Tesla CEO Elon Musk indicated that the company may need to establish a dedicated, large-scale semiconductor fabrication facility to meet the burgeoning demands of its artificial intelligence and robotics initiatives. The announcement, made at Tesla’s annual shareholders meeting on Thursday, highlights the escalating chip requirements for the electric vehicle giant’s expanding technological ambitions.
“One of the things I’m trying to figure out is — how do we make enough chips?” Musk stated, emphasizing the critical role of semiconductor supply in Tesla’s future growth.
Currently, Tesla relies on major contract chip manufacturers, including Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung Electronics, for the production of its custom-designed chips. Musk also mentioned the possibility of collaborating with U.S. chipmaker Intel to diversify its supply chain. The potential partnership with Intel could serve to mitigate geopolitical risks and bolster domestic manufacturing capabilities.
“But even when we extrapolate the best-case scenario for chip production from our suppliers, it’s still not enough,” he cautioned, suggesting that relying solely on external vendors may not suffice for Tesla’s ambitious goals.
Musk proposed the construction of a “gigantic” chip fabrication plant, which he playfully termed a “Tesla terra fab.” “I can’t see any other way to get to the volume of chips that we’re looking for.” This signals a significant shift towards vertical integration, potentially granting Tesla greater control over its chip supply and manufacturing processes.
Microchips are the core components powering virtually all modern technologies, from smartphones to advanced data centers. Demand for these essential components is surging, fueled by the rapid expansion of the AI sector. This surge is creating immense pressure on chipmakers globally.
Tech titans, including Tesla, are vying for increased supply from leading chip manufacturers like TSMC, which is recognized as the world’s largest and most technologically advanced chipmaker. The company is facing increasingly high demand from multiple sectors.
Musk projected that Tesla’s prospective fab would initially achieve a production capacity of 100,000 wafer starts per month, eventually scaling up to 1 million. Wafer starts per month is a crucial metric in the semiconductor industry, representing the number of new chips a fab can produce monthly.
For context, TSMC reported an annual wafer production capacity of 17 million in 2024, translating to approximately 1.42 million wafer starts per month. This comparison underscores the magnitude of Tesla’s intended capacity and its potential to disrupt the existing semiconductor landscape.
While Tesla does not currently manufacture its own microchips, the company has been designing custom chips for autonomous driving systems for several years, demonstrating its expertise in semiconductor architecture.
The company is currently outsourcing the production of its latest-generation “AI5” chip, which Musk claims will be more cost-effective, energy-efficient, and specifically optimized for Tesla’s AI software. This highlights Tesla’s strategy of leveraging external manufacturing expertise while retaining control over chip design and functionality.
Musk also announced at the meeting that Tesla plans to commence production of its Cybercab – an autonomous electric vehicle devoid of pedals or a steering wheel – in April. This announcement reaffirms Tesla’s ongoing commitment to self-driving technology and its potential to revolutionize transportation.
Musk’s pronouncements highlight Tesla’s strategic pivot toward AI and robotics – sectors that the CEO views as integral to the future of the global economy. This strategic shift is underscored by substantial investment in both research and development.
“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,” Musk asserted at the shareholder meeting. This ambitious vision underscores the potential for transformative economic growth driven by advancements in AI and robotics.
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