Elon Musk’s $16.8 Billion Chip Factory Could Become the World’s Largest Building

Elon Musk is planning a massive semiconductor factory in Texas that could become the world's largest building as his companies move to secure their own supply of advanced chips for artificial intelligence, robotics, autonomous vehicles and future space-based computing.

SpaceX and Tesla will initially invest $16.8 billion in the Terafab project in Grimes County, Texas, Reuters reported, as Musk's companies prepare for a surge in demand for computing power.

Musk's companies have significant chip requirements of their own. Tesla needs advanced processors for its electric vehicles, autonomous-driving systems and Optimus humanoid robots, while SpaceX is pursuing plans for AI data centers in space.

The combined computing requirements of SpaceX and Tesla are expected to exceed 1 terawatt, underscoring the scale of the companies' future demand for computing power.

The Terafab website says the factory will have about 100 million square feet of manufacturing space, a scale that could make it the largest building in the world.

Fortune reported that the planned Terafab would be more than five times the size of the current world's largest building, based on the proposed 100-million-square-foot footprint.

The size is not the only unusual aspect of the project. According to the Terafab website, the facility will be vertically integrated, bringing multiple stages of semiconductor production together at the same site.

That includes manufacturing, packaging and testing. The project is also expected to produce logic and memory chips and use advanced packaging technology.

Reuters reported that Terafab will integrate the different stages of chip production, while SpaceX has also partnered with Intel on the project.

The strategy could give Musk's companies greater control over their semiconductor supply chain. Instead of relying entirely on outside manufacturers for chips and related processes, Tesla and SpaceX would have much more of the production process under their own control.

The chips produced at Terafab are expected to serve several of Musk's biggest projects.

The factory is also expected to create thousands of jobs in Texas. The first phase of Terafab is expected to create at least 3,000 high-paying jobs.

Texas officials have welcomed the investment as Musk's companies expand their presence in the state.

Texas Gov. Greg Abbott said the first phase of the Terafab project represents an investment of more than $16.8 billion and will create 3,000 new jobs. The figure, however, may not represent the final size of the project. The total investment could eventually reach about $119 billion if all planned phases are completed. That would make the project one of the largest private industrial investments ever proposed.

For now, the $16.8 billion commitment covers the initial phase. Further expansion would depend on the companies' requirements and how the project develops.

The project is closely connected to Musk's plans for space-based computing. The Terafab website says the facility is intended to help address the growing demand for AI computing and eventually support infrastructure beyond Earth.

Musk has previously discussed putting AI data centers in orbit, where solar power could provide energy for large computing systems. Chips produced at Terafab could potentially become part of the hardware needed for those systems.

The factory's environmental requirements will also be substantial because semiconductor manufacturing requires significant amounts of water and electricity.

According to the Terafab website, the facility plans to use water from a nearby reservoir rather than relying on local groundwater.

Construction is expected to begin this year, although turning a project of this scale into an operating semiconductor facility will be a major undertaking.

The factory will require specialized equipment, large amounts of electricity and water, a highly skilled workforce and a complex network of suppliers. Producing advanced chips at scale is also among the most technically demanding manufacturing processes in the world.