It is still morning in Texas when Elon Musk logs in to the ASML Technology Conference on Thursday afternoon at ten past five. This is the annual meeting in the Brabanthallen in Den Bosch where engineers from the chip machine manufacturer exchange knowledge and consider the future.
One day before he expects to make the largest IPO to date with SpaceX, the richest man on earth sets aside fifty minutes for a virtual chat with the European high-tech giant ASML. That has everything to do with Musk’s Big Plan: data centers in space, self-driving cars on the streets and robots in shops, factories, hospitals and households. All powered by AI, and therefore by chips.
The large-scale use of artificial intelligence, which Silicon Valley dreams of, requires much more computing power than is currently available. That’s why all the chip designers are lining up at TSMC, the Taiwanese chipmaker that dominates the production of advanced chips.
Musk doesn’t like to wait. In March he announced that SpaceX is building its own chip factory, for both processors (for calculations) and memory chips (for data storage and processing). These are the “main ingredients” which Musk misses to fulfill the ambitions of his companies SpaceX and Tesla, manufacturer of electric cars.
He needs ASML for this, because the Veldhoven company is the only manufacturer of EUV chip machines. These are the complex devices that can apply fine-meshed structures to silicon disks using extreme ultraviolet light – an indispensable tool for making AI chips.
Boycott
The ASML summit often invites customers to give an online presentation on the technology day. But the invitation for Musk did not go down well with a group of ASML employees who vented about his extremist ideas on the internal discussion forums. They promise to boycott the conversation between Musk and ASML CEO Christophe Fouquet by logging out or walking away just before the closing drinks.
However, ASML cannot ignore Musk: the company considers itself a ‘neutral’ player that supplies to any chip manufacturer that is not subject to legal restrictions, such as export restrictions. If the Terafab reaches serious proportions, it will generate serious turnover and ASML should grow much faster than planned.
Musk, never averse to a wild prediction, ultimately wants to produce a million wafers (discs with chips) per month with the Terafab. The majority are intended for data centers in space. The first test factory would more than 100,000 wafers per month have to make. By comparison, market leader TSMC delivered around 17 million wafers per year in 2024.
The Terafab investments can be made according to recent estimates amount to $119 billion. A rule of thumb is that at advanced chip factories, one fifth of the investment goes to the purchase of lithography machines. This means that Terafab can generate billions in turnover for ASML over the years.
The A is for Ångström
An ambitious newcomer to the chip market means extra competition for TSMC, ASML’s largest customer. Musk works for Terafab together with Intelthe American chip manufacturer. Intel was in a deep slump, but is aiming for a comeback with the support of President Trump. Like TSMC, Intel also wants to manufacture products from other chip designers. That is the only way to survive in the capital-intensive semiconductor industry. It is also important for the United States that chips are made domestically, to reduce dependence on Asian suppliers. TSMC in particular is investing money in new factories in the US, so far $165 billion.
A bit of technology: Intel is working on a new ’14A’ production process (the ‘A’ is from Ångström, a tenth of a nanometer, which is again a millionth of a millimeter). Intel hopes to squeeze hundreds of billions of transistors onto one chip and surpass competitor TSMC in technology. But first Intel must prove that it can produce such chips efficiently, without too many errors. Otherwise no customer will dare.
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Intel uses the most expensive ASML machines for this. These High NA EUV systems cost up to 400 million euros each and can draw even finer lines than their predecessors. If Musk wants the cream of the crop for his Terafab, that is an important boost for ASML’s new devices.
You can think of a complex chip as a stack of dozens of A4 pages, with a few pieces of paper printed at the highest resolution, with the most expensive equipment. That 14A process also works with ‘normal’ EUV machines and less complicated lithography systems are also needed to expose the somewhat ‘coarser’ layers.
‘Impossible’
Musk wants his companies to be able to provide crucial components themselves: cars with their own batteries, satellites with their own solar cells and data centers with their own chips. What unites him with ASML is his affinity with complex hardware and the ambition to build ‘impossible’ things.
Besides being controversial, Musk is also a pioneer in the field of infrastructure. The Tesla charging network, Starlink internet and space transport with reusable rockets are commercially successful. Selling computing power to AI companies as Anthropic will be the next step. If SpaceX has its way, that computing power will soon come mainly from space – within four or five years, Musk initially predicted. But floating data centers are far from certain. “You have to take this with a grain of salt,” Musk indicated in a recent one video on X. “It’s not a promise, we’re trying to make this happen”
In addition, Terafab must make chips for Tesla. This is not a novelty; the Chinese automaker BYD, for example, also designs and produces semiconductors itself. With his own factory and his own AI chip designs, Musk hopes to reduce his dependence on Nvidia and TSMC while accelerating the expansion of the entire chip industry.
Tesla has already signed a deal with South Korea’s Samsung for a chip factory $16.5 billion in Texas. The first Terafab location is also emerging in Texas: the directors of Grimes County agree with the building permit and cancel Musk’s property taxes lost in advance.
The upcoming major IPOs of SpaceX, Anthropic and OpenAI show signs of a bubble about to burst, but for now the chip industry is benefiting from the explosive demand for computing power and memory chips. “We are just at the beginning,” CEO Fouquet said in an interview with NRC. The ASML share (annual turnover 32.7 billion euros) is now at a record high: 1,500 euros, 50 percent above the previous peak in the summer of 2024.
Despite all AI ambitions and geopolitical strategies, there is a natural limit to the number of chip factories that arise worldwide. The production lines are largely automated, but human expertise is still needed to optimize the chip machines and keep them running. For example, TSMC continues to fly in Taiwanese engineers to its factories in Arizona because there is not enough experience available in the US.
The same applies to SpaceX: without the right experts, the Terafab will not get off the ground.