Intel announces joining Musk's Terafab project, partnering with SpaceX, xAI, and Tesla to build a 1-terawatt AI computing power plant

On April 7th, Intel officially announced on Musk's social media platform X (formerly Twitter) that it has joined the Terafab ultra large chip manufacturing project initiated by Musk, working together with SpaceX, xAI, and Tesla to build an AI chip manufacturing base with an annual output of 1 terawatt (1TW) of computing power.

Terafab Project: The Worlds Largest AI Chip Factory

The Terafab project was officially launched by Elon Musk on March 30, with a total planned investment of $20 to $25 billion. The first phase will be implemented in Austin, Texas, USA. Jointly driven by Tesla, SpaceX, and xAI, the project aims to achieve an annual computing power output exceeding 1 terawatt—equivalent to approximately 2% of the combined production capacity of all global chip manufacturers—and represents 50 times the current annual AI computing power output worldwide (around 20 gigawatts).

According to the plan, 80% of the chips produced by Terafab will be deployed in space (for SpaceXs interstellar AI satellite data centers and radiation-resistant chips), while 20% will be used for ground applications, including Teslas FSD autonomous driving system, Cybercab self-driving taxis, and Optimus humanoid robots. Elon Musk stated that the project will produce specialized chips for Teslas humanoid robots.

The Key Breakthrough of Intels Foundry Strategy

In its announcement, Intel stated that the companys extensive capabilities in designing, manufacturing, and packaging ultra-high-performance chips will enable Terafab to achieve its annual target of 1TW computing power, providing robust computational support for the future development of AI and robotics technologies.

This collaboration holds significant strategic importance for Intel. The semiconductor giant has been actively seeking external foundry clients over the years, encouraging third-party manufacturers to utilize its facilities for chip production. However, no substantive agreements have been announced to date. The partnership with Elon Musks companies could serve as a pivotal breakthrough in expanding Intels wafer foundry operations.

Following the announcement, Intels stock price surged approximately 2.5% to $52.05.

Strategic Considerations Behind Intels Entry into the Market

1. Breaking the deadlock in foundry business: Intel has been vigorously promoting its IDM 2.0 strategy in recent years, actively transitioning into wafer foundry services. However, the strategy has progressed slowly, with no publicly announced foundry contracts implemented to date. Elon Musks companies span multiple high-computational-demand sectors including electric vehicles, aerospace, and artificial intelligence, creating massive demand for customized chips. If the Terafab project proceeds as scheduled, Intel could leverage this to establish its first benchmark case in foundry services, overcoming the long-standing challenge of lacking external clients.

2. Demonstrating advanced process capabilities The Terafab project targets 2nm advanced manufacturing processes, posing a significant challenge to Intels production capacity. Through collaboration with Elon Musk, Intel can prove to the market that its manufacturing capabilities are sufficient to meet the chip demands of top-tier tech companies, thereby restoring its reputation in the advanced process sector that has lagged behind TSMC and Samsung.

3. Securing Long-Term Orders The demand for AI chips from three companies—Tesla, SpaceX, and xAI—is characterized by long-term stability and certainty. Teslas Optimus humanoid robot is projected to reach annual production volumes of 1 billion to 10 billion units; SpaceX plans to launch 1 million AI data center satellites; while xAI requires massive computing power to support large model training. These demands will provide Intel with a reliable source of orders.

Details of collaboration remain to be clarified

Despite Intels high-profile announcement of its entry into the market, the details of this announcement remain somewhat vague. Intel did not disclose its specific role or positioning within the Terafab project, nor did both parties disclose any financial terms or contract terms.

In fact, this collaboration had been foreshadowed earlier. At Teslas annual shareholder meeting last month, Elon Musk publicly stated that he might partner with Intel to build a semiconductor factory exclusively serving its subsidiaries, though he clarified that no formal agreements had been signed at the time. Intels official announcement of entering the project now marks a transition from public statements to concrete progress in their partnership.

Industry Landscape May Be Reshaped

Intels participation in the Terafab project signals potential major shifts in the global semiconductor industry landscape. On one hand, it marks a significant milestone in Intels foundry strategy; on the other hand, it reflects Elon Musks dissatisfaction with the existing foundry model (Fabless+Foundry). Previously, Musk had repeatedly expressed his intention to acquire all chip production capabilities from TSMC and Samsung, but noted that their capacity for expansion has inherent limits.

By introducing Intel, the Terafab project has not only acquired potential chip manufacturing capabilities but also gained political significance in domestic chip production within the United States. Against the backdrop of increasingly pronounced regionalization and localization trends in the global semiconductor supply chain, this collaboration may accelerate the process of achieving self-reliance and technological control in advanced chip manufacturing processes in the U.S.