Musk Turns to Korean Suppliers for Terafab After Reported Chip Plant Rejections

A $16.8 Billion Chip Project Builds Its Supplier Network

Elon Musk's Terafab semiconductor project is negotiating with about 10 South Korean suppliers as Tesla and SpaceX assemble a manufacturing network for a planned Texas complex with an initial investment estimated at $16.8 billion. HPSP has agreed to supply one research system, while other companies are discussing chemicals, valves, cleaning services and equipment for testing chips.

The outreach follows reported attempts to acquire manufacturing facilities from Intel, Taiwan Semiconductor Manufacturing Co. and Micron. An unnamed official at an overseas equipment supplier said Musk turned toward partnerships after those approaches were rejected. The account gives no proposed purchase prices or dates for the approaches.

Musk has since outlined an ambitious production schedule. During SpaceX's October 20, 2026, conference call, he said Terafab aims to produce a functioning test chip in May or June 2027 and reach volume production in the third or fourth quarter of 2028. He also warned that those dates carry considerable uncertainty.

Tesla, SpaceX and xAI announced in March that they would jointly pursue Terafab. The companies have not disclosed a separate corporate entity or ownership structure. The first phase is planned for Grimes County, Texas, with roughly 3,000 jobs expected, while Tesla is building a research facility at its Gigafactory Texas campus in Austin.

Terafab's immediate task is to turn supplier discussions into an operating production system. Its proposed scope brings chip manufacturing, packaging and testing together, serving Tesla's driving systems and robots alongside SpaceX satellites and planned data centers in space. The Korean negotiations show how much of that work involves the pipes, chemicals and environmental systems surrounding the machines that make chips.

From Buying Factories to Working With Chipmakers

Intel illustrates how a rejected acquisition approach can give way to a different relationship. The company said in April that it would join Terafab to help accelerate the project. The proposed technical contribution includes Intel's 14A manufacturing process, although the companies have not explained how their collaboration will operate.

A manufacturing process is the sequence of steps used to build microscopic electronic circuits on a silicon wafer. Securing a process partner can help a new factory move beyond purchasing machinery toward learning how to use that machinery consistently.

TSMC's discussions with Musk have exposed a disagreement about operational control. TSMC chairman and chief executive C.C. Wei said the company is open to collaboration, but any plant it participates in operating in Texas must be run by TSMC. He also said teams had visited Texas to evaluate possible expansion.

Musk, by contrast, has said Tesla and its partners intend to build and operate Terafab themselves. Descriptions of TSMC's possible role have varied between subcontracting and subleasing part of the complex. The central issue is who would run the manufacturing operation.

For chip production, that decision reaches directly into daily work: who approves process changes, sets quality requirements and takes responsibility when too many chips fail testing. TSMC's interest in Texas also comes amid heavy demand for its existing capacity.

Wei described that demand during TSMC's earnings conference:

The demand, actually, is still far above our capability today to supply, and we're working very hard to narrow the gap.

What Korean Suppliers Are Being Asked to Provide

Tesla and SpaceX representatives visited about 10 Korean company booths on October 13, the opening day of SEMICON West 2026 in San Francisco. The exhibition ran through October 15. Discussions with several companies had already been underway for months.

The visitors included materials procurement staff and specialists in gas delivery systems. Their meetings covered ENF Technology, Dongjin Semichem, Asflow, BMT, GnG Intech, Unisem, MiCo and Hanmi Semiconductor, among others.

More than half of the roughly 10 suppliers involved have signed nondisclosure agreements, which allow companies to share confidential technical and commercial information. The talks range from initial product introductions to exchanges of samples and research designs.

ENF Technology was asked to introduce manufacturing materials it could supply. Asflow discussed piping components and valves, while BMT has been negotiating over valves and other parts that control the movement of fluids. Three Tesla facilities staff visited GnG Intech to ask about wastewater recycling equipment.

Dongjin Semichem had been talking with Tesla for two to three months, examining possible supplies associated with its Texas thinner production plant. Phosphoric acid was also under discussion. These chemicals perform specific jobs in manufacturing, including preparing, cleaning or removing material from wafer surfaces.

