Elon Musk said Saturday that Terafab, the chipmaking venture of his companies, is in discussions with Taiwan Semiconductor Manufacturing Co., confirming a report that the world's largest contract chipmaker is exploring a role in the project, Tom's Hardware reported. Musk described the talks as preliminary, and TSMC has not commented.

What Happened

Former Bloomberg columnist Tim Culpan reported Friday in his Culpium newsletter, citing unnamed sources, that TSMC is exploring ways to help Terafab run new semiconductor factories in Texas. The report said TSMC could use Terafab as the anchor customer for a future Texas fab, and that the foundry's rumored plans for a Texas campus are tied to that effort.

Early Saturday, Musk responded on X that it was just discussions but that something may come of it. He did not elaborate.

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Culpan outlined two possible structures. In the one he considers most likely, TSMC would own and operate the new plant, while SpaceX and Terafab would invest in it, commit to buying a guaranteed volume of chips, or both. In the other, SpaceX would hold majority control and TSMC would invest less while contributing process technology and operating expertise. Either way, the facility would make chips only for Tesla, SpaceX and xAI, according to the report.

Why It Matters

The first model resembles TSMC's JASM and ESMC joint ventures in Japan and Germany, where local partners supply capital and demand while TSMC provides the technology and runs the fabs, Tom's Hardware noted. The second would be new for TSMC, which has not previously operated a fab majority-owned by a customer.

The talks also put Intel's position in doubt. Intel joined Terafab in April and is currently slated to supply its 1.4-nanometer-class 14A process, and Musk had said that node was intended for the project. If TSMC operates the plant, it would bring its own manufacturing process, and Intel's 14A could be dropped, according to Tom's Hardware. That would cost Intel a high-profile outside customer for the node it has been counting on to revive its foundry business. Culpan wrote in a follow-up that cooperation between Intel and Terafab was not progressing.

Tom's Hardware raised another possible reason for Musk to court TSMC: Intel has a broad cross-patent license with TSMC, but Terafab does not, so producing chips on an Intel-developed node could expose Terafab to patent claims. TSMC is also a major supplier of advanced chip packaging, which Terafab would need.

Context

Terafab was unveiled in March as a joint effort of Tesla, SpaceX and xAI to secure advanced chip supply for vehicles, humanoid robots, AI data centers and space hardware. Musk has argued that existing foundries cannot produce enough chips for his companies' plans. Tesla North places the planned site in Grimes County, Texas.

TSMC is separately weighing additional investment in Texas on top of its multiyear Arizona expansion, Reuters reported Sept. 30, though that report said no final decision had been made.

What to Watch

The next signal will be whether TSMC acknowledges the talks, possibly around its quarterly earnings call this month. Intel's response, and whether Terafab reaffirms 14A, will show whether the two foundry options can coexist. Any TSMC Texas announcement that names an anchor customer would indicate which ownership model, if either, the companies have chosen.