Tesla’s ambitious plan to build its own massive computer chip factory signals a major shift in how the electric car company plans to compete in the artificial intelligence race.
Tesla’s chip factory plan marks a pivotal shift in how the automaker aims to compete in the artificial intelligence race.
The company has proposed what it calls a “terra fab” that would start by producing 100,000 wafer starts per month. Eventually, Tesla intends to scale production to 1 million wafer starts monthly. This massive facility would rank among the world’s largest semiconductor manufacturing sites.
Tesla currently relies on partners like TSMC and Samsung to produce its AI chips. However, the company says even their maximum output isn’t enough. This supply shortage threatens Tesla’s plans to develop advanced AI and robotics technology. By building its own factory, Tesla hopes to control its chip supply and reduce dependence on other manufacturers. The Tech Buzz reports that this vertical integration strategy has become increasingly common among major technology companies seeking competitive advantages.
The scale of Tesla’s ambition is striking. TSMC, the world’s largest chip manufacturer, produces about 1.42 million wafer starts per month globally. Tesla’s planned facility alone would hit 70 percent of that total. This represents an extraordinary move for an automotive company trying to compete in artificial intelligence.
Tesla’s next-generation AI chip, called AI5, is scheduled to reach sample production in late 2026. High-volume manufacturing won’t begin until 2027. The AI5 chip will have nine times more memory than Tesla’s current hardware. It’ll also deliver 40 times better computing power for specific tasks.
But Tesla isn’t stopping there. The company plans AI6 chips for mid-2028, with double the performance of AI5. AI7 and AI8 chips are in the development pipeline, with Tesla targeting annual releases of new generations. Each step forward requires more manufacturing capacity.
Company leadership views the chip factory as essential for survival in the AI era. Without controlling its own chip production, Tesla can’t scale its robotics ambitions fast enough. Tesla’s approach mirrors its emphasis on energy efficiency in vehicle design, prioritizing optimized performance over relying on external suppliers. The factory represents a critical piece of Tesla’s long-term strategy. It’s a bold bet that vertical integration—controlling everything from design to manufacturing—is the key to winning the AI race.