Musk pledges 2028 chip production at Texas plant

The pace of semiconductor manufacturing for artificial intelligence infrastructure is set to accelerate, as Elon Musk announced that major equipment suppliers are moving to expedite deliveries for the Terafab project. This joint venture between Tesla and SpaceX aims to establish a self-sufficient chip production capacity in the United States, potentially altering the global supply chain for high-end processors. For the broader industry, this shift signals a move away from exclusive reliance on external foundries like TSMC, aiming instead to produce chips internally for Musk’s various enterprises, including xAI, self-driving vehicles, Optimus robots, and orbital data centers.

During a live broadcast of SpaceX’s third-quarter 2026 earnings call on October 20, Musk detailed the aggressive timeline for the facility located in Gibbons Creek, Texas. He stated that the company targets the start of volume chip production by either the third or fourth quarter of 2028. While acknowledging the ambitious nature of this schedule, Musk described the timeline as highly aspirational, noting that it carries significant uncertainty or "big error bars." He expressed gratitude to suppliers for their willingness to fast-track equipment shipments to support this goal.

The Terafab project is designed to be a vertically integrated manufacturing hub capable of producing logic chips, memory, and advanced packaging in a single location. The facility utilizes Intel’s 14A manufacturing node technology, leveraging traditional extreme ultraviolet lithography systems. Intel joined the venture in April 2026 to co-develop and refactor silicon fabrication processes. Central to this operation is ASML, the sole commercial provider of the $400 million EUV lithography machines necessary for leading-edge production. While unofficial sources previously suggested the first EUV tool would arrive in mid-2027, it is unclear if this aligns with the expedited schedule Musk referenced.

Beyond the primary facility, the project involves a complex network of collaborators across the semiconductor supply chain. American equipment manufacturers, including Applied Materials, Lam Research, and KLA Corporation, along with Japan’s Tokyo Electron, are supplying front-end processing and metrology machinery. Additionally, Tesla and SpaceX are in discussions with approximately ten South Korean firms, such as Hanmi Semiconductor and HPSP, for specialized packaging equipment, piping components, and process valves. This broad coalition of suppliers is essential to meeting the facility’s massive planned output.

In the interim, SpaceX plans to manufacture its first experimental test chip at its research fabrication facility in Austin, Texas, around the second quarter of 2027. This step is part of the broader rollout that will see the Gibbons Creek facility reach full commercial scale. Musk emphasized that the commercial value of Terafab’s advanced chip output, once fully operational, would be substantial enough to place the facility’s single-building production within the top 20 global country GDPs, a benchmark currently held by Switzerland at approximately $1.14 trillion.

Musk also outlined near-term computing capacity goals for his AI companies, stating an expectation of having 2.5 to 3 gigawatts of capacity active by the end of 2026. He expressed high confidence in adding an incremental 10 gigawatts in 2027, predicting a total of 13 gigawatts of AI compute by the end of that year. To achieve this, SpaceX and xAI are aggressively procuring next-generation NVIDIA architecture, with plans to bring a 440,000-GPU "Vera Rubin" training cluster online by the end of the second quarter of 2027. This expansion is significantly larger than competing projects like Project Stargate or Meta’s Hyperion, which are expected to reach full capacity in the 2030s.

Despite the optimistic announcements, industry experts have raised questions about the feasibility of Terafab’s ultimate goal of manufacturing one terawatt of AI computing power per year. Research firm Gartner estimates that total global AI-optimized data center capacity is roughly 44 gigawatts as of late 2026. This figure represents only 4.4% of Terafab’s planned output, highlighting the scale of the challenge. However, global AI computing capacity has grown at a rate of 3.3 to 3.4 times per year since 2022, according to EpochAI, suggesting rapid sector expansion.

The next phase involves the continued integration of expedited equipment deliveries into the Gibbons Creek facility. With the first EUV tool delivery potentially occurring in mid-2027, the coming months will be critical for validating the supply chain commitments made by ASML and other partners. The success of the Terafab project will depend on whether the "highly aspirational" 2028 timeline can be met without significant delays, ultimately determining if the facility can effectively mitigate future shortfalls in cutting-edge AI processors.