Tesla is exploring the idea of building its own semiconductor fabrication plant to meet rising demand for chips that power its artificial intelligence and robotics ambitions.
Chief executive Elon Musk told investors at Tesla’s annual shareholders meeting on Thursday that the company is considering a “gigantic” facility, signalling its intention to take control of a crucial part of its technology supply chain as global chip demand accelerates.
The electric carmaker’s move comes as global competition for advanced chips intensifies.
Microchips, which act as the central processors in nearly every modern device, have become the backbone of innovation in autonomous driving, data processing, and robotics.
Tesla’s focus on AI systems and self-driving technology has left it dependent on external suppliers such as Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung Electronics for chip production.
Tesla’s path toward vertical integration
At the meeting, Musk noted that even the most optimistic production forecasts from Tesla’s current partners would not meet the company’s needs in the coming years.
He said Tesla may need to construct what he called a “Tesla terra fab” to achieve sufficient capacity.
The proposed fab would start with a capacity of around 100,000 wafer starts per month and could expand to 1 million wafer starts per month over time.
For context, TSMC’s annual wafer production capacity reached about 17 million in 2024, which translates to roughly 1.42 million wafer starts per month.
Tesla’s goal suggests it aims to compete at scale with some of the largest producers in the world, highlighting its ambition to integrate hardware manufacturing with its AI development.
Collaboration options and capacity challenge
Tesla has designed its own chips for autonomous driving for several years, but it continues to outsource their manufacturing.
The company’s most recent design, the AI5 chip, is expected to be cheaper and more power-efficient, optimised specifically for Tesla’s AI software.
The global semiconductor industry has experienced sustained pressure since the AI boom began.
Demand from technology giants building data centres and autonomous systems has outpaced supply, causing delays and cost increases.
By establishing its own fabrication facility, Tesla could gain tighter control over production timelines and costs, as well as secure a reliable source of chips tailored for its vehicles and robotics platforms.
Beyond vehicles, Tesla’s AI ambitions expand
Alongside the chip discussion, Musk confirmed that Tesla will begin producing its autonomous electric vehicle, the Cybercab, in April.
The vehicle will feature no pedals or steering wheel, operating entirely through AI-driven systems.
The development aligns with Tesla’s broader vision of transforming itself from a car manufacturer into a technology company focused on AI and robotics.
Musk has previously suggested that AI and robotics could expand the global economy significantly, and Thursday’s remarks reinforced Tesla’s commitment to that vision.
The company’s investment in custom chip technology, combined with its potential new fabrication plant, reflects a strategy to lead the next generation of automated mobility and machine intelligence.
If realised, Tesla’s semiconductor fab would not only reduce reliance on external chipmakers but could also reshape the company’s cost structure and accelerate innovation.
The move would mark a new chapter in Tesla’s evolution, from an electric vehicle pioneer to a vertically integrated AI hardware manufacturer.
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