Musk Confirms TSMC Talks Over Terafab, Raising Competition Concerns for Intel

Intel could face more competition for its role in Elon Musk’s Texas chip factory after Musk confirmed discussions with TSMC. CNBC’s October 6 reporting captures a split over how far that relationship might go: buying components or sharing manufacturing technology. Musk has confirmed talks, not an agreement, calling them “just discussions, but something may come of it.”

Terafab is the large semiconductor factory Musk is building in Texas. Intel’s partnership with Musk for the project was announced in the spring, according to Mizuho analyst Jordan Klein. That existing relationship is why a possible TSMC arrangement has drawn attention beyond the prospect of another supplier for Tesla and SpaceX.

Musk’s Saturday comments also suggested a supplemental role for TSMC. He replied “True” to an X post describing its potential contribution that way. That description leaves room for participation alongside Intel rather than a replacement, though it does not specify what TSMC would supply.

Chip purchases or manufacturing know-how?

Bank of America analyst Haas Liu favors the narrower interpretation. In a Monday client note, he said deeper collaboration would likely involve component purchases for Tesla and SpaceX. He pointed to custom chips for cars, robotics and cloud AI, as well as purchases of graphics processors and networking switches.

Liu put the likelihood of TSMC licensing its technology or operating a chip factory with Terafab holding a meaningful share at low. His view separates a growing customer relationship from a deeper arrangement that would give Musk access to manufacturing processes or a jointly operated plant.

DA Davidson technology research head Gil Luria sees a possible commercial case for sharing intellectual property—the technology and know-how behind chip production. He told CNBC that TSMC could limit what it provides, while licensing could carry nearly 100% margins. That is an argument for a possible deal structure, not a disclosed negotiating term.

Chris Miller, a semiconductor industry expert at the American Enterprise Institute, said licensing and joint product development have a long history in the industry. He identified shared research costs and another partner’s ability to operate a plant in a different geography as reasons such arrangements can make sense.

Competition does not mean displacement

Klein called a potential TSMC deal good news for TSMC and a modest negative for investors betting on Intel. But he did not see it erasing Intel’s opportunity to win outside customers for its chip-manufacturing business. In his assessment, Terafab could still contribute to that opportunity in some form.

Intel shares fell 3% Monday and were down another 3% in Tuesday trading. Those moves coincided with scrutiny of the talks; they do not establish that the discussions caused the declines. Luria offered a more skeptical assessment of investor expectations, saying Intel’s investors were “wearing rose-colored glasses right now.”