TSMC Is Talking to Terafab About Using Its Capacity. Its One Condition: 'The Fab Has to Be Run by TSMC.'

Two weeks after Elon Musk confirmed that Terafab was talking to TSMC, TSMC has said so itself. On its third-quarter earnings call on 15 October 2026, chairman and chief executive C.C. Wei told analysts that the company is "still in discussion" with the customer building Terafab, that it has sent teams to Texas to evaluate a site, and that whatever comes of it carries one fixed condition: "the fab has to be run by TSMC."

What was asked, and what was answered

The question came from Gokul Hariharan of J.P. Morgan, who asked about the reports of a new fab cluster in Texas and about "any engagement with SpaceX or Tesla, given your customer did call you out last week" — a reference to Musk's 7 October post ruling out any TSMC role at Terafab beyond a sublease.

Wei's answer, as transcribed by Investing.com, came in three parts. On the United States: "we work very hard to expand our capacity in U.S." On location: TSMC has looked at sites outside Arizona, and "Texas is one. We send the teams to Texas to do all the evaluation." On the project itself: "We also talk to one of our customer who try to build a fab, Terafab, let me be more specific. We discuss with them, see whether that we can be utilizing that actual capacity also. We're still in discussion."

Hariharan followed up: "But all these are going to be TSMC-run fabs, right?" Wei said the talks could take more than one form, then closed the door on the rest: "the fab has to be run by TSMC."

Wei did not name Tesla or SpaceX, gave no timeline, size or investment figure, and said TSMC would report when it had a firm conclusion.

Where the two conditions overlap

Musk's position, from 7 October, was: "No, we will build and run the fab. Let there be ZERO doubt about that. Maybe TSMC subleases part of the Terafab if they want, but nothing more than that."

Set the two statements side by side and only one arrangement satisfies both: TSMC rents part of the Terafab site and operates that part itself, on its own process, for its own customers. That is also the plainest reading of "utilizing that actual capacity". What neither side will accept is the version Tim Culpan called likeliest on 3 October — TSMC owning and operating the plant for Tesla and SpaceX — and Wei's condition equally rules out Tesla and SpaceX running a TSMC process line in their own building.

The rest of the call touches Tesla too

Wei called demand "extremely robust", with no sign of a slowdown: the capacity queue Terafab was announced to escape is getting longer. In Arizona, TSMC has finished building its second fab and is moving in tools, with volume production due in the third quarter of 2027, slightly ahead of plan. Arizona is where Tesla's AI5 chip is due to be made alongside Samsung's Taylor plant, where trial production started in September.

What it means for an owner

Nothing in any car changes. Terafab is aimed at Optimus and training compute, not at vehicles, and the Grimes County site announced in August has not broken ground. What has changed is that both sides have stated their terms in public, and they are narrow enough to check against whatever is eventually announced: a TSMC-run block inside a Terafab that Tesla and SpaceX build and run, or no TSMC at all. Tesla's own earnings call on 22 October is the next place either company could say more.