Elon Musk, SpaceX confirm $16.8B Terafab facility in Texas

Terafab, a computer chip manufacturing campus that Elon Musk has said will be the world’s largest, is a go.

The campus in a rural county east of College Station is to be more than twice the size of Tesla Inc.’s sprawling 2,500-acre site outside Austin.

In a joint announcement Thursday, SpaceX and Tesla unveiled an initial $16.8 billion investment in the massive manufacturing facility, well below SpaceX’s earlier estimate of a $55 billion first phase. The plant eventually is expected to employ at least 3,000 people, with many of those jobs expected to go to residents of Grimes and neighboring Brazos counties.

“We’re now embarking on the most epic chip-building effort,” Musk, CEO of both companies, said in a statement. “The Terafab is bringing cutting-edge manufacturing to America, creating thousands of high-paying jobs in the Lone Star State and enabling us to produce AI chips at scale for use on Earth and in space.”

As proposed, the plant itself would eventually span 100 million square feet — roughly 10 times the size of the main Gigafactory Texas building east of  Austin.

The companies said their need for computer chips will outstrip current and projected global production and that a facility of such scale is required “to bridge the divide between current global chip supply and the compute demand of the future.”

The massive plant, a joint venture between Tesla, SpaceX, its artificial intelligence subsidiary xAI and foundry partner Intel Corp., also would cement Texas’ place as a global leader in semiconductor manufacturing as AI companies race to secure computing capacity.

The companies said Texas has become central to their manufacturing ambitions and praised the state’s commitment to innovation.

Gov. Greg Abbott confirmed Thursday that the project is receiving a $30 million Texas Enterprise Fund grant from the state after two small Grimes County school districts approved them. Anderson-Shiro Consolidated Independent School District and Iola Independent School District gave final approval for tax breaks for the project in mid-July. Grimes County previously approved waiving property taxes in exchanging for annual payments of $20 million.

Currently, the world’s largest semiconductor fabrication facilities are operated by industry leaders including Samsung Electronics Co. Ltd., which is nearing completion of a major fabrication plant in Taylor, and Taiwan Semiconductor Manufacturing Co., or TSMC.

Most of TSMC’s manufacturing capacity is in Taiwan, though it also operates U.S. plants in Arizona and Washington. Samsung has said its Williamson County campus will encompass about 8 million square feet by 2028.

Musk said Terafab would dwarf those facilities, describing 100 million square feet as the “right order of magnitude” for plants that would manufacture chips for SpaceX’s Starlink broadband satellites and the network of AI data centers he envisions in space.

In late May and early June, Wit Tech LLC, which lists a Palo Alto, California, address associated with Musk’s artificial intelligence company xAI, entered contracts to acquire more than 6,000 acres near Gibbons Creek Reservoir in Grimes County. Additional parcels were acquired in the following weeks, deed records show.

On Wednesday, SpaceX employees leading development of Terafab told Grimes County commissioners that, after securing approval for tax breaks from the two school districts, the company was ready to begin construction on the massive chip plant.  

“With the (tax abatement deal) done, we are going to be moving nearly immediately to get going on the project,” Riley Trettel, who works in energy and data center development for xAI, said in a public meeting about the project. “We need to get our civil work started. We need to start to get foundations in place, and we’re going to get cracking.”

In comments to residents who have been grappling with rapid movement and little transparency on the ambitious project, Trettel and other Terafab representatives stressed the company’s desire to boost domestic chip manufacturing and the area job market.  

Commissioners were told to expect to see renderings of the plant in the next few days.

Terafab representatives also defended the tax breaks the project has received from the county and area school districts, noting the annual payments Terafab will make annually to the county for the next 35 years in exchange for paying no property tax.

“I’ve seen and heard some comments that $20 million is not a lot and so I thought I’d give it some perspective, because it is in fact a lot of money relative to what other taxpayers in the state pay,” said Bucky Brannen, a lawyer for SpaceX. He said Centerpoint Energy paid about $2 million in total taxes in Grimes County, Samsung Electronics Co. Ltd. paid about $10 million in total taxes to Williamson County in 2025 and Tesla Inc. paid $14 million in taxes to Travis County in 2025. 

The estimated abatement for Terafab in the coming years is 78%, Brannen said.

“That is quite a bit lower than what this type of facility has received in other communities,” he said. “Also, in terms of total payments, that is $710 million over 35 years. So that is a lot.”

As the development comes together, SpaceX touted its interest in hiring locally for a variety of roles in construction, janitorial and security services, along with advanced semiconductor engineering. 

“This is also a really great opportunity to provide cutting edge opportunities for folks with degrees, without degrees, that if they want to stay in the area and work for leading edge technology, they can,” said Jordan Buss, a commissioner in the SpaceX company town of Starbase. “I think that’s really exciting.”

Thursday’s announcement similarly touted job opportunities, as SpaceX said its existing Texas footprint has already generated more than 56,000 direct and indirect jobs and more than $28 billion in estimated economic impact since 2024. SpaceX also noted the Terafab site will use Gibbons Creek Reservoir water for industrial operations rather than local groundwater and that it has plans for on-site wastewater treatment facilities and its own electric generation plants.

Before the SpaceX representatives took questions at Wednesday’s meeting, leaders of Grimes County Citizens for Responsible Development presented steps they’d like to be taken before any other projects are granted tax abatements. 

They said the group has collected nearly 900 signatures on a petition asking for “meaningful, enforceable protections, transparency, independent oversight and a genuine voice in the decisions that will shape our future,” Marie Egyed, director of operations, said in a statement.

Their request included bringing on independent legal counsel to assist with incentive negotiations; disclosure of projected water demand and power infrastructure impacts; dedicated funding for fire and emergency protection; commitments for local hiring, wage standards and workforce training; and compliance reporting with clawback provisions if obligations aren’t met.  

Debra Morwood, a resident of Iola, said Grimes County’s own tax abatement guidelines and criteria say incentives should not be granted where a project may create hazards to public safety, health, or morals. 

“Other Texas counties have negotiated specific written terms for large industrial projects,” Morwood said. “Grimes County should do no less.”

The SpaceX representatives declined to comment on Abbott’s call this week for a pause on approvals for data centers until a comprehensive audit of such developments is complete.  

“We don’t have an immediate reaction to that,” Brannen said. “So I think there’s a lot to learn on the data center side about what’s going to come in the next legislative session.”  

Still, David Tullos, the lone commissioner who voted against the tax breaks in June, asked if it’s safe to assume that data centers will want to locate nearby to support Terafab’s work. 

“Yes, there will be a lot of computing equipment on the site,” Trettle said, reiterating Musk’s vision for space-based data centers. 

“The whole point of the Terafab facility is to build chips at such a massive scale that you couldn’t possibly put all of the chips that this facility could make into operation on Earth,” he said. “The point is to put the chips on satellites to then do the computing in space to get it off the ground, where the power is more available.”