Tesla Inc. (TSLA, Financials), the electric-vehicle and artificial-intelligence company, is moving forward with a $16.8 billion semiconductor complex designed to reduce Elon Musk's dependence on outside chip suppliers.
Terafab will be built in Grimes County, Texas, as a joint project involving Tesla and SpaceX. The vertically integrated complex is expected to combine chip design, wafer production, memory, advanced packaging and testing in one location.
The companies aim to produce more than one terawatt of AI computing capacity annually. The chips would support Tesla vehicles and Optimus robots, along with SpaceX satellites and AI data centers.
Building the complex could create a significant opportunity for semiconductor-equipment suppliers. ASML, Applied Materials, Lam Research and KLA provide the lithography, deposition, etching and inspection systems needed to manufacture advanced chips.
ASML has already said its future capacity plans include expected demand from Terafab.
The project could give Musk's companies greater control over chip costs and supply, but building an advanced factory at this scale carries major execution risks.
Investors will watch equipment orders, construction milestones and whether Terafab can begin production on schedule.