Tesla May Build “Gigantic” Chip Fab to Meet AI and Robotics Ambitions, Says Elon Musk

Tesla CEO Elon Musk announced Thursday that the company may need to construct a “gigantic” semiconductor fabrication plant, or “Tesla terra fab,” to keep pace with its artificial intelligence and robotics initiatives.

“One of the things I’m trying to figure out is — how do we make enough chips?” Musk said at Tesla’s annual shareholders meeting.

Tesla currently relies on contract manufacturers such as Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung Electronics to produce its chip designs. Musk indicated the company is also exploring potential collaboration with U.S.-based Intel to supplement production.

“But even when we extrapolate the best-case scenario for chip output from our suppliers, it’s still not enough,” he said.

Meeting Surging Demand

Microchips, the brains of modern technology, power everything from smartphones to massive data centers. The ongoing AI boom has accelerated demand, creating a global shortage that has affected Tesla and other tech companies.

Musk said the proposed Tesla fab would begin with an initial capacity of 100,000 wafer starts per month, scaling eventually to 1 million wafer starts per month. For context, TSMC’s 2024 annual capacity reached 17 million wafers, or roughly 1.42 million wafer starts per month.

The new facility would allow Tesla to secure a steady supply of chips for its autonomous driving systems, AI software, and upcoming robotics projects.

Tesla’s Custom Chips

While Tesla does not yet manufacture chips in-house, it has been designing custom semiconductors for autonomous driving for several years. The company currently outsources production of its latest-generation “AI5” chip, which Musk described as more cost-efficient, power-optimized, and specifically tailored for Tesla’s AI-driven software.

Expanding Into Robotics

In addition to AI, Tesla is accelerating its robotics initiatives. Musk announced that the company will begin production of the Cybercab, an autonomous electric vehicle with no pedals or steering wheel, in April 2026.

“With AI and robotics, you can actually increase the global economy by a factor of 10, or maybe 100,” Musk said. “There’s not, like, an obvious limit.”

Implications

Building its own fab would mark a major step for Tesla, potentially reducing dependence on external suppliers and positioning the company as a direct competitor in the semiconductor space. The move underscores Musk’s vision of integrating AI and robotics not just into vehicles, but into the broader economy.

Industry analysts say such a facility could reshape Tesla’s supply chain, allowing faster development cycles for both automotive and robotics technologies while reducing exposure to global chip shortages.