TSMC is talking to Elon Musk about Terafab, his sprawling chip fabrication project in Texas. The world’s most important chipmaker has one condition: it wants to be the one running the factory.
What TSMC actually said
On its Q3 2026 earnings call on October 15, TSMC confirmed it is in active discussions about collaborating on Terafab. Chairman and CEO C.C. Wei made clear that any chip fabrication facility involved would need to be operated by TSMC itself.
That framing directly contradicts what Musk posted on X on October 7. He wrote that SpaceX would “build and run the fab,” adding that TSMC’s role, if it had one at all, would be no more than a subleasing arrangement.
SpaceX will “build and run the fab.” — Elon Musk, via X
The talks first surfaced publicly around October 2-3, following initial reporting by Tim Culpan. At the time, Musk described the discussions as preliminary, while suggesting they could lead somewhere significant.
Market speculation about TSMC’s potential role in running Terafab has periodically moved the company’s share price.
What Terafab is supposed to be
Terafab is a joint effort led by Tesla and SpaceX, with elements from xAI also involved. Its goal is an advanced chip fabrication facility in Grimes County, Texas, targeting about 1 terawatt of annual AI computing capacity.
The first phase alone carries an investment of approximately $16.8 billion. The site broke ground in August 2026 on the grounds of the former Gibbons Creek coal plant. The full Grimes County campus is planned to exceed 100 million square feet.
Terafab aims to bring logic, memory, packaging, and testing together in one place, combining stages of production that are normally spread across different companies and often different countries.
Musk has argued that this vertical integration is necessary because existing foundries cannot keep up with demand. His companies’ appetite for chips, spanning Tesla and SpaceX applications, is growing faster than he believes the current suppliers can serve.
Intel is already at the table
TSMC is not the only chipmaker in the picture. Intel has been a development partner on Terafab since April 2026 and has committed to using its 14A manufacturing process for the project.
Why the control question matters
TSMC’s insistence on operating the fab is not just corporate pride. Its manufacturing know-how, process discipline, and yield expertise are the core of its value. Handing over a facility for someone else to operate would mean handing over the thing that makes TSMC, TSMC.
What this means
For investors, the clearest takeaway is that confirmed discussions are not a signed agreement, and the two parties are describing very different structures. Any TSMC share price reaction to Terafab news has, so far, been driven by speculation rather than settled terms.
The scenarios worth watching break down fairly simply. If TSMC gets operational control, it would gain a major new US facility tied to some of the most demanding chip customers anywhere. If Musk prevails and TSMC accepts a subleasing role, that would mark an unusual concession from a company that typically sets its own terms. If neither budges, Intel’s existing partnership and its 14A commitment become more central to the project.
TSMC’s interest in the Texas site fits with wider US efforts to expand domestic semiconductor manufacturing. For the AI industry, Terafab’s stated target of about 1 terawatt of annual compute capacity could reshape how Musk’s companies source the processing power behind their AI and hardware ambitions. The first phase alone runs approximately $16.8 billion, and its technology partners do not yet agree on basic questions of control.
The next signals to watch are any formal announcements from TSMC or SpaceX clarifying roles, further detail on how Intel’s 14A process fits alongside a possible TSMC presence, and construction progress at the Gibbons Creek site.
Disclosure: This article was edited by Diego Almada Lopez. For more information on how we create and review content, see our Editorial Policy.