SpaceX Terafab Chip Factory in Texas Estimated to Cost Up to $119 Billion

A semiconductor manufacturing facility proposed by SpaceX in Grimes County, Texas, could cost up to $119 billion for the full buildout, according to county filings released this week. The first phase alone is estimated at $55 billion. The company is seeking a property tax abatement from the county, which has scheduled a public hearing for June 3 to consider the incentives.

The project, described as a multi-phase, next-generation, vertically integrated semiconductor manufacturing and advanced computing fabrication facility, would be jointly built to supply chips for several affiliated companies. Plans call for combining logic, memory and advanced packaging operations under one roof.

The facility is positioned outside Austin and would support production needs across artificial intelligence, space systems, autonomous vehicles and robotics. The company has stated that semiconductor supply constraints make the project necessary to meet internal demand.

One filing noted the eventual goal of manufacturing enough chips to provide 1 terawatt of power per year. Grimes County is only one of several locations under consideration, according to an update posted Tuesday.

Intel has committed to participate in the Terafab effort to help design, fabricate and package ultra-high-performance chips at scale. The arrangement marks the first major outside commitment for Intel's foundry business, which previously manufactured chips only for its own products.

During a quarterly earnings discussion last month, officials indicated that Tesla plans to use Intel's forthcoming 14A process at the facility. Intel's stock more than doubled in April following the announcement, recording its best month on record. The company is positioned to benefit from tightening manufacturing capacity at major foundries, where long-term reservations by large customers have limited availability for new orders.

A chip analyst at Creative Strategies described the initiative as part of a 15-year strategy to secure control over the supply chain. The analyst noted that priority access at leading foundries has become difficult to obtain. Officials have also cited the importance of mitigating geopolitical risks that could disrupt external chip supplies.

A smaller research fabrication line capable of producing a few thousand wafers per month is planned at an existing factory in Austin at an estimated cost of $3 billion. The scaled-up production phase would be managed initially by SpaceX. The company filed confidentially for an initial public offering in April.

The planned listing follows a merger with xAI that valued the combined entity at $1.75 trillion, with the offering expected in the coming months. The project was officially launched in March. One update indicated that xAI will be dissolved as a separate company and integrated under the SpaceX name as SpaceXAI.

The combined organization is also pursuing data centers in space to meet growing artificial intelligence computing requirements.

“We either build the Terafab or we don't have the chips, and we need the chips, so we build the Terafab.”

Officials said key chip suppliers could not produce sufficient hardware to satisfy projected needs for artificial intelligence servers, satellites, autonomous vehicles and related systems. The Terafab proposal reflects an effort to address those constraints through vertical integration.

Grimes County will hold the public hearing next month before deciding on the tax abatement request. The companies involved did not immediately respond to requests for additional comment.