Tesla to Launch Its Own Chip Manufacturing

Tesla to build a "gigantic" semiconductor factory for AI and robotics.

Tesla is set to construct a “gigantic” semiconductor factory to advance its ambitions in artificial intelligence and robotics, as announced by CEO Elon Musk at the annual shareholders’ meeting, reports CNBC.

“One of the things I’m trying to figure out is how to produce enough chips,” he pondered.

Currently, the company relies on TSMC and Samsung, with a potential collaboration with Intel also under consideration.

“But even if we extrapolate the best-case scenario of chip production from our suppliers, it’s still not enough,” the entrepreneur added.

Musk believes the company needs to build a factory he described as a Tesla terra fab, seeing no other way to secure a sufficient supply of chips.

Chips are the “brains” of nearly all modern technologies, powering a wide range of devices from smartphones and televisions to large data centers. With the rise of artificial intelligence, demand for them has surged dramatically.

According to the billionaire, the initial capacity of the potential facility will be 100,000 wafers per month, eventually increasing to 1 million.

For comparison, TSMC declares 17 million wafers annually, or about 1.42 million per month.

While Tesla does not currently manufacture its own microchips, it has been developing specialized chips for autonomous driving for several years.

At present, the latest generation AI5 processors are outsourced. Musk stated they will be cheaper, more energy-efficient, and optimized for the company’s proprietary AI software.

The billionaire announced plans to launch production of the Cybercab, an autonomous electric vehicle without pedals or a steering wheel, in April.

Musk’s statements underscore Tesla’s shift towards artificial intelligence and robotics.

“They could effectively increase the world’s economy by 10 or even 100 times. There’s no obvious limit here,” he said at the shareholders’ meeting.

A Trillion for Musk

75% of voting Tesla shareholders approved a compensation plan for Musk worth nearly $1 trillion.

The package involves 12 tranches of shares to be issued upon reaching certain milestones over a decade. It will grant Musk greater voting power in the company, increasing his stake from approximately 13% to 25%, or by 423 million shares.

The first tranche will be awarded if Tesla reaches a market capitalization of $2 trillion (currently $1.54 trillion). The next nine will be issued progressively as the firm’s capitalization increases by $500 billion increments, totaling $6.5 trillion.

The final two tranches will be issued after a $2 trillion increase—$1 trillion for each. Thus, to receive the full package, the electric vehicle manufacturer’s value must reach $8.5 trillion.

Rewards from the company’s value growth are combined with operational achievements. Tesla has set several profit targets for Musk, starting at $50 billion annually and reaching $400 billion.

Other goals include producing 20 million vehicles, manufacturing 1 million Optimus robots, 1 million robotaxis, and achieving 10 million active subscriptions to the Full Self-Driving (FSD) system.

At the shareholder meeting, Musk stated that the company’s bots will “eliminate poverty,” “provide everyone with amazing healthcare,” and will be “bigger than mobile phones and anything else.” They will also aid in combating crime.

FSD in China

Tesla’s CEO announced that China is expected to approve driver assistance systems similar to FSD by February or March.

The company has long sought approval for its software from authorities. Permission for its use is considered crucial for reviving the automaker’s sales in China.

Currently, the company has partial approval, allowing for testing. During these tests, Tesla omitted the mention of FSD from its name to comply with stricter local regulations.

The firm’s efforts to implement the technology began in April 2024.

Back in November, Musk hinted at the release of a flying car by the end of 2025.