TSMC Urged to Avoid Elon Musk’s Terafab Project Amid Concerns Over Customers and Capacity
Taiwan Semiconductor Manufacturing Company is being urged to think carefully before entering any deeper cooperation with Elon Musk on his ambitious Terafab chip project, according to a recent opinion piece published in Taiwan’s Liberty Times.
The debate intensified after Musk confirmed that discussions with TSMC had taken place regarding possible cooperation on Terafab. However, he did not share specific details about what the partnership might involve. As rumors spread, some speculated that TSMC could own, operate, or manage the facility. Musk quickly pushed back against that idea, saying TSMC would not take control of the fab and suggesting instead that the company could potentially sublease part of the project.
Terafab is central to Musk’s long-term plans for artificial intelligence, data centers, robotics, and high-performance computing. Musk has described the project as a way to produce a massive amount of computing capacity each year, arguing that global chip production is not enough to meet the needs of his companies.
Intel has also been linked to the effort, as Musk seeks ways to secure more semiconductor supply for future products and infrastructure. Despite the push to build his own production capacity, Musk has also stated that Tesla will remain a TSMC customer.
The Liberty Times opinion piece, however, argues that TSMC should be cautious. It suggests that working too closely with Musk could place TSMC in a difficult position with its existing customers, including major chip designers such as NVIDIA and AMD.
The concern is simple: if TSMC gives Musk special access to chipmaking capacity, other major customers may feel they are being pushed back in line. TSMC’s success is built on serving a wide range of global technology companies, and any deal that appears to favor one customer could create tension across the semiconductor supply chain.
The article also raises concerns about Tesla’s large business presence in China, suggesting that Musk’s commercial interests are closely tied to the Chinese market. For a company as strategically important as TSMC, geopolitical considerations are never far from the conversation.
Another major issue is capacity risk. Musk has openly said that one reason for pursuing Terafab is the difficulty of securing enough production from TSMC. He has reportedly told TSMC leadership that limited available capacity helped push him toward the idea of building his own large-scale chip production operation.
From TSMC’s perspective, that could make cooperation complicated. If TSMC supports Terafab, it may effectively help create a production structure that could one day compete with parts of its own business or reduce Musk’s dependence on TSMC.
The financial risks are also significant. The opinion piece warns that partnering on such a large project could increase TSMC’s capital burden, including higher depreciation expenses and dividend pressure. If chip demand weakens or the economy slows, TSMC could be left with excess capacity, a costly problem in the semiconductor industry.
For now, the exact nature of Musk’s discussions with TSMC remains unclear. What is clear is that Terafab has become a closely watched topic in the global chip industry. Musk wants more control over the computing power needed for Tesla, AI, robotics, and data center expansion. TSMC, meanwhile, must protect its position as the world’s leading contract chipmaker while balancing the needs of its most important customers.
The situation highlights a growing challenge in the semiconductor market: demand for advanced chips is exploding, but production capacity remains limited. As companies race to secure supply for artificial intelligence and next-generation computing, partnerships between chipmakers and technology giants are becoming more strategic, more expensive, and more politically sensitive.
Whether TSMC chooses to cooperate with Elon Musk’s Terafab project or keep its distance, the decision could have major implications for Tesla, AI hardware development, and the future of advanced semiconductor manufacturing.
