Elon Musk has announced plans to build a large-scale semiconductor manufacturing complex in Austin, Texas, in a move aimed at addressing growing global shortages of advanced chips.

The project, known as “Terafab,” will consist of two fabrication plants covering approximately 100 million square feet. The facility is designed to produce chips for Tesla’s electric vehicles and humanoid robots, as well as high-performance processors for space applications linked to SpaceX.

According to Musk, the ambition is to manufacture up to one trillion watts of computing power annually — a scale intended to support the rapid expansion of artificial intelligence and advanced automation technologies.

The initiative comes in response to what Musk describes as a significant gap between current chip production capacity and future demand. Global output of AI chips is estimated at around 20 gigawatts per year, representing only a fraction of the capacity required for next-generation technologies.

While existing suppliers such as Samsung, TSMC and Micron are expanding production, Musk indicated that their growth pace is insufficient to meet demand, prompting the decision to vertically integrate manufacturing capabilities.

The Terafab facility will integrate the full semiconductor production process under one roof, including design, lithography, manufacturing, testing and packaging. This approach is expected to accelerate innovation cycles and improve efficiency.

Approximately 20% of production will be dedicated to terrestrial applications, including Tesla’s Full Self-Driving systems and Optimus robots. The remaining capacity will focus on space-based applications, including data infrastructure supporting orbital systems.

SpaceX has already filed plans with the Federal Communications Commission for an “Orbital Data Center System,” which could involve a constellation of up to one million satellites designed to harness solar energy for AI processing.

The project is expected to be a joint venture involving SpaceX, Tesla and xAI, with total investment estimates reaching around $25 billion.

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