TSMC Demands Operational Control Over Musk’s Terafab Chip Project
TSMC insists on managing any collaboration with Musk's joint chipmaking venture in Texas.
1Operational Control Dispute
TSMC chairman C.C. Wei stated during the third-quarter earnings call that the company is open to collaborating on Elon Musk’s Terafab project. However, he emphasized that TSMC must retain operational control of any facility involved. This requirement directly contradicts Musk’s stated preference for Tesla and SpaceX to manage their own manufacturing plants.
2Terafab Project Scope
Terafab is a joint venture involving Tesla, SpaceX, and xAI, aimed at producing chips for robots, vehicles, and data centers. The project’s first phase involves a $16.8 billion facility in Grimes County, Texas, which broke ground in August. The initiative seeks to secure a dedicated supply chain for Musk’s various technology ventures.
3Conflicting Strategic Visions
While TSMC insists on running the fab, Musk previously indicated on X that he prefers to operate the plant independently. He suggested that TSMC could potentially sublease a portion of the facility if desired, but ruled out a broader operational role for the Taiwanese chipmaker. No formal agreement has been reached yet.
4Intel’s Continued Involvement
Despite the ongoing negotiations between TSMC and Musk, Intel remains an active participant in the Terafab project. Lip-Bu Tan confirmed that Intel intends to supply its 14A manufacturing process to the venture. This multi-vendor approach highlights the complexity of Musk’s strategy to build a self-sufficient chip supply chain in Texas.
5TSMC’s Texas Expansion
TSMC is currently evaluating a potential new cluster of facilities in Texas to meet demand from large US customers. The company has dispatched teams to scout locations beyond its existing Arizona base. These discussions are separate from the Terafab talks but reflect TSMC's broader strategy to increase its domestic manufacturing footprint.
6Financial Performance Context
TSMC reported strong third-quarter results with revenue reaching $46.7 billion, representing a 41% increase compared to the previous year. The company projects fourth-quarter revenue to fall between $52.3 billion and $54.3 billion. This robust financial position provides the company with significant leverage when negotiating complex joint venture structures with major clients.
7Comparison to Existing Models
Analysts have questioned whether a potential Terafab deal would mirror TSMC’s joint ventures in Japan and Germany. In those specific international cases, TSMC maintains full operational control over the facilities. Wei’s insistence on this model suggests that TSMC is unwilling to deviate from its proven manufacturing and management standards for new partnerships.
8Future Negotiation Outlook
TSMC has not provided a specific timeline for concluding discussions regarding the Terafab project. Management stated that further details will be shared only once both parties reach a firm conclusion. The outcome will determine whether Musk’s ambitious chipmaking project integrates with TSMC’s global manufacturing network or proceeds as an independent entity.
Original article: The Next Web — TSMC Demands Operational Control Over Musk’s Terafab Chip Project