Elon Musk says Tesla could build a gigantic chip fab and work with Intel to meet demand

"I can't see any other way to get to the volume of chips that we're looking for"

by · TechSpot

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What just happened? Fresh from being awarded his $1 trillion pay package by Tesla, Elon Musk has announced that the EV giant will probably have to build "a gigantic chip fab" to ensure its AI and robotic ambitions are fulfilled. Musk also said he was considering working with Intel to help meet chip demand.

Speaking at the annual shareholders meeting this week, Musk said, "One of the things I'm trying to figure out is – how do we make enough chips?"

"You know, maybe we'll, we'll do something with Intel," he added. "We haven't signed any deal, but it's probably worth having discussions with Intel."

Tesla currently relies on TSMC and Samsung as its contract chipmakers for the hardware powering its next-gen full-self-driving systems. The automaker signed a $16.5 billion deal with Samsung earlier this year for its future A16 chip to be produced at the Texas fab. It now seems Intel could be added as another chip-building partner.

A deal with Intel would give its foundry business a boost. Reports in August claimed its 18A process has been experiencing low yields and quality issues, but since then we've heard that it could begin manufacturing x86 chips for AMD, and reports suggest it has signed Microsoft as a major client for 18A.

Intel's share price jumped 2.2% following Musk's comments, while Tesla's shares were up 4% in after-hours trading.

Intel's year-to-date share price

Musk said this week that Tesla is finalizing the design of its A15 chip, which will apparently see a 40x improvement compared to the current A14. A small number of A15 units will be produced in 2026, with high-volume production only possible in 2027.

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A16, meanwhile, is predicted to double the performance metrics of its predecessor and go into volume production in 2028. Musk added that it would be inexpensive, power-efficient, and optimized for Tesla software. He claimed it would probably consume about a third of the power used by Nvidia's Blackwell chip, but cost 10% less to make.

"But even when we extrapolate the best-case scenario for chip production from our suppliers, it's still not enough," Musk warned. As such, Tesla will probably need to build a "gigantic" chip fab, which Musk described as a "Tesla terra fab."

"I can't see any other way to get to the volume of chips that we're looking for," he said. The CEO claimed the Tesla fab would have an initial capacity of 100,000 wafer starts per month and eventually scale to 1 million. For comparison, the world's largest contract chipmaker, TSMC, has a capacity of around 1.42 million per month.