Tesla and SpaceX announce $16.8B semiconductor plant in Grimes County, Texas

Aug 6, 2026

Tesla and SpaceX have announced the construction of Terafab, a massive 100-million-square-foot semiconductor plant in Grimes County, Texas. Representing an initial $16.8 billion investment, the vertically integrated facility will combine logic, memory, packaging, and testing to produce AI chips for Tesla's Optimus robots and Cybercabs, alongside SpaceX's space-based data centers. Supported by a $30 million state grant and local tax abatements, the project has drawn environmental and transparency concerns from local residents.

Terafab semiconductor plant announcement

▪The Terafab facility is planned to span more than 100 million square feet of manufacturing space.
▪SpaceX and Tesla announced that they will construct a vertically integrated semiconductor fabrication plant, named Terafab, in Grimes County, Texas.
▪The initial phase of the Terafab project represents a capital investment of $16.8 billion and is expected to create at least 3,000 jobs.

Vertical integration chip manufacturing

▪Intel Corporation is participating as a foundry partner in the Terafab project, though its exact contributions remain unconfirmed.
▪Terafab will produce chips optimized for edge computing and inference for use in Tesla's Optimus robots and Cybercabs, as well as high-power chips for SpaceX's space-based data centers.
▪Terafab is designed to consolidate the production chain under a single roof, combining logic, memory, advanced packaging, and testing.

Grimes County site selection

▪The local advocacy group Grimes County Citizens for Responsible Development collected nearly 900 signatures on a petition demanding independent oversight, transparency, and water protections.
▪SpaceX stated that Terafab will pull water from the Gibbons Creek Reservoir for industrial operations rather than using local groundwater.
▪The Terafab facility will be built on the Gibbons Creek Reservoir in Grimes County, Texas, at the site of a demolished coal-fired power plant.

Texas Enterprise Fund incentives

▪Grimes County approved waiving property taxes for Terafab in exchange for annual payments of $20 million over 35 years, totaling $710 million.
▪Governor Greg Abbott announced that the Terafab project will receive a $30 million Texas Enterprise Fund (TEF) performance-based grant.
▪The Anderson-Shiro Consolidated Independent School District and the Iola Independent School District approved tax incentive agreements for the Terafab project under the Texas Jobs, Energy, Technology, and Innovation (JETI) Act.

Investment cost revisions

▪The initial phase investment of $16.8 billion is lower than prior estimates, which had ranged from $25 billion to $55 billion.
▪SpaceX's May 2026 S-1 filing described the Terafab project as a non-binding general framework with no finalized intellectual property split or participation obligations.