Tesla Plans Massive Chip Manufacturing Plant: Intel Partnership on the Agenda

Metaverse Planet November 7, 2025Last Updated: November 7, 2025

3 minutes read

Elon Musk is considering building a gigantic factory in the US, to be named Tesla Terra-Fab, to increase Tesla’s currently insufficient capacity for Artificial Intelligence (AI) chip production, and is evaluating a potential collaboration with Intel.

Tesla CEO Elon Musk announced that the company plans to build a “gigantic chip factory” to support its AI goals, and in this process, he is considering holding discussions about a potential partnership with Intel. Musk made this statement at Tesla’s annual shareholder meeting, saying, “Maybe we’ll do something with Intel. We haven’t signed any deals yet, but it’s worth having discussions with Intel.“

This announcement is also seen as a significant opportunity for Intel, which has recently fallen behind in the AI chip race. The US government’s recent acquisition of a 10% stake in the company increased Intel’s need to find external customers for its new manufacturing technology. Following Musk’s remarks, Intel shares rose by 4% after the market closed.

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🤖 AI5, AI6, and New Chips are on the Way

Musk also shared the production plans for Tesla’s fifth-generation chip, “AI5,” during the meeting. Stating that the company will use these new chips in its autonomous driving systems, Musk said AI5 will support Tesla’s “Full Self-Driving” software. Tesla is currently using the AI4 chip.

Musk announced that small-scale production of AI5 is planned to begin in 2026, with high-volume production starting in 2027. The subsequent AI6 chip will be produced in the same manufacturing facilities, is expected to provide approximately double the performance increase, and will enter high-volume production in mid-2028.

According to Musk, Tesla’s new chip will be produced at one-third the power consumption and 10% of the cost compared to Nvidia’s flagship Blackwell chip. It will also be cheaper, more efficient, and specifically optimized for Tesla’s own software.

🏭 Both Samsung and TSMC Will Produce

Meanwhile, the new AI5 chips will be manufactured at TSMC’s facilities in Taiwan and Arizona, and Samsung’s factories in South Korea and Texas. These facilities will also transition to AI6 production later on. According to the announcements made at the event, the AI5 chip will offer a 5-fold increase in block quantization, a 9-fold increase in memory capacity, a 10-fold increase in processing power, and a total general performance improvement of 50-fold compared to the current chip.

🏗️ Tesla Will Build Its Own Chip Factory

Stating that they could not obtain enough chips even in the most optimistic production scenario, Musk said, “That’s why I think we may have to do a Tesla Terra-Fab. It’s like a Giga, but way bigger. I can’t see any other way to get to the volume of chips that we’re looking for. So I think we’re probably going to have to build a gigantic chip fab,” he stated. Musk did not provide details for the Terra facility he mentioned but said it will be a factory capable of producing 100,000 wafers per month. In the long term, the plan is for 10 modules, meaning 1 million wafers per month.

For comparison, TSMC’s annual production capacity as of 2024 is 17 million wafers, equivalent to approximately 1.42 million wafers per month. Tesla wants to use the chips not only in its cars but also in its humanoid robots called Optimus. Musk’s statements emphasize Tesla’s transition from an electric vehicle manufacturer to an AI and robotics company.onth. The long-term plan is for 10 modules, meaning 1 million wafers per month. For comparison, TSMC’s annual production capacity as of 2024 is 17 million wafers, which is approximately 1.42 million wafers per month. Tesla intends to use the chips not only in its automobiles but also in its Optimus humanoid robots. Musk’s statements emphasize Tesla’s transition process from an electric vehicle manufacturer to an artificial intelligence and robotics company.