Intel to partner on Elon Musk’s Terafab semiconductor factory

Intel is partnering with SpaceX and Tesla to build a new U.S. semiconductor fabrication plant—or fab—in Texas. The project, named Terafab, is a semiconductor factory project, though the specific scope of Intel’s contributions remains unclear. Elon Musk, who leads both SpaceX and Tesla, announced a team-up between the two companies in March to develop chips for artificial intelligence compute, satellites, and SpaceX’s mooted space data center, as well as to support the possibility of autonomous Tesla vehicles and robots.

In a corporate post on X, Intel stated, “Our ability to design, fabricate, and package ultra-high-performance chips at scale will help accelerate Terafab’s aim to produce 1 TW/year of compute to power future advances in AI and robotics”. Beyond this statement, Intel has not shared additional details regarding its exact role or the timeline for the Texas facility. Intel declined to comment further on the partnership, while SpaceX did not respond to queries regarding the project.

Building a chip fab is a massive undertaking, typically requiring years of time and more than $20 billion to create a facility with a clean room for machines to carve silicon. Because the Terafab project previously lacked clear execution experience in the semiconductor sector, Intel’s participation provides a necessary foundry partner with manufacturing expertise. This expertise is critical for executing such a complex infrastructure project.

The partnership comes as Intel attempts to expand its foundry business—a business model where a company manufactures chips designed by other firms—to compete with rivals like Nvidia and AMD. These rivals have adopted a “fabless” model, where chip designers outsource their manufacturing. Intel has been searching for anchor customers to support its foundry business, and this deal provides two partners. Markets reacted positively to the announcement. Intel’s stock rose more than 3% on the news, trading at $52.28, which was about 2.9% higher than its opening price at 2 p.m. ET.

Why it matters

Intel’s participation provides a necessary foundry partner for the Terafab project, while simultaneously marking a significant move for Intel as it seeks anchor customers for its foundry business.