Invest4 publishers2 min readPublished
Musk's Terafab courts TSMC for Texas chipmaking months after naming Intel its first partner
Intel shares fell 4% after Elon Musk confirmed on October 3 that Terafab is in early talks with TSMC on chipmaking in Texas. There is no agreement yet, so the drop prices the chance that Intel ends up sharing Terafab's work with a second foundry.
The Investor · Invest desk
Drafted by a language model from the sources cited here and checked against its claim ledger before publication. How we use AISend a correction
What happened
- Intel was named Terafab's first designated manufacturing partner in April 2026, and its contribution is its advanced 14A process technology.
- Digitimes reported that Musk's confirmation came after a report that TSMC is looking at running new chip factories in Texas.
- Terafab is a joint effort by Tesla, SpaceX and xAI to build a vertically integrated semiconductor fabrication complex.
- The only facility under way so far is a prototype at Tesla's Giga Texas site in Austin.
Compiled by The InvestorSomething wrong?How this is made
Why it matters
- decision TSMC has to choose between control and capital. In Cryptobriefing's assessment, running the plant gives it more control, while supplying expertise keeps its balance sheet lighter and its influence smaller.
- exposure What Intel gets from its Terafab partnership now depends on an operating model that Terafab and TSMC are negotiating with each other.
- precedent Terafab opened talks with a second foundry about six months after naming its first, so its partner designations should be treated as non-exclusive until a contract says otherwise.
Two deal structures are under discussion, and they affect Intel differently. In the first, TSMC would run the Texas facility itself and Terafab would be its anchor customer [5]. In the second, TSMC would contribute manufacturing expertise while other investors hold majority ownership [6].
The first structure is the costly one for Intel. A TSMC-run plant anchored by Terafab would give the Musk companies a second source for chips Intel was named to help make with 14A [5][3]. I'd expect the second structure to leave more room for the partner already in place. The third outcome is no deal at all, in which case Intel holders paid for a conversation [2].
I think the market priced a real risk. A partner targeting about 1 terawatt a year of output [12] is worth less to Intel once TSMC is also in the conversation. The counter-case comes from the same reporting. Cryptobriefing, which says the Musk companies appear to be shopping for a second foundry [16], also notes that nothing in Musk's comments says Intel is being replaced [14]. On that reading, the drop priced in a replacement Musk has not described. My view is wrong if the talks end with TSMC as a minority adviser and Intel's 14A still in Terafab's plans. In that case Intel keeps the work it was named for in April, and TSMC sits in an advisory role.
The scale figures explain why two foundries would want the work. The first phase in Grimes County carries about $16.8 billion of investment and at least 3,000 jobs [10], which puts capital at no more than about $5.6 million per job [1]. The footprint could eventually exceed 100 million square feet [11], and the chips are meant for Optimus robots, Cybercab vehicles, SpaceX data centers and xAI [9]. The reporting does not say whether a TSMC-run facility would be that first phase or a separate plant, or who the majority investors in the second structure would be.
What to watch
- Who the majority investors would be if TSMC takes the expertise-only route, and how much of the plant they would fund.
- Whether the reported TSMC interest in running new Texas factories turns into a named site and a start date.
- Spending on the Grimes County first phase moving beyond the Austin prototype.