By Asa Fitch
Some of Elon Musk's ventures -- Tesla, SpaceX -- have been spectacularly successful. Others -- The Boring Company, Neuralink -- haven't come close to matching his grand visions.
Musk's latest moonshot is a sprawling, vertically integrated chip-making operation called Terafab. Don't expect it to emerge from the latter category anytime soon. That in turn means the benefits for most companies involved, including chip giant Intel, also lie largely in the far-off future, if they materialize at all.
Musk's targets for the Terafab have been characteristically fabulous: Mass production is supposed to start next year, with an initial target of 100,000 silicon wafers a month. If all goes to plan, it will grow to a million wafers a month.
To put those figures in context, the largest factories of the world's largest chip maker, by market value Taiwan Semiconductor Manufacturing Co., put about 100,000 wafers a month into production. A million a month would be around 70% of TSMC's total monthly output, per analysts at New Street Research.
Musk says he needs to make such a huge number of chips because his companies will need far more than TSMC or other incumbents are willing to invest in producing -- an echo of the pressures that drove Tesla to develop a fully-integrated battery-production operation for its cars. Some of the chips will go into Tesla's self-driving cars. Others will go into humanoid robots. Many others will go into space-based AI data centers that run on solar electricity.
What is certain is that this will take much more time than Musk imagines, even if he isn't overestimating his ultimate needs. Chip factories require specialized construction capabilities and materials -- seismic-resistant concrete, for example, that absorbs even the most minute vibrations in the Earth's crust. Building chip factories involves a lot of location-specific engineering that can't happen overnight.
And Musk doesn't want to build a standard factory. He is pushing a novel method of chip-making that brings many parts of the supply chain under one roof. On a call with analysts Wednesday, he gave an indication of just how gradual the rollout actually will be. Tesla would first build a chip-research facility with capacity to produce "a few thousand wafers" monthly, spending about $3 billion, he said -- chump change in the chip-manufacturing world. The intent was "to try out ideas," he said.
Competitors are hardly shaking. Asked about Terafab last week, TSMC Chief Executive C.C. Wei effectively dismissed Musk's timeline without explicitly rejecting the venture altogether. "It takes two to three years to build a new fab, no shortcuts," he said. "And it takes another one to two years to ramp it up."
Musk's venture faces other challenges that arguably loom larger. The Terafab aims to go from zero to producing some of the most advanced chips in the world. To bridge that gap, he plans to use Intel's most advanced chip-making technology, called 14A, which the company doesn't expect to be in high-volume production for several years. Notwithstanding the share-price boost Intel got from that news this week, its chip-making stumbles over the past decade suggest delays and costs could easily mount.
Even if things do go smoothly, in the time it takes to set up factories with Intel's help, the rest of the industry likely will have moved on to even-more-advanced chips, leaving Musk's operation less than state-of-the-art.
The financial model for the factory raises more questions. There is some logic to Musk's vertical integration: The more chip-making machinery that can be integrated around producing one thing, the faster and more economical it becomes to produce that thing.
But there is also logic behind the chip industry's drift toward disintegration over the past couple of decades, largely into companies that either make or design chips. As Intel has discovered, making chips exclusively for yourself is great when your factories and chip designs are the best in the world. When they aren't, competitors can use contract manufacturers like TSMC to make better ones. If Terafab chips are a couple of generations behind TSMC's, Tesla might regret being tightly tied to its own factories.
Of course, as implausible as Terafab's prospects appear, Musk's wealth and track record make him impossible to completely discount. He does seem serious about the venture, is hiring for it and gathering chip-making partners. Semiconductor manufacturing equipment makers -- Lam Research and Applied Materials among them -- are some of the few obvious shorter-term beneficiaries as Musk gets the operation off the ground.
Musk noted when he unveiled the Terafab in March that ventures such as SpaceX that at first seemed absurd turned out to be world-changing. Chip-making isn't rocket science, but it might prove to be his biggest challenge yet.
Write to Asa Fitch at asa.fitch@wsj.com
(END) Dow Jones Newswires
April 24, 2026 05:30 ET (09:30 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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