Billionaire Elon Musk's SpaceX and Tesla plan to launch what could be the world's largest building at 100 million square feet — or the equivalent of 15 U.S. Pentagons — in a rural county in Texas.
The chipmaking plant is planned for Grimes County, with a population of about 30,000, located about 30 miles east of Texas A&M University in the Brazos Valley. Grimes County is about 75 miles northwest of downtown Houston.
The SpaceX-led project that the firm calls a Terafab is expected to be capable of producing chips that can process 1 terawatt — or 1 million megawatts — per year. A terawatt is equivalent to 1,000 gigawatts, capable of powering 750 million homes. A gigawatt is equal to roughly 1,000 megawatts, enough energy to power 750,000 homes.
The chips are expected to power SpaceX's space-based data centers, as well as Tesla's Optimus robots and self-driving Cybercabs, the company said.
Texas Gov. Greg Abbott announced the project on Thursday, saying the Terafab is eligible for a $30 million grant from the Texas Enterprise Fund, the state's deal-closing program, to help develop the facility that could create 3,000 jobs.
"The first-of-its-kind Terafab facility will accelerate chip production in Texas at an unprecedented scale, create thousands of good-paying jobs in Grimes County, and expand economic opportunity for generations of Texans," Abbott said in the statement.
Two rural school districts and other local government entities also offered incentives for the project that is qualified for the state's Jobs, Energy, Technology and Innovation program — a competitive economic development program offering a 10-year limitation on school district maintenance and operations property taxes.
Grimes County and the school districts of Anderson-Shiro CISD and Iola ISD approved tax incentive agreements for the proposed campus, despite some community opposition. The school districts approved $1.66 billion in incentives, while the county offered SpaceX a 100% tax abatement in a 10-year period from 2027 to 2036, as well as pay in lieu of taxes with a lump sum of $10 million.
SpaceX and Tesla said they conducted a multistate site selection process evaluating potential locations across Texas, Arizona, New Mexico and Nevada for the Terafab project, according to the application for state incentives.
Current plans for the semiconductor fabrication plant involve four phases and a combined total investment of $119 billion, the application said.
SpaceX reported its first quarterly earnings this week since going public earlier this year. The firm's revenue nearly doubled in the quarter compared with the same period the prior year, as CoStar News reported.
Betting on Texas
Musk is no stranger to Texas. He co-founded SpaceX in a Southern California warehouse in 2002 as a rocket company with dreams of sending humans to Mars. Now, SpaceX has real estate supporting its three core business lines — space, internet access and artificial intelligence — throughout the country and in the Lone Star State.
SpaceX relocated its headquarters to South Texas in a town now called Starbase from California in 2024. The company also has a major factory in Bastrop, Texas, about 30 miles outside of Austin, and a rocket engine complex in McGregor, Texas.
"In addition to our headquarters in Starbase, Texas, where Starship is being developed and launched, and our Starlink factory in Bastrop, Texas, where our high-speed internet kits are manufacturing for millions of Starlink customers all around the world — we're now embarking on the most epic chip-building effort — combining logic, memory, and advanced packaging all under one roof — in Grimes County," Musk said in the statement.
In addition, Musk relocated Tesla's headquarters to Austin from Palo Alto, California, in 2021. Tesla selected Austin in 2020 to build a Gigafactory after an extensive site selection process in which the electric vehicle company was deciding between Texas and Tulsa, Oklahoma. Tesla has been expanding the Texas Gigafactory ever since.
By the end of this year, the Gigafactory in Austin is expected to span more than 15 million square feet of space — but only a small fraction of what Musk is planning to develop in Grimes County for the Terafab.
The 100 million-square-foot Terafab facility is expected to help SpaceX consolidate its production chain under a single roof to accelerate production to meet the company's future chip needs. SpaceX plans to hire engineers, technicians and plant workers to manufacture these chips.
Texas was selected for the Terafab project by SpaceX because of its skilled workforce, robust infrastructure, logistical advantages and its so-called business-friendly environment known for its lighter regulatory oversight and low taxes, officials said in describing the site selection for the facility.
"The Terafab is bringing cutting-edge manufacturing to America, creating thousands of high-paying jobs in the Lone Star State, and enabling us to produce AI chips at scale for use on Earth and in space," Musk added.
Musk's decision to build what could be the world's largest building comes as Abbott has ordered a comprehensive audit of another type of high-powered real estate: data centers. But a chipmaking plant, even though it needs a lot of power, has a very different impact on a community.
"Communities are much more receptive to industrial high-tech assembly projects compared with data centers," Michael Rareshide, a partner at Site Selection Group who specializes in data center site selection, told CoStar News.
"These manufacturing projects are 50-year decisions with high-paying jobs," Rareshide added. "They are like an auto plant. Whether the data center likes it or not, these projects get the power and the incentives."