SpaceX and Tesla plan to build a semiconductor fabrication plant in Texas, with the goal of producing 1 terawatt of compute per year.

The newly public rocket company is doubling down on its operations in Grimes County, Texas, where it is also headquartered, in an effort to produce the chips it needs for its spacecraft.

The project, known as Terafab, will span 100 million square feet and represent a $16.8 billion investment for the first phase, Texas Governor Greg Abbott said Thursday. The initial phase will also employ 3,000 people, he said.

SpaceX and Tesla, which are both led by Elon Musk, are in need of semiconductor chips for their technologies. In April, Tesla broke ground on a research fab project in Texas, which it said Thursday was a precursor to the Terafab site.

"Both Tesla & SpaceX will need far more chips than current & future global production can supply," Tesla said in a post on X.

Tesla also said the Terafab will be the biggest chip manufacturing facility ever built. Tesla and SpaceX expect their combined demand for chips will exceed 1 terawatt a year, SpaceX said.

SpaceX said its operations in Texas have generated more than $28 billion in economic impact for Texas over the past two years. The company moved its headquarters to Starbase, Texas, from California in 2024, with Chief Executive Musk citing California's political environment as a reason for the move.

Tesla has been based in Austin since 2021, also moving from California.