Tesla Announces Plans to Build Its Own Chip Factory

Tesla's Semiconductor Play: Is a Proprietary Chip Factory on the Horizon?

Electric vehicle giant Tesla is planning a radical step to reduce its supply chain dependency and secure leadership in future technologies. CEO Elon Musk declared that achieving self-sufficiency in producing semiconductor chips, critical for the future of artificial intelligence and full self-driving systems, is essential. This announcement has created significant reverberations across the automotive and tech worlds.

Musk's vision aligns with his insistence that Tesla is not merely an automobile manufacturer but also an AI and robotics company. The processing power required for Full Self-Driving (FSD) and future robotaxi projects exponentially increases the need for custom-designed, high-performance chips. Influenced by the global chip crisis, Tesla's consideration of this strategic move has been interpreted by industry analysts as an expected development.

Strong Reaction from NVIDIA CEO: "Impossible"

However, Tesla's ambitious plan has been met with skepticism by a key industry player. NVIDIA CEO Jensen Huang, in a statement from November 2025, described Elon Musk's plan to build a mega chip factory at the level of TSMC as "impossible." Huang emphasized that advanced semiconductor manufacturing requires enormous capital investment, deep expertise, and time, making it practically very difficult for a new entrant in this field to instantly reach world-leader status.

This debate is part of a larger struggle over who will produce what, during a period where the automotive industry is deeply intertwined with technology. Automakers, traditionally dependent on chip manufacturers, want greater control over software and hardware. As a pioneer in this regard, Tesla is on a path to vertically integrate its supply chain, much as it has previously done with battery technology and vehicle manufacturing.