Will this year’s entire market scale be achieved in the next 5 years? Musk’s “chip super factory” Terafab makes a big splash in semiconductor equipment

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Musk is building an unprecedented vertically integrated semiconductor complex, with a potential investment scale large enough to reshape the global semiconductor equipment market landscape.

According to Chasewind Trading Desk, a research report released by UBS on July 7 indicates that the wafer fabrication equipment (WFE) procurement scale for SpaceX’s Terafab project over the next five years is expected to equal the total size of this year’s global WFE market. Analysts expect Terafab to launch its pilot production line as early as 2027, with equipment orders already being placed with suppliers, initially at a scale of about $5 billion.

The advance of this project means the global WFE market ceiling will be significantly raised. The report points out that if Terafab proceeds as planned, global WFE spending could approach $300 billion by 2029, and a new single client with annual procurement exceeding $50 billion may emerge around 2030–2031.

Terafab: A "Full Chip Industry Chain" Superfactory

The core logic of Terafab is very similar to Tesla’s past efforts to build its own battery supply chain. At the Terafab project launch event in March 2026, Musk stated clearly that the combined AI computational output of all current wafer fabs worldwide is only about 2% of SpaceX's target demand. He noted that existing suppliers—including TSMC, Samsung, and Micron—are expanding far too slowly to meet SpaceX’s growing needs: "Either we build Terafab ourselves, or there will be no chips."

In terms of product planning, Terafab will focus on two types of chips: chips for edge inference, mainly for the Optimus humanoid robot; and high-power chips specifically optimized for space environments. Musk expects terrestrial computing power demand to be about 100–200 gigawatts per year, while demand for space-based computing could reach as much as 1 terawatt per year.

For the factory structure, Terafab plans to concentrate mask manufacturing, front-end logic and memory fabrication, advanced packaging, and testing under one roof, enabling an ultra-fast "design–manufacture–test–iterate" closed loop. The report describes it as a truly vertically integrated semiconductor complex.

WFE Spending Estimates: $135 Billion Over Five Years, Peak Year Exceeding $50 Billion

Analyst John Hodulik predicts that SpaceX’s AI business (excluding satellite internet and rocket launch operations) will have capital expenditures totaling about $1.1 trillion in the next five years, with about 20% (roughly $225 billion) allocated to Terafab. Based on the industry norm that 60% of capex becomes WFE purchases, cumulative WFE procurement over five years is estimated at about $135 billion—roughly equivalent to the entirety of this year’s global WFE market.

In terms of timing, Terafab’s WFE spending is expected to start at about $5 billion for pilot lines in 2027, rise to about $10 billion in 2028 (already factored into predictions of a $250 billion global WFE market that year), and leap to an annual level of over $50 billion around 2030–2031—adding a new WFE buyer on par with TSMC in scale.

For site selection, SpaceX has submitted tax abatement applications in Grimes County, Texas. Related filings indicate an initial semiconductor fab investment of $55 billion, which could potentially expand to $119 billion if all planned phases are completed. Based on this, Terafab’s planned initial capacity may include about 80,000 pieces/month of memory wafer capacity and two 20,000 pieces/month logic/foundry fabs, with supporting mask workshops and backend packaging and testing plants.

Intel May Become the "Technology Knowledge Holder", Memory Suppliers Face Potential Impact

On the technical partnership front, the report notes that Intel is in talks with SpaceX about Terafab, potentially in a role similar to IBM’s historical technology licensing arrangement with AMD—providing Terafab with process flows, manufacturing intellectual property, PDK design rules, and tool recipes, while retaining ownership of underlying technology and charging license or patent fees. UBS also suggests another scenario: if the pilot line is validated successfully, Intel may integrate its "Ohio One" fab into the Terafab ecosystem via a joint venture. The size of this site could support operations equivalent to two leading-edge wafer fabs. If Terafab ultimately cannot achieve success independently, the likelihood of SpaceX increasing investment into Intel will also rise.

In the memory sector, Musk made it clear at the launch that memory chips are one of Terafab’s production goals. However, the source of memory IP remains unclear, as existing suppliers have little incentive to license core IP to a competitor. Still, the report notes that if Terafab succeeds in establishing volume production of memories, this could force Korean firms to speed up building local US memory fabrication—Samsung has ample land for expansion in Taylor, Texas, while Micron and SK Hynix are also paying close attention.

In summary, regardless of how Terafab takes shape, the project’s progress is considered a major positive for semiconductor equipment suppliers as a whole, and will be a central market theme for several financial reporting seasons to come.

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