Tesla Inc. is contemplating the construction of a semiconductor manufacturing facility as it navigates chip supply shortages that could hinder growth in artificial intelligence and autonomous technologies. During an earnings call, CEO Elon Musk outlined the critical choice facing the company. Tesla must either face increasingly stringent supply constraints or invest billions in its production facility, designated as "Terafab," designed to aid in the company's ambitious AI, autonomy, and robotics initiatives.
Musk highlighted challenges with current suppliers, stating that they are unable to meet Tesla’s high-volume needs. Coupled with geopolitical uncertainties, the need for in-house production becomes crucial for the electric vehicle and robotics sector.
This strategic shift comes as Tesla gears up for the roll-out of its AI5 chip, with initial silicon samples scheduled for late 2026 and mass production set for the following year. To support this initiative, Samsung’s Texas foundry will commence testing extreme ultraviolet lithography equipment in March 2026, which is crucial for the anticipated high-volume AI5 production scheduled for later that year.
Furthermore, Tesla is assessing a possible partnership with Intel for the Terafab facility while simultaneously investing $2 billion into xAI to enhance its AI hardware and software capabilities. Musk has stressed the existential importance of the AI5 chip, as he dedicates extensive time to its development, underscoring its pivotal role in the company's future.
Production of the Cybercab is expected to start in April 2026, initially utilizing AI4 chips before transitioning to the more powerful AI5. Future chip designs, including AI7, AI8, and AI9, are now expected to follow a nine-month cycle instead of the traditional year-long process, showcasing Tesla's commitment to rapid innovation in chip technology.