Elon Musk Needs to Put His Fab Money Where his Mouth is!

To me this is going to be one of the bigger Chicken Little moments in the history of semiconductors. Mostly because we are now a click driven society and the media is plagued by so called influencers that live and die by clicks. In my 40+ years as a semiconductor professional I have witnessed many of these Chicken Little moments with semiconductor outsiders saying that we cannot scale semiconductors for one reason or another. A common headline starting in the early 2000s was that “Moore’s Law is Dead”, right? Yet here we are making semiconductors that were deemed impossible to make many times over.

This time however the richest man in the world says that we will not have enough 2nm capacity to satisfy the world’s demands due to the AI surge and the coming onslaught of AI driven products. Please note that Elon Musk did not consult the top semiconductor manufacturing company in the world (TSMC) nor did he consult the semiconductor legend that is Intel UNTIL AFTER HE SAID THIS. I’m sure there is a method to his madness and I’m also sure that the semiconductor industry will respond appropriately, we always do.

The picture above is encouraging. If anyone can turn Elon Musk around it is Lip-Bu Tan. Remember when he turned Donald Trump around?

Donald Trump Truth Social (Aug 7, 2025)
“The CEO of INTEL is highly CONFLICTED and must resign, immediately. There is no other solution to this problem. Thank you for your attention to this problem!”

This was on Thursday. Lip-Bu met with Donald Trump the following Monday at the White House which resulted in this:

“I met with Mr. Lip-Bu Tan, the CEO of INTEL. The meeting was a very interesting one. His success and rise is an amazing story. We discussed many things, including the future of Intel and the importance of U.S. chip manufacturing. We will see what happens, but it was an honor to meet him.”

Not only did Lip-Bu Tan turn POTUS around, he got an incredible investment and backing from the US Government. Talk about taking lemons and making lemon aide!

At the TSMC Technical Symposium this week TSMC made it clear that there will be no issue with TSMC N2 (2nm) availability. In fact, TSMC N2 is ahead of TSMC N3 on the yield learning curve. Remember, TSMC N2 went into HVM in Q4 of 2025 so this is a fact not a forecast.

I remember when Apple turned to TSMC to manufacture the iProduct chips back at 20nm (iPhone 6). Semiconductor outsiders did not think TSMC could deal with Apple’s volume, or Apple would ruin TSMC as they did other partners, or TSMC could not handle Apple’s accelerated schedules. Just about every year the media claims Apple will consume all of TSMC NX so there would not be wafers left for anyone else. They now say that about Nvidia but of course that is also not true. Wafer agreements are legally binding contracts and are the life blood of contract semiconductor manufacturing.

The fact of the matter is that Apple and TSMC have a wafer agreement that spells out how many wafers Apple will get on a specific process node several years in advance so TSMC can build fabs for Apple. Every single TSMC customer has a wafer agreement, that is how we do business. In Apple’s case TSMC made processes tuned just for Apple and Apple had exclusive rights to it. Apple and TSMC would collaborate closely on process development and the process release would be timed for the Apple iPhone launches in the fall. This has been going on for 15 years and today the Apple iPhone is the most successful in the history of smartphones and the A Series SoC inside them is nothing short of miraculous.

Someone needed to explain to Elon Musk how semiconductor design and manufacturing really works and who better than Lip-Bu Tan?

Elon Musk needs to know that it takes longer for companies to design complex AI chips on leading edge processes than it takes TSMC and Intel to build the fabs that will manufacture them. Elon also needs to know that he will need to collaborate very closely with the semiconductor supply chain and make some very big investments to make sure his companies have the chips they need to be successful.

Lip-Bu Tan will explain this to him of course and Elon will tell the world so this is a win-win Chicken Little situation if I have ever seen one.

Intel is the big winner here of course and we can all thank Lip-Bu for that. As I have said many times before, do not bet against Lip-Bu Tan!

 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.

TSMC and the semiconductor industry as a whole are both winners here as Intel will become a serious foundry competitor and that will push semiconductor innovation and supply chain strength to an even higher level which is for the greater good for all.

“We either build the Terafab or we don’t have the chips,” Musk had said during a presentation in Austin in March, adding that current global chip production would meet only a small fraction of his companies’ future needs.

The only loser that I can see here is Samsung Foundry. Not long after Samsung and Tesla signed an 8 year $16.5B 2nm wafer agreement Elon Musk announces to the world that not enough 2nm chips can be made? Ouch!

Bottom line: Elon Musk is a disrupter and I am glad to have him inside the semiconductor industry. The first thing I said in the SemiWiki forum after the Terafab announcement was made is that the only chance of success is for Elon to work with Lip-Bu Tan and Intel. So there you have it. I am still waiting for the financial details but I would bet that Elon Musk will in fact be putting his money where his mouth is, absolutely.

Also Read:

Is Intel About to Take Flight?

Disaggregating LLM Inference: Inside the SambaNova Intel Heterogeneous Compute Blueprint

Who’s Buying America’s Foundry Future?