Unisem signed a confidentiality agreement covering environmental equipment, including scrubbers that treat gases released during production. KoMiCo, MiCo's cleaning subsidiary, signed a three party agreement with Tesla and SpaceX to discuss cleaning services for the Texas research line.

One Research Tool Is Committed, Other Equipment Is Under Discussion

HPSP's agreement covers one high pressure hydrogen annealing system for Terafab's research line. Annealing treats semiconductor structures to improve their electrical properties. This is the only specifically identified equipment supply commitment in the supplier accounts.

Hanmi Semiconductor is discussing thermocompression bonders, which use heat and pressure to connect semiconductor components. A sales executive visited at SpaceX's request to introduce the equipment, and the companies subsequently exchanged questions.

ISC has progressed to exchanging samples and research design information for silicone rubber sockets used in chip testing. These sockets provide temporary electrical connections so manufacturers can check whether a chip works before it enters a finished product.

Existing business relationships are helping Terafab find suppliers. BMT already supplies piping components to SpaceX, KoMiCo provides cleaning services to Tesla's automotive business, and Hanmi supplies equipment used to manufacture materials for SpaceX satellites.

Former Intel staff overseeing Terafab have also brought connections to suppliers including ENF Technology, Asflow, ISC and HPSP. Procurement personnel from GlobalFoundries have contributed contacts such as Dongjin Semichem. The emerging network therefore draws on both Musk's existing businesses and the experience of people recruited from established chipmakers.

Why Korea Fits the Procurement Strategy

A Korean equipment company official said Tesla and SpaceX are avoiding Chinese suppliers for Terafab and view Japanese alternatives as expensive. Another industry official said the project is seeking prices below those offered by Chinese suppliers. Together, those accounts describe a demanding combination: fewer eligible vendors and strong pressure on cost.

Korean manufacturers can supply several parts of the production chain, from fluid handling to chemicals and testing components. Terafab is also approaching companies elsewhere. Fujifilm is holding regular meetings about polishing slurries, photoresists, etchants and cleaning chemicals. These materials help flatten wafer surfaces, define circuit patterns and remove unwanted layers.

Lam Research and Applied Materials are also involved in discussions and reportedly have dedicated Terafab teams. Fujifilm has said the eventual products supplied will depend on which manufacturing technologies the project selects.

Suppliers describe unusually rapid communication. An unnamed official at a Korean supplier said inquiries received replies within 30 minutes to an hour, even during early morning hours in the United States. Engineers were said to have direct authority to make decisions.

Fast replies can shorten negotiations and resolve equipment questions sooner. The next stages still involve installing tools, connecting utilities, testing processes and producing chips reliably. Those tasks will determine how quickly purchasing decisions become usable capacity.

The Production Calendar Runs From 2027 to 2036

Musk's October update sets an earlier goal than industry expectations that an initial factory processing 100,000 wafers a month would be completed before 2030. The longer ambition is one million wafers a month within 10 years.

The milestones describe different stages of development:

• March 2026: Tesla, SpaceX and xAI announced their joint pursuit of Terafab.
• April 2026: Intel said it would join the project.
• October 2026: SpaceX reportedly signed a Texas tax abatement agreement and construction began; supplier meetings followed at SEMICON West.
• May or June 2027: Terafab aims to have its first functioning SRAM test chip at the Austin research facility.
• Third or fourth quarter of 2028: Musk hopes to achieve volume production.
• Before 2030: Industry expectations place completion of the initial facility at about 100,000 wafers a month.
• Through 2036: Four potential construction phases could extend the complex, subject to later investment decisions.

Musk, the chief executive of Tesla and SpaceX, qualified the production schedule during the October 20 call:

I put big error bars on this because we don't know if we will actually achieve this or not.

The first planned test device uses static random access memory, or SRAM, a type of memory commonly built into processors. Manufacturers use SRAM circuits to check and refine a new process before attempting more complex products.

The Factory Also Needs Water, Power and Waste Treatment

Public records described in construction reporting outline four potential phases and possible spending of $119 billion if all proceed. Each later expansion would require a separate decision. The initial $16.8 billion investment is therefore the first portion of a much larger proposed development.

The Grimes County campus has been described as covering 100 million square feet. Plans identify a central utility plant, electrical substations, water treatment and recycling systems, industrial wastewater treatment, power generation on site, cooling equipment and infrastructure for compressed gases and chemicals.

