April 23 (Reuters) - Tesla (TSLA.O) chief Elon Musk said on Wednesday the electric vehicle maker plans to use Intel’s (INTC.O) next-generation 14A manufacturing process to make chips at its Terafab project, an advanced artificial-intelligence chip complex Musk has envisioned in Texas.WHAT IS THE TERAFAB PROJECT? Musk’s SpaceX, its xAI unit and Tesla will build two advanced chip factories at a sprawling facility in Austin, one to be used in Tesla vehicles and Optimus humanoid robots, and another designed for AI data centers in space.“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.Musk said he was grateful to existing chip suppliers, naming Samsung (005930.KS) , TSMC (2330.TW) and Micron (MU.O) , but said demand from his companies would eventually exceed total global chip output.He did not give a timeline for the project and has a track record of announcing highly ambitious projects, though several have faced delays or fallen away. Intel announced it would join the project in April, bringing established chip manufacturing expertise to the venture.<h3>LOCATION AND SCALE</h3>Musk has said the Terafab will handle each step of chip production, including the design.On Tesla’s earnings call on Wednesday, Musk said that the details of the Terafab deployment are still being worked out.In the near term, Tesla will be building the research fab on its Giga Texas campus in the Austin area. The initiative is expected to cost about $3 billion and “capable of maybe a few thousand wafers per month, but it’s really intended to try out ideas,” Musk said.“What we figured out thus far is Tesla doing the research fab, SpaceX doing the initial part of the large-scale Terafab. And then we got to figure out the rest,” he said.Terafab will eventually produce one terawatt of computing capacity a year, compared with about half a terawatt currently generated across the United States, Musk had said in March.Building enough chip capacity to power one terawatt of annual compute would cost between $5 trillion and $13 trillion in capital expenditure, according to Bernstein estimates.<h3>TECHNOLOGY</h3>Tesla plans to use Intel’s 14A manufacturing process to make chips at the Terafab project. The contract would mark Intel’s first major customer for the technology, a breakthrough for the chipmaker which has struggled to stand up its contract manufacturing business essential for taking on top rival TSMC.Musk said that by the time Terafab scales up, Intel’s 14A manufacturing process “will be probably fairly mature or ready for prime time” and “seems like the right move.”Musk’s staff have reached out to chip industry suppliers, including Applied Materials (AMAT.O) , Tokyo Electron (8035.T) and Lam Research (LRCX.O) , and Samsung for the Terafab project, according to Bloomberg.Staff have sought price quotes and delivery times for an array of chipmaking gear, Bloomberg reported last week, adding that in the past few weeks, they have contacted makers of photomasks, substrates, etchers, depositors, cleaning devices, testers and other tools.Reuters reported that SpaceX is planning to make its own graphics processing units, or GPUs, the chips at the heart of training AI models.<h3>THE “UNKNOWNS”</h3>Though Musk has said Terafab would target chips for cars, humanoid robots and space-based data centers, many details are unknown, such as:<ul><li>Who will pay for pricey chipmaking equipment</li><li>Who will operate the factory</li><li>When it will come online</li></ul>

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- Tesla plans to use Intel's next-generation 14A manufacturing process at its Terafab project, which aims to produce advanced AI chips in Texas.  
- The Terafab will feature two factories dedicated to chips for Tesla vehicles, humanoid robots, and AI data centers, with an expected production capacity of one terawatt annually.  
- Elon Musk highlighted the necessity of the project due to anticipated chip shortages but did not provide a timeline, and numerous operational details remain unconfirmed.

FACTBOX-Elon Musk lays out Terafab AI chip project plan