product Engineering for Starlink at SpaceX. Last month, he represented SpaceX at a Terafab factory tax abatement hearing in Grimes County, Texas.
The project also includes several long-tenured SpaceX veterans with over a decade of service, such as hardware development engineer Michael Ornstein and materials engineering lead Lora Ulmer. SpaceX's Senior Director of Employee Health and Safety, John Buffalo, is also listed among the project personnel.
Terafab combines Tesla's experience in designing custom AI hardware and constructing large-scale manufacturing facilities with SpaceX's expertise in developing complex hardware systems.
Starting at $55 Billion, Project Serves AI Manufacturing Needs
Terafab is a manufacturing project first announced by Musk in March. Tesla and SpaceX have agreed to an initial joint investment of $55 billion, with the potential for the total investment to grow to $119 billion.
The project's goal is to build semiconductor factories to help Tesla and SpaceX secure the materials needed for their AI businesses, which include autonomous vehicles, humanoid robots, and data centers.
The report characterizes Terafab as a fusion of the two companies' capabilities. Tesla contributes its experience in custom AI hardware design and building mass manufacturing facilities, while SpaceX provides its experience in developing intricate hardware systems.
This is also why the project is significant for investors. It is not merely a chip initiative but pertains to the future AI infrastructure supply capabilities of both companies. An external concern is whether Tesla shareholders are funding a project not fully controlled by Tesla, given that SpaceX executives lead its management.
Incorporating Intel Technology and Talent
To compensate for a lack of semiconductor manufacturing experience, the Terafab team is recruiting specialized talent externally. Intel has joined the project as a partner. In recent months, four Intel employees have moved to the project.
Former Intel factory manager Gary Jiang currently serves as the Terafab Project Director at Tesla. Musk had previously indicated that his companies plan "to use Intel's manufacturing process to make chips."
Among the team members reporting to Federspiel, only Gary Jiang and Daner Abdula, the principal engineer responsible for epitaxy processes, are formal Tesla employees. Both executives joined Tesla only within the past few months.
Overlapping Organizational Structures Spark Merger Speculation
Terafab is not the only point of convergence between the two companies. An organizational analysis of 70 Tesla executives revealed that Tesla and SpaceX operate as a single entity in key areas.
Apart from Musk himself, several executives hold roles at both companies. For example, Charlie Kuehmann has led the materials engineering departments of both firms for over a decade. Tesla's Vice President of AI Software, Ashok Elluswamy, and Senior Director of Vehicle Software, Silvio Brugada, also hold positions at Musk's AI company, xAI.
Internal structures at Tesla are also undergoing adjustments. In February, Vice President of Infrastructure and Information Security, Raj Jegannathan, departed. His responsibilities were subsequently distributed to IT Director Tony Tran, North American Factory Software Director Senthil Velmurugan, and Vice President Joe Ward.
With SpaceX's successful public listing and its status as one of the world's most valuable companies, market speculation about a potential merger of the two entities has intensified in recent months. According to the report, some employees at both companies have privately discussed that a potential merger is "increasingly looking like a possibility."
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