GnG Intech's wastewater discussions and Unisem's environmental equipment talks fit directly into those requirements. A chip factory needs tightly controlled water, gases and chemicals because small amounts of contamination can damage microscopic circuits. It also needs systems to handle the resulting waste.

Packaging and testing add further demands. Packaging connects and protects the manufactured chips; testing checks whether they perform as intended. Combining those activities with wafer manufacturing could give Terafab greater control over how its products move from design to finished components.

Terafab's initial monthly target of 100,000 wafers is one tenth of its eventual one million wafer ambition. For comparison, TSMC's 2 nanometer capacity has been projected at 120,000 wafers a month by the end of 2026. Terafab's initial target is about 83% of that figure. The number of usable chips produced from each wafer also depends on chip size, manufacturing technology and the share that pass testing.

Equipment Deliveries Could Set the Pace

Musk thanked ASML and other suppliers for accelerating equipment deliveries during the October call. Asked whether orders had been placed for ASML's extreme ultraviolet lithography machines, he did not directly confirm an order.

These machines use light to transfer extremely small circuit patterns onto wafers and are central to today's most advanced chip production. Terafab will also need equipment for depositing materials, removing layers and inspecting manufacturing results.

KLA has cited delivery times of up to 18 to 24 months for some products, compared with a typical 12 months. ASML has indicated price increases beginning in 2027 and accelerating from 2028. Those conditions make delivery schedules and equipment budgets important to Terafab's 2028 target.

Equipment investors responded positively to Musk's update. ASML's American depositary receipts rose as much as 2.7% in late Tuesday trading, while Applied Materials gained more than 2%.

Samsung Electronics and SK hynix face the same competitive market for machinery as they expand their own production. A large new buyer could add pressure to already lengthy delivery schedules, while providing equipment manufacturers and Korean component suppliers with another source of demand.

Tesla Is Pursuing Outside Supply Alongside Its Own Factory

Terafab's planned customers connect the project to several distinct chip needs: Tesla's automated driving systems and Optimus robots, SpaceX satellites, and proposed computing infrastructure in space. Logic chips perform calculations, while memory chips hold the data those calculations require. Terafab plans to develop both manufacturing capabilities.

Musk has described an ambition to add computing capacity associated with one terawatt of power each year. A terawatt equals one trillion watts. That measure describes the scale of computing infrastructure envisioned; the wafer targets describe the factory's intended manufacturing throughput.

Tesla is also continuing to work with outside manufacturers. Its AI5 processor is reportedly in trial production at Samsung's Taylor facility in Texas, with volume production targeted for 2027. Later AI6 and AI6.5 designs are expected to use 2 nanometer processes at Samsung and TSMC.

The competition extends to people. Samsung has reportedly sent engineers specializing in advanced manufacturing yields from South Korea to Taylor ahead of planned production in 2027. Yield is the proportion of manufactured chips that work properly, a major factor in production cost.

A semiconductor engineer posting as @TTHUEONE has alleged that Tesla sought sensitive Samsung manufacturing information, audit rights and lower prices, and that Terafab recruited employees from Taylor. Those allegations are unconfirmed, and neither company has publicly confirmed or denied them. They sit alongside a more concrete commercial reality: Tesla is developing its own manufacturing operation while continuing to depend on established producers for upcoming chips.

Terafab's next technical milestone is the Austin SRAM test chip targeted for May or June 2027. Progress there, followed by equipment installation and reliable production, will show how quickly the expanding supplier network can support Musk's proposed factory.

Key Points

• Terafab is negotiating with about 10 Korean suppliers after reported attempts to acquire Intel, TSMC and Micron manufacturing facilities were rejected.
• HPSP has agreed to supply one hydrogen annealing system for the research line; other suppliers are discussing materials, equipment and services.
• The first phase in Grimes County carries an estimated $16.8 billion investment and roughly 3,000 expected jobs.
• Musk targets a functioning SRAM test chip in May or June 2027 and volume production in late 2028, while warning that the schedule is uncertain.
• The initial capacity target is 100,000 wafers a month, rising eventually to one million.
• TSMC and Musk have expressed different positions on who would operate a factory under any partnership.
• Equipment delivery times, utilities and manufacturing yields will shape the project's progress.