American billionaire Elon Musk, TSMC at odds over Texas chip plant control

American billionaire Elon Musk's plan to build a giant chip complex in Texas has drawn Taiwan Semiconductor Manufacturing Co., the world's largest contract chipmaker, which confirmed on Thursday that it is in talks to join the project but said any factory it is involved in must be operated by TSMC.

"We are still in discussion. If we have any solid conclusion, we will share with you," TSMC Chairman and Chief Executive C.C. Wei said on the company's third-quarter earnings call on Oct. 15. "But the fab has got to be run by TSMC."

The comments set up a clear split with Musk over who would control the plant. On Oct. 3, Musk acknowledged on X that his companies had been talking with TSMC, writing, "Just discussions, but something may come of it." Four days later he ruled out a larger role for the Taiwanese company. "We will build and run the fab," Musk wrote. "Maybe TSMC subleases part of the Terafab if they want, but nothing more than that."

No agreement has been reached.

What Terafab is

Musk, who runs Tesla and SpaceX, unveiled Terafab in March as a joint chipmaking effort by his companies to supply semiconductors for self-driving cars, humanoid robots and artificial intelligence. He has argued that the world's existing foundries will not be able to produce enough chips to meet that demand. The project's stated goal is to produce enough chips each year to deliver one terawatt of computing capacity.

Intel joined the project in April and is expected to contribute chip design, manufacturing and advanced packaging expertise.

Texas Governor Greg Abbott announced on Aug. 6 that SpaceX would build the first phase of Terafab in Grimes County, northwest of Houston, with more than $16.8 billion in planned investment and 3,000 jobs. The state awarded SpaceX a $30 million grant from the Texas Enterprise Fund. Musk said at the time that "the foundations for the most exciting future are being built right here in Texas."

A SpaceX filing with the U.S. Securities and Exchange Commission says SpaceX and Tesla have agreed on a general framework for the project, while specific projects, timelines and spending remain subject to separate negotiations.

TSMC weighs Texas

TSMC, whose customers include Nvidia and Apple, has pledged about $265 billion for factories, advanced packaging plants and a research center in Arizona. Wei said the company is now looking at other U.S. sites to meet requests from its American customers. "Texas is one. We send the teams to Texas to do all the evaluation," he said. TSMC has not named a site, an investment amount or a timetable.

The talks come as TSMC's AI business accelerates. The company reported record net income of NT$763.06 billion (about $24 billion) for the three months to Sept. 30, up 68.7% from a year earlier, on revenue of NT$1.49 trillion ($46.72 billion). It expects fourth-quarter revenue of $52.3 billion to $54.3 billion and has set capital spending for 2026 at $60 billion to $64 billion.

"The AI market continues to be very strong," Wei said. "The demand, actually, is still far above our capability today to supply, and we're working very hard to narrow the gap."

Wei also said chips made in the United States would be priced differently from those made in Taiwan. TSMC expects its overseas factories to cut its gross margin by nearly 2 percentage points this year and by 3 to 4 percentage points over the next several years.