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The world's chips sit within China's reach. Musk and Intel are building in Texas.

The World’s Chips Sit Within China’s Reach. Musk and Intel Are Building the Answer in Texas.

by
M.A. Rothman

By M.A. RothmanOctober 5, 2026 · 4 min read
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The most important factories in the modern economy sit on one island across the narrow Taiwan Strait from Communist China, and Elon Musk is trying to build an alternative in rural Texas. His Terafab project, a semiconductor fabrication complex backed by SpaceX, Tesla and xAI, is going up at the Gibbons Creek Reservoir site in Grimes County, with Texas Gov. Greg Abbott putting the first phase at more than $16.8 billion in capital investment.

The partner Musk signed in April is an American company: Intel. And on October 3, 2026, Musk confirmed that he is also talking with Taiwan’s TSMC, the very company whose dominance makes Terafab necessary in the first place.

The single point of failure

For decades, the United States let a national-security problem hide in plain sight. The chips behind artificial intelligence, smartphones, cars and weapons systems overwhelmingly come from one company in one place. According to the market research firm TrendForce, Taiwan Semiconductor Manufacturing Co. held 69.9 percent of the global foundry market in 2025, up from 64.4 percent the year before. Its 2025 revenue reached $122.54 billion.

That concentration is a gift to Beijing, which claims Taiwan and has never ruled out taking it by force. In January 2024, Bloomberg Economics modeled what a war over Taiwan would do to the world and put the price tag at about $10 trillion, roughly 10 percent of global GDP, more than the damage from the COVID-19 pandemic or the 2008 financial crisis. The biggest driver of the losses in its model was not the fighting itself. It was the missing semiconductors.

Put simply, the world’s economy is betting on the restraint of the Chinese Communist Party. That is not a bet any serious country should want to keep making.

What is being built in Grimes County

Musk pitched Terafab earlier this year as a joint effort of his companies to supply their own enormous chip demand for AI, robotics and space systems. On August 6, 2026, Abbott’s office announced that SpaceX would build a vertically integrated semiconductor fabrication plant in Grimes County, a facility of 100 million square feet designed to bring chip production under one roof. The state projects 3,000 new jobs, from engineers and technicians to plant operators, and awarded SpaceX a $30 million Texas Enterprise Fund grant. The project also qualifies for the state’s JETI incentive program.

“The foundations for the most exciting future are being built right here in Texas,” Musk said in the governor’s announcement, calling it “the most epic chip-building effort.” Abbott put it more simply: “Texas is where big ideas grow even bigger.”

The location has its own symbolism. Gibbons Creek Reservoir once cooled a coal-fired power plant that went offline in 2018. According to local station KBTX, SpaceX plans to build its own natural gas-fired power plants for the facility and says it will not draw on the state’s ERCOT grid in a way that raises costs for other ratepayers. It says it will use the reservoir for water instead of local groundwater, and rely on closed-loop water systems. Under its county agreement, SpaceX will make a fixed payment of $20 million a year to Grimes County for 35 years.

Intel’s bet, and America’s

On April 7, 2026, Intel announced it was joining the project. “Intel is proud to join the Terafab project with SpaceX, xAI, and Tesla to help refactor silicon fab technology,” the company said, adding that its ability to “design, fabricate, and package ultra-high-performance chips at scale” would help Terafab reach its goal of a terawatt of compute a year.

Intel CEO Lip-Bu Tan was effusive. “Elon has a proven track record of reimagining entire industries,” he wrote. “This is exactly what is needed in semiconductor manufacturing today.” He called Terafab “a step change in how silicon logic, memory and packaging will get built in the future.”

For Intel, the stakes are existential. Tan inherited a company that had lost ground to TSMC and AMD, whose manufacturing roadmap had slipped repeatedly, and whose foundry business had drawn little outside interest. According to The Next Web, Intel Foundry booked only $307 million in revenue from external customers in its most recent full year. A customer with the appetite of Tesla, SpaceX and xAI combined is the kind of anchor that could turn America’s original chipmaker into a genuine rival.

Talking to TSMC anyway

In early October, Bloomberg columnist Tim Culpan reported that TSMC was weighing a role in the Texas project. Musk confirmed the talks in a reply on X on October 3: “Just discussions, but something may come of it.” No terms have been disclosed, and TSMC had not confirmed the talks.

Some will read that as a hedge. I read it as the point. Whoever ends up running which line, the fab is on American soil, powered by its own plants, outside the range of a blockade in the Taiwan Strait.

None of this will be easy. Advanced chipmaking is among the hardest manufacturing on Earth, the equipment is scarce, and the full scale, production technology and construction timeline have not been officially confirmed. But people have been betting against Musk on hard engineering for twenty years, and the rockets keep landing.

This is also what patriotic industrial policy looks like when it works: private capital, an American chipmaker and a reservoir that once served a coal plant in Texas, building a supply chain that does not run through Beijing’s good graces.

The future should be made in America, and Elon Musk and Intel are pouring the foundation in Grimes County.

Sources

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