5 Key Questions Regarding Elon Musk’s Terafab Collaboration with Intel

Intel CEO Lip-Bu Tan announced on Tuesday that the semiconductor giant will “collaborate closely” with Elon Musk to aid the billionaire’s Terafab project, an ambitious initiative for chip development and fabrication set to be co-developed by SpaceX and Tesla. A photo shared on Intel’s official X account features the two leaders shaking hands last weekend in front of a prominent Intel sign. Musk’s proposed 1-terawatt, ultra-high-performance chip manufacturing facility, which could span several locations, is expected to cost billions of dollars.

“Terafab signifies a transformative shift in how silicon logic, memory, and packaging will be developed in the future,” Tan stated in a social media update. “Intel is excited to partner and work closely with Elon on this critically strategic project.”

However, the specifics of how Tan and Musk intend to bring such a bold undertaking to fruition remain uncertain. Musk has been emphasizing the necessity of establishing a Terafab for months, viewing it as essential for producing the large quantity of chips needed for his companies’ vehicles, robots, and data centers. Some analysts in the chip industry express significant skepticism about Musk’s ability to successfully manage such a complex and capital-heavy project.

In the meantime, Intel has been striving for a strong comeback following years of stagnation, with part of its strategy focused on offering its advanced semiconductor manufacturing capabilities to tech firms eager for chips to fuel the AI surge. As reported by WIRED, Intel’s capacity to attract these external clients is vital to its success. Musk could represent a substantial potential customer.

Musk has not responded to WIRED’s inquiries regarding the partnership. An Intel spokesperson directed WIRED to the company’s social media announcements about the collaboration and refrained from further comments. Currently, here are five critical questions about how Intel’s involvement might impact the success of Terafab.

How Significant Is The “Deal”?

It’s difficult to determine. Neither Intel nor Tesla has submitted paperwork to the US Securities and Exchange Commission, which is usually necessary when a new partnership or agreement significantly alters the capital investment or manufacturing capabilities of a public entity.

For instance, when chipmaker AMD and Meta disclosed a “multi-year, multi-generation” collaboration in February to implement up to 6 gigawatts of AMD GPUs for Meta’s AI services, AMD made the deal known in an SEC filing. As of this publication, there have been no such filings from Intel or Tesla. This suggests that the agreement between Tan and Musk might currently lean more toward handshakes and good intentions. As one industry insider put it, “It grabs headlines for a few days, doesn’t it?”

What Is Intel Really Contributing?

Intel’s public remarks about the collaboration with Musk are quite ambiguous. The company indicated that its “capability to design, fabricate, and package ultra-high-performance chips at scale” will facilitate Terafab’s objective of generating 1 terawatt of computing power annually to support “future advancements in AI and robotics.”

Pat Moorhead, a veteran chip industry analyst and founder of Moor Insights & Strategy, anticipates that Musk will initially rely on Intel for its advanced packaging capabilities. He points out that Tesla “doesn’t require [chip] design engineering; they are already quite proficient in that area.” Moorhead suggests that Musk might also consider licensing Intel’s chip architecture for Terafab to build upon and personalize.

Having Intel handle advanced packaging seems a prudent initial approach, as it allows all parties involved to gauge their collaboration without aggravating TSMC, which operates the world’s largest fabrication plants, Moorhead observes. “If you start with packaging, you’re less likely to upset TSMC than if you sourced wafers from Intel,” he states. (Tesla already collaborates with TSMC and Samsung for chip manufacturing.)