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Published Aug 6, 2026Updated Aug 10 Major6
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Tesla and SpaceX to build 100M-square-foot chip factory in Texas
Tesla and SpaceX announced Terafab, a semiconductor factory in Grimes County, Texas, planned to exceed 100 million square feet and become the world's largest building. The $16.8 billion first phase of a potential $119 billion multi-phase project will produce chips for AI data centers, self-driving vehicles, and robots, with production targeted to begin in 2027.
Quick Facts
- Joint announcement of Terafab semiconductor megafactory
- Advanced semiconductor manufacturing facility with integrated packaging and testing
- Construction of on-site natural gas power plants and battery arrays
- Water sourcing from Gibbons Creek Reservoir
- County meeting with resident concerns about tax incentives and transparency
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Tesla and SpaceX have announced Terafab, a semiconductor megafactory planned for Grimes County, Texas, approximately 45 miles northwest of Houston. The joint project will span more than 100 million square feet of manufacturing space, surpassing all existing buildings. The first phase carries an initial investment of $16.8 billion, though SpaceX filings from May 2026 indicate a multi-phase construction ceiling of $119 billion.
The facility will house manufacturing, packaging, and testing of advanced logic and memory semiconductors in a single vertically integrated location. Terafab is designed to address what Musk describes as a critical supply shortage: both companies project their combined chip demand will exceed global production capacity. The plant is intended to produce over 1 terawatt of compute annually, with chips optimized for Tesla's Optimus robots, self-driving Cybercabs, and SpaceX's space-based data centers.
Power infrastructure will consist of natural gas power plants built on-site alongside large battery arrays, rather than renewable energy sources. The project will draw water from the Gibbons Creek Reservoir instead of local groundwater. SpaceX's binding commitments to local authorities require at least $5 billion invested in Grimes County by 2030 and at least 1,800 full-time jobs by 2035, though the companies project at least 3,000 jobs across Grimes and neighboring Brazos County. Early production is targeted for 2027, with mass production in 2028.
Intel has agreed to contribute to the project without specifying the scale of its involvement. Texas is offering $30 million in incentives, and Grimes County granted SpaceX a 100% tax abatement on the project. The facility will be constructed on the site of a former coal-fired power plant that ceased operations in 2018.
At a county meeting held Wednesday before the announcement, hundreds of residents raised concerns about tax incentives and transparency in the deal-making process. The local school district superintendent characterized the project as a defining opportunity for the district. Terafab would exceed the current largest building, China's New Century Global Center in Chengdu (18.9 million square feet), by more than five times and would dwarf the Pentagon (6.6 million square feet), Apple Park (2.82 million square feet), and the Mall of America (5.6 million square feet) combined.
Why This Matters
The project represents a $16.8 billion semiconductor manufacturing commitment targeting 2027 production start and 2028 mass production. It directly affects chip supply availability for autonomous vehicle and AI data center markets; contractual obligations require $5 billion investment in Grimes County by 2030 and 1,800 full-time jobs by 2035. Local infrastructure impacts include on-site natural gas power generation, water sourcing from Gibbons Creek Reservoir, and tax abatement arrangements. Measurable outcomes: production capacity (1 terawatt annually targeted), employment, capital deployment, and energy/water resource allocation in Texas.
Timeline & Sources
Mar 22, 2026
WireElon Musk first floats Terafab project in Austin
Aug 6, 2026
WireGrimes County meeting held with hundreds of residents raising concerns about tax incentives and transparency
Jan 1, 2030
WireBinding deadline: SpaceX to invest $5 billion in Grimes County
Jan 1, 2035
WireBinding deadline: 1,800 full-time jobs to be created
Related Signals
Sources
- Tesla and SpaceX will invest $16.8B to start building ‘Terafab’ chip factory in TexastechcrunchMediaAug 6, 2026
- SpaceX’s Terafab will rely on natural gas power plants, not Tesla solar panelstechcrunchMediaAug 7, 2026
- Elon Musk to build the biggest building in the world — spanning a colossal 100M square feetNew York PostMediaAug 7, 2026
- Elon Musk Plans to Spend $119 Billion to Construct the World’s Largest Building, Just Outside HoustonYahoo FinanceMediaAug 10, 2026
- SpaceX and Tesla choose Texas for AI chip manufacturing plant that will be world's largest buildingFox BusinessMediaAug 10, 2026
- Musk’s Terafab chip plant will run on gas, not Tesla solarElectrekMediaAug 10, 2026