Tesla and SpaceX have confirmed plans to build their jointly developed Terafab semiconductor megafactory in Grimes County, Texas, with an initial investment of approximately $16.8 billion.

The companies say the completed facility will span more than 100 million square feet, making it the largest chip manufacturing site in the world. Terafab is intended to supply chips for Tesla’s future products, including the Cybercab and Optimus humanoid robot, as well as SpaceX’s planned space-based data centres.

The $16.8 billion commitment is significantly lower than earlier figures associated with the project. When Elon Musk first unveiled Terafab in March, the headline investment was $25 billion. A SpaceX filing in May subsequently outlined a potential investment of $55 billion initially, rising to $119 billion over multiple phases. That filing also described the project as a general framework without binding commitments.

The latest figure represents the first firm capital commitment attached to the project. Tax-abatement agreements have also been signed, while SpaceX has made an initial $10 million payment to Grimes County.

Intel is expected to play a central role in the actual manufacturing, handling semiconductor design, fabrication and packaging. Tesla has never manufactured semiconductor wafers, while Intel has decades of experience operating advanced fabrication facilities.

Despite the confirmed location and investment, major questions remain over Terafab’s ultimate scale and timeline. The proposed 100-million-square-foot footprint would dwarf existing semiconductor facilities, while the companies’ projected computing capacity has no direct industry benchmark.

For now, Terafab has moved from an ambitious proposal toward a funded construction project, but its final scope remains uncertain.