Musk says Tesla needs to build 'gigantic' chip fab plant to meet AI demand

Elon Musk, chief executive officer of Tesla, said on Thursday (local time) that the carmaker will likely need to build a “gigantic” semiconductor fabrication plant to support its artificial intelligence (AI) and robotics ambitions, CNBC reported.

 

Speaking at Tesla's annual shareholders' meeting, Musk said, "One of the things I’m trying to figure out is — how do we make enough chips?”

 

The electric carmaker currently relies on contract chipmakers, including Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung Electronics, to manufacture its chip designs. The report suggests that Musk is also considering working with Intel to increase its supply. "You know, maybe we'll, we'll do something with Intel", and added that they haven't signed a deal with Intel yet.

 

Speaking at the meeting, he said, "But even when we extrapolate the best-case scenario for chip production from our suppliers, it’s still not enough."

 

He added that establishing a gigantic chip fab will likely be needed to achieve the chip volumes the company aims for.

 

Tesla’s proposed ‘terafab’

 

Musk said Tesla’s proposed semiconductor facility, described as Tesla terafab, could initially produce about 100,000 wafer starts per month, with plans to eventually scale up to one million. In the chip industry, “wafer starts per month” refers to the number of new semiconductor wafers a fabrication plant begins processing each month.

 

In comparison, TSMC says that its annual wafer production capacity crossed the 17 million mark in 2024, or approximately 1.42 wafer starts per month.

 

Rising global chip demand

 

Microchips are the core components that power nearly all modern technologies, from smartphones and cars to robotics. Demand for them has surged with the rise of artificial intelligence.

 

Tech giants such as Tesla are competing for greater supply from chipmakers like TSMC, the world’s largest and most advanced semiconductor manufacturer. 

 

Tesla’s AI and robotics focus

 

Musk's statement highlights Tesla's apparent shift to artificial intelligence and robotics, industries he believes are the future of the global economy. He said, "With AI and robotics, you can actually increase the global economy by a factor of 10, or maybe 100. There’s not, like, an obvious limit."

 

According to a Reuters report, the company is designing its fifth-generation artificial intelligence chip to power its autonomous ambitions.

 

Musk has previously mentioned the AI5 chip and confirmed that Tesla is partnering with Taiwan’s TSMC and South Korea’s Samsung. These AI chips power Tesla’s autonomous driving systems, including its Full Self-Driving software. The company is currently using its fourth-generation chip.