Elon Musk-led SpaceX and Tesla are planning a semiconductor factory in Texas to meet combined computing demand expected to exceed 1 terawatt (TW), a scale the companies say is far beyond current global chip supply. Called Terafab, the facility will be built in Grimes County and combine chip manufacturing, advanced packaging and testing under one roof.
The factory is designed to produce chips tailored to the companies’ hardware, from Tesla’s Optimus robots and self-driving Cybercabs to SpaceX’s planned space-based data centers. The project is intended to help bridge the growing gap between the amount of computing the companies expect to need and the chips currently available worldwide.
The project follows Tesla’s move earlier this year to break ground on a research fabrication facility at the North Campus of Giga Texas. That facility is described as a precursor to the larger Terafab project.
Terafab is planned to span more than 100 million square feet of manufacturing space. If built as planned, it would bring logic chips, memory devices, packaging and testing together in a single manufacturing operation.
The planned massive facility is part of a broader effort by SpaceX and Tesla to build more of the computing hardware they depend on. Rather than relying entirely on external chip suppliers, the companies are planning a vertically integrated manufacturing operation capable of producing both logic and memory at very large scale.
Chips built for future demand
The vertically integrated setup is intended to shorten the path from chip development to deployment. SpaceX and Tesla say keeping manufacturing and packaging together could allow faster improvements to chip designs and speed up the deployment of new computing hardware.
The chips will target different types of workloads. Some will be optimized for edge computing and inference in Tesla hardware, while higher-power processors will be developed for SpaceX’s space-based data centers.
The scale of the project is also reflected in its expected investment. The initial phase is estimated to require about $16.8 billion from SpaceX and Tesla, with later expansion potentially pushing the total much higher.
The facility is expected to employ at least 3,000 people, with many hires coming from Grimes County and neighboring Brazos County. The companies say 60 percent to 80 percent of new hires at their other Texas sites have been local residents.
Texas takes chipmaking role
The project places another large semiconductor investment in Texas, where SpaceX already has operations at Starbase, Bastrop and McGregor. According to the companies, SpaceX’s Texas operations have generated more than 56,000 direct and indirect jobs and an estimated $28 billion in economic impact since 2024.
Grimes County was selected for its available land, infrastructure and access to major Texas markets. The project is also expected to create work for construction companies, suppliers and skilled trades while supporting longer-term technical workforce development.
The companies said the site will use water from Gibbons Creek Reservoir for industrial operations instead of local groundwater. It also plans to include on-site wastewater treatment, water reuse and conservation measures, along with systems for managing industrial chemicals and waste.