Elon Musk forays into the chip manufacturing industry

Recently, American entrepreneur Elon Musk explicitly stated that his business empire will independently build and operate the Terafab chip factory, essentially ruling out the previously rumored possibility that TSMC will participate in its operation. Lip-Bu Tan, CEO of Intel, said that Intel will continue to cooperate with Musk to advance the Terafab project.

Located in Texas, the United States, the Terafab project is a key attempt by Musk to enter the chip manufacturing sector, aiming to meet the chip demand of his companies Tesla and SpaceX. Earlier, Musk said he was in talks with TSMC, but on October 7 local time, he posted on social platforms that the only matter the two sides are currently considering is that TSMC may rent part of the planned plant area, without taking on any operational role.

On October 1, reports claimed that TSMC is considering building a new large-scale chip park in Texas, which may include multiple fabs with a total investment of hundreds of billions of dollars. Previously, TSMC has pledged to invest about 265 billion US dollars in Arizona, United States. TSMC's major customers include NVIDIA, Apple, Tesla, etc.

It is reported that both Tesla and SpaceX under Musk design their own chips, but have no manufacturing capacity, and outsource chip production to wafer foundries such as TSMC and Samsung. In March this year, Musk announced the official launch of the Terafab project in collaboration with SpaceX, Tesla and xAI, planning to build an ultra-large-scale chip manufacturing facility with an annual production capacity target of 1 terawatt of computing power. This computing power is about 50 times the current global annual chip production capacity.

Musk said at the time that existing suppliers, including TSMC and Micron Technology, can no longer keep up with the growth rate of Tesla's demand in the fields of robotics, autonomous driving and AI. He plans to take the lead in building an advanced factory near the Giga Texas plant in Austin, integrating logic chips, memory chips and advanced packaging into the same facility, and equipping it with photomask manufacturing equipment to form a full-link closed loop of design, production and testing.

This is the largest single industrial project ever announced by Musk, and it is also the first time that the three companies SpaceX, Tesla and xAI have announced the same plan to the outside world as a joint entity.

In April this year, Intel officially joined the Terafab super chip project and became a development partner of the project. Subsequently, Musk further confirmed that Terafab plans to use Intel's next-generation 14A process to produce chips.

At TSMC's April performance communication meeting, when asked about his views on customers building their own Terafab chip factories and cooperating with other chip manufacturers, TSMC Chairman C.C. Wei responded that both Intel and Tesla are TSMC's customers and competitors. Intel is a strong competitor, but relevant business also requires technology, leadership, manufacturing capabilities, customer trust and service capabilities. "It takes 2-3 years to build a new chip factory and 1-2 years to ramp up production capacity, which is the basic rule of the industry. We are very confident in our technical position."

Regarding the feasibility of the Terafab project, analysts generally hold a reserved attitude, pointing out that semiconductor manufacturing involves tens of billions of dollars in capital investment, multi-year construction cycles and highly scarce professional talents. However, some views hold that the strategic significance of Terafab has gone far beyond the chip industry itself. It integrates computing power manufacturing and space expansion into the same industrial logic, directly providing industrial-level support for SpaceX's valuation narrative.

From the perspective of the development of Musk's business territory, the Terafab project was proposed at a critical period for SpaceX's IPO. On June 12 local time in the United States, SpaceX was officially listed on the NASDAQ at a pricing of 135 US dollars per share, with a basic fundraising scale as high as 750 billion US dollars, which broke the $294 billion fundraising record of Saudi Aramco in 2019 and became the largest IPO in global history; the company's valuation is about 1.77 trillion US dollars.

From the perspective of the chip industry, the sector currently has strong demand. Data released by the industry tracker Counterpoint Research in mid-June this year shows that driven by the growing investment in AI infrastructure, the global memory chip market size is expected to reach 1500 trillion won (about 975 billion US dollars) in 2026, an increase of about 3.2 times from 360 trillion won last year. This rapid growth is mainly attributed to the surge in market demand for server memory products, as technology companies, especially those in North America, are increasing their investment in AI infrastructure.

The research institution said that strong server memory demand has exacerbated the imbalance between supply and demand, driving up memory prices, and this upward trend is expected to continue into the first half of next year.

This article is from the WeChat official account "Jiemian News", written by Hou Ruining, and authorized for release by 36Kr.