Tesla and SpaceX, together with Elon Musk’s AI company xAI, are building a new chip factory named Terafab in Grimes County, Texas. The first construction phase costs 16.8 billion dollars, and later expansion phases could push the investment volume considerably higher, according to the companies.
Factory to span more than 1,300 football fields
Tesla and SpaceX are building a joint chip factory in Grimes County near Houston, as first reported by TechCrunch. The facility is expected to cover more than 100 million square feet – equivalent to roughly 9.3 million square meters, or more than 1,300 football fields. On X, Tesla and SpaceX chief Elon Musk wrote that the facility will be the largest and most valuable building on Earth – and stunningly beautiful as well. In a further post, he compared the planned footprint to 50 times the size of the Pentagon. Terafab is set up as a joint project of Tesla, SpaceX and xAI, three companies Musk controls. The site is a previously agricultural plot directly on the Gibbons Creek Reservoir, which is meant to supply enough cooling water for the energy-intensive chip production, while the proximity to Houston promises short routes to ports and suppliers. The first expansion phase covers the stated 16.8 billion dollars; later phases could, according to planning documents seen by the companies, push the investment volume to as much as 119 billion dollars – a figure that is independently unverified. Neither company gave a date for the start of production.
Factory is meant to supply chips for robots and space data centers
Terafab aims, according to its own statements, to bundle chip design, wafer fabrication, memory production and packaging under one roof. The industry has so far mostly split these steps across specialized contract manufacturers such as TSMC or Samsung. The logic and memory chips produced there are meant to power Tesla’s humanoid Optimus robots and the planned driverless Cybercabs, among other uses. Additionally, high-performance processors for SpaceX data centers in Earth orbit are planned – a project the company has already pursued before. With its own chip production, Musk’s group of companies joins a broader industry trend: Meta has also been mass-producing its own AI chips since September to reduce dependence on Nvidia and AMD graphics processors. For Tesla, SpaceX and xAI, vertical integration promises shorter supply chains and more control over scarce manufacturing capacity that is in high demand across the industry. DeepSeek is also reportedly working, according to insiders, on its own inference chip to reduce dependence on Nvidia graphics processors and partly export-restricted hardware. Nvidia itself remains by far the largest supplier of AI accelerators despite these moves, which further explains the need for in-house manufacturing capacity within Musk’s group of companies.
Texas backs the project with a 30 million dollar grant
Texas Governor Greg Abbott officially confirmed the project and announced a grant of 30 million dollars from the Texas Enterprise Fund. The grant runs through the new Texas Jobs, Energy, Technology and Innovation program, which is designed to support business settlements that are also weighing locations outside Texas. Tesla and SpaceX expect at least 3,000 new jobs in Grimes County and neighboring Brazos County. The two rural counties north of Houston anticipate a significant influx of skilled workers and supplier firms because of the factory.
Whether the ambitious timeline holds remains open: so far there is no date for the start of production, and earlier large-scale projects by Musk’s companies – such as the Tesla plant in Austin or SpaceX launch facilities – have repeatedly slipped against their initial announcements. What will matter, then, is whether Terafab actually delivers chips faster than buying from external contract manufacturers like TSMC – or whether the promised independence from the global semiconductor supply chain itself becomes a source of delay.
