Tesla CEO Elon Musk says the company may have no choice but to build an enormous chip manufacturing facility—what he called a “Terafab”—as Tesla’s need for advanced semiconductors accelerates far beyond what global suppliers can provide.
The comments, made during the company’s annual shareholder meeting on Thursday, suggest that Tesla intends to bring chip fabrication in-house to support its rapidly expanding AI and robotics roadmap.
Musk acknowledged that while Tesla currently works with industry titans TSMC and Samsung, even the most optimistic projections from these partners fall short of Tesla’s long-term needs.
“One of the things I’m trying to figure out is — how do we make enough chips?” he told shareholders, adding that “even when we extrapolate the best-case scenario for chip production from our suppliers, it’s still not enough.”
According to Musk, Tesla would eventually aim for a fabrication capacity starting at roughly 100,000 wafer starts per month, eventually scaling to as many as one million. For context, TSMC produced about 1.42 million wafer starts per month in 2024 across its global network.
A Tesla-run “Terafab” would therefore place the automaker among the world’s major semiconductor producers—an unprecedented shift for a company that has long outsourced chip manufacturing.
The push comes as Tesla doubles down on its own silicon development. The automaker’s next-generation AI5 chip, seen above, is designed to run its autonomous driving stack and future robotics systems, and is currently manufactured externally. Musk says AI5 will begin low-volume production in 2026, with mass production expected the following year. A sixth-generation chip, AI6, is already planned and projected to deliver double the performance of AI5 once it enters production in mid-2028.
Musk also emphasized the efficiency gains Tesla expects from its new chips, saying they would be “inexpensive, highly efficient,” and cost roughly one-tenth the price of Nvidia’s Blackwell platform while using only one-third the power. This cost structure underscores why Tesla believes vertically integrating chip manufacturing may be essential to meeting future demand.
A surprising name also entered the conversation. Musk said Tesla is exploring collaboration with U.S. chipmaker Intel, though nothing has been finalized. “We might do something with Intel,” he noted, calling the discussions “worth exploring.”
Musk’s comments come as Tesla prepares to launch its fully autonomous Cybercab in April, a vehicle that relies heavily on AI compute power. However, with the AI chip production timelines revealed by Musk earlier this week, the Cybercab will debut with the current AI4 hardware.
