By Zaheer Kachwala and Stephen Nellis
April 22 (Reuters) – Tesla CEO Elon Musk said on Wednesday the EV maker plans to use Intel’s next-generation 14A manufacturing process to make chips at its Terafab project, an advanced AI chip complex Musk has envisioned in Austin.
The contract would mark Intel’s first major customer for the technology, a breakthrough for the chipmaker which has struggled to stand up its contract manufacturing business essential for taking on top rival TSMC. Intel CEO Lip Bu Tan has said that the company would exit the chip manufacturing business altogether if it failed to secure an external customer.
Intel has previously said it was in discussions with large customers about 14A, but has not yet disclosed a major external customer. It declined to comment on Musk’s remarks.
The chipmaker’s shares rose 3.6% in extended trading.
Intel joined Musk’s Terafab AI chip complex earlier this month with SpaceX and Tesla to make processors to fuel the billionaire’s robotics and data center ambitions. Tesla on Wednesday sharply boosted its capital investment plans, with Musk saying the outlay was necessary to fuel future revenue streams.
The carmaker’s investors were less than impressed, pushing its stock down slightly after hours. Musk, who has wooed investors with his promises to build ubiquitous humanoid robots and data centers in space, has also drawn criticism for his loose timelines and often-missed deadlines.
The Terafab, too, would be a massive undertaking. Musk said in March his space startup SpaceX and Tesla would build two advanced chip factories at this sprawling facility, one to power cars and humanoid robots, and another designed for the space data centers.
Many details of the Terafab project – such as who will pay for pricey chipmaking equipment, who will operate the factory and when it will come online – remain unknown. Musk has said, though, that Terafab will eventually produce one terawatt of computing capacity a year, compared with about half a terawatt currently generated across the United States.
Building enough chip capacity to power one terawatt of annual compute would cost between $5 trillion and $13 trillion in capital expenditure, according to Bernstein estimates.
REAL VOLUMES
For Intel shareholders, though, this is good news.
“Given that by the time Terafab scales up, 14A will be probably fairly mature or ready for prime time,” Musk said. “14A seems like the right move, and we have a great relationship with Intel,” he said.
Ben Bajarin, head of technology consultancy Creative Strategies, said that Intel’s 14A technology could “turn out to be a bigger deal for Intel than folks thought.”
“It’s important to have multiple partners as early design partners to help clean the pipe and work through needed learnings at the leading edge. They will definitely have scale, so a great first non-Intel customer,” Bajarin said.
Seaport Research Partners analyst Jay Goldberg said Musk’s vote of confidence in Intel’s technology outweighed the unknowns about the Terafab project.
“Having a customer is more important than the timing,” he said.
Goldberg said that Musk’s lofty estimates of how many chips its robots could one day require may or may not materialize, but even making chips for Tesla’s existing businesses would be a significant win for Intel.
“It’s not equivalent to Apple or Nvidia” in terms of chip volumes, Goldberg said. “But it’s a real customer. It can be real volumes.”
(Reporting by Zaheer Kachwala and Aditya Soni in Bengaluru and Stephen Nellis in Morgan Hill, California; Editing by Deepa Babington, Sayantani Ghosh and Kim Coghill)
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