Elon Musk’s Tesla Chip Fab Dream Could Derail Samsung Foundry’s Comeback

Elon Musk’s latest ambition — to build a “gigantic chip fab” for Tesla — could turn one of Samsung Foundry’s biggest wins into a looming headache. The South Korean tech giant has only just begun to regain momentum in the foundry race, with Tesla as a key client. However, the carmaker’s push toward self-sufficiency threatens to undercut that progress in the years ahead.

Samsung’s AI chip partnership with Tesla could be short-lived

After years of trailing TSMC, Samsung’s foundry business is finally gaining traction. Earlier this year, the company signed a massive $16.5 billion deal with Tesla to produce the carmaker’s next-gen AI6 chip for autonomous driving systems. The agreement gave Samsung Foundry a major boost as it prepares to mass-produce 2nm chips, reinforcing its position in the advanced semiconductor race.

Elon Musk also revealed that Samsung will manufacture part of Tesla’s AI5 chipset. Meanwhile, his other venture, xAI — the company behind the Grok chatbot — is said to be developing custom silicon for AI training and inference workloads. This opens another potential opportunity for the Korean firm to strengthen its ties with one of the tech industry’s most influential figures.

However, Musk’s comments at Tesla’s 2025 shareholder meeting hint at a different future. He acknowledged that even under “best-case scenarios,” third-party suppliers cannot meet Tesla’s soaring chip demand for AI and robotics. The solution, according to him, is to build an in-house “Terafab” — a vast semiconductor facility potentially developed in collaboration with Intel.

“Even when we extrapolate the best-case scenario for chip production from our suppliers, it’s still not enough,” Musk said (via Reuters). “So I think we may have to do a Tesla terafab. It’s like giga but way bigger. I can’t see any other way to get to the volume of chips that we’re looking for. So I think we’re probably going to have to build a gigantic chip fab. It’s got to be done.”

Intel, which recently secured U.S. government backing through a 10% stake acquisition, is eager to prove its manufacturing revival through high-profile collaborations. Partnering with Tesla would help both companies advance their respective ambitions. Intel will reestablish its foundry credibility, and Tesla will internalize chip production, much like it has done with batteries and software.

The implications for Samsung Foundry

If Tesla’s in-house chipmaking vision materializes, its reliance on Samsung and TSMC could shrink over time, especially as the company expands its footprint in AI, robotics, and data centers. For Samsung, Tesla’s fab ambitions pose a classic “ally today, rival tomorrow” scenario. With most big guns already tied to TSMC, Tesla is one of Samsung’s key foundry clients.

While Tesla lacks the immediate expertise or infrastructure to rival Samsung Foundry, the intent alone changes the competitive landscape. Vertical integration has been a defining strength of Tesla — from manufacturing cars and batteries to writing its own software stack. Bringing semiconductors in-house is a natural extension of that philosophy. And a partnership with Intel could help it realize that plan sooner.

The timing is also delicate. Samsung’s foundry division is finally rebounding after several slow quarters, driven by renewed demand in AI and high-performance computing. A future where Tesla builds its own fab could slow that recovery just as Samsung seeks to expand its client base.

“You know, maybe we’ll, we’ll do something with Intel,” Musk said to Tesla shareholders. “We haven’t signed any deal, but it’s probably worth having discussions with Intel.”

Of course, Samsung’s heavy investment in Gate-All-Around (GAA) transistors and upcoming 2nm process technology could give it a decisive edge in manufacturing reliability and efficiency. These are areas where any newcomer, even Tesla, will face steep learning curves and billion-dollar costs. But in the long term, a fully operational Tesla fab could evolve into a disruptive new force.