Tesla CEO Musk Says Company Plans to Use Intel's 14A Process for Terafab

Tesla becomes first customer for Intel’s advanced 14A chip technology

Tesla Partners with Intel for Advanced Chip Manufacturing

Overview of the Partnership

April 22 (Reuters) - Tesla's plans to use Intel's advanced 14A manufacturing process to make chips at its Terafab project, CEO Elon Musk said on Wednesday, making the company Intel's first major customer for the technology.

The move marks a breakthrough for Intel, which has been trying to revamp its business to attract outside customers to use its chip manufacturing technology. Intel's forthcoming 14A chipmaking technology aims to compete with top rival Taiwan Semiconductor Manufacturing Co, but Intel had not yet disclosed a major external customer.

Intel's shares rose 3.6% in extended trading. Intel, which has said it was in discussions with large customers about 14A, declined to comment.

Intel's Role in the Terafab Project

Intel joined Musk's Terafab AI chip complex earlier this month with SpaceX and Tesla to make processors to fuel the billionaire's robotics and data center ambitions.

"Given that by the time Terafab scales up, 14A will be probably fairly mature or ready for prime time, 14A seems like the right move, and we have a great relationship with Intel," Musk said during Tesla's earnings conference call.

The move could boost investor confidence in Intel's next-generation manufacturing process after the firm's previous struggles with yields for its chips.

Details of the Terafab Project

Terafab is an advanced AI chip complex Musk has envisioned in Austin. SpaceX and Tesla will ‌build two advanced chip factories at a sprawling facility, one to power cars and humanoid robots, and another designed for artificial intelligence data centers in space, Musk said in March.

Ben Bajarin, head of technology consultancy Creative Strategies, said that Intel's 14A technology could "turn out to be a bigger deal for Intel than folks thought."

"It’s important to have multiple partners as early design partners to help clean the pipe and work through needed learnings at the leading edge. They will definitely have scale, so a great first non-Intel customer," Bajarin said.

Uncertainties and Industry Reactions

Many details of Tesla's Terafab project - such as who will pay for pricey chipmaking equipment, who will operate the factory and when it will come online - remain unknown.

But Musk's vote of confidence in Intel's technology outweighs those unknowns, said Jay Goldberg of Seaport Research Partners.

"Having a customer is more important than the timing," Goldberg said.

Intel’s Manufacturing Evolution

From In-House Production to External Partnerships

REAL VOLUMES

For most of its history, Intel made chips for itself, pouring billions of dollars into creating factories that made the world's fastest and smallest chips. But Intel lost its manufacturing lead to TSMC and computing markets shifted first to mobile phones and later to AI, two areas where Intel's chips have never dominated.

That left Intel's future uncertain, with former CEO Pat Gelsinger plotting a comeback plan that required finding external customers to offset the staggering cost of creating advanced chip factories. The customers never materialized under Gelsinger's management, and under current CEO Lip-Bu Tan, Intel has warned that it might exit the chip manufacturing business altogether if it could not secure a customer.

Potential Impact of the Terafab Project

Terafab will eventually produce one terawatt of computing capacity a year, compared with about half a terawatt currently generated across the United States, Musk has said. 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.

Seaport's Goldberg said that Musk's lofty estimates of how many chips its robots could one day require may or may not materialize, but even making chips for Tesla's existing businesses would be a significant win for Intel. 

"It's not equivalent to Apple or Nvidia" in terms of chip volumes, Goldberg said.

"But it's a real customer. It can be real volumes," he said. 

Reporting Credits

(Reporting by Zaheer Kachwala and Aditya Soni in Bengaluru and Stephen Nellis in Morgan Hill, California; Editing by Pooja Desai and Deepa Babington)