Elon Musk says Tesla may have to build its own massive semiconductor fabrication plant to meet the company’s rising chip needs — a move that underscores both Tesla’s growing dependence on artificial intelligence and the immense challenge of meeting the lofty milestones tied to Musk’s $1 trillion compensation plan.
Speaking at Tesla’s annual shareholders meeting on Thursday, Musk said the company’s existing chip supply from Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung Electronics would fall short of what’s needed to power Tesla’s expanding AI, robotics, and self-driving systems.
“One of the things I’m trying to figure out is — how do we make enough chips?” he told investors, adding that even with optimistic projections from suppliers, Tesla’s needs far exceed what’s available.
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Musk said he’s also considering working with U.S.-based Intel, but added, “Even when we extrapolate the best-case scenario for chip production from our suppliers, it’s still not enough. Tesla would probably need to build a gigantic chip fab. I can’t see any other way to get to the volume of chips that we’re looking for.”
If built, the so-called “Tesla terra fab” would mark one of the most ambitious expansions in the company’s history. Musk estimated an initial production capacity of 100,000 wafer starts per month, scaling up to as many as 1 million — roughly two-thirds of Taiwan’s TSMC’s current monthly output. Semiconductor fabrication plants of that size typically cost tens of billions of dollars and take years to complete, highlighting how formidable the task would be for Tesla to vertically integrate into chip manufacturing.
The move comes as global demand for semiconductors continues to surge amid an AI boom that has left even major players like Nvidia and AMD scrambling to meet orders. Microchips are essential to everything from electric vehicles and robotics to data centers and AI models, and shortages have repeatedly hampered Tesla’s production lines in recent years.
Tesla currently designs its own AI chips for autonomous driving — including the latest “AI5” processor, which Musk said will be cheaper, more power-efficient, and optimized for Tesla’s AI systems — but relies on external foundries to manufacture them. A Tesla-built fab would give the company more control over production but would also represent an expensive and risky venture at a time when Tesla faces pressure to deliver on its long-promised breakthroughs in self-driving and robotics.
On Thursday, Musk reaffirmed Tesla’s plans to launch its fully autonomous Cybercab — an electric vehicle with no pedals or steering wheel — in April. The project is central to his vision of turning Tesla into a global leader in AI-driven mobility and automation, which he has claimed could one day increase the global economy “by a factor of 10, or maybe 100.”
But the scale of Musk’s ambitions, including the idea of a Tesla-run chip plant, also underscores how difficult it will be for the company to meet the targets tied to his massive $1 trillion compensation package. That plan, approved on Thursday, links Musk’s pay to a series of market capitalization and performance milestones that depend on sustained growth across Tesla’s core businesses — electric vehicles, robotics, and now, artificial intelligence.
While Tesla remains profitable and influential, its path to those goals has become increasingly complex. The company faces stiff competition from both automakers and AI hardware firms, global regulatory scrutiny over its self-driving software, and persistent supply chain risks. The idea of building a “terra fab” highlights just how vertically Tesla may need to integrate — and how steep the climb could be — to deliver the performance needed for Musk’s trillion-dollar compensation to materialize.