What to know about Elon Musk's massive $16.8 billion chip factory

The factory is set to be the largest building in the world, Musk said.

Elon Musk plans to build a $16.8 billion chip factory that he says is set to become the largest building in the world.

Musk, the CEO of SpaceX and Tesla, announced the project as chip manufacturers worldwide ramp up production in response to a surge of demand triggered by advances in artificial intelligence.

The massive plant, known as Terafab, will be located in southeastern Texas, roughly 70 miles outside Houston, according to its website.

"The facility will be an advanced semiconductor fab that will bridge the divide between current global chip supply and the compute demand of the future," the website says.

Here's what to know about the new chip factory:

Why is Elon Musk building a new chip factory?

Semiconductors are a key ingredient in a vast array of products ranging from washing machines to refrigerators to laptops. The growing adoption of AI, meanwhile, has driven up demand for advanced chips.

SpaceX oversees xAI, a Musk-led AI company that offers a chatbot in competition with the likes of OpenAI's ChatGPT and Anthropic's Claude. Those AI ambitions will require data centers equipped with semiconductors.

Tesla-made electric vehicles and humanoid robots will also need chips, the factory's website says.

The combined demand for chips from SpaceX and Tesla is expected to exceed 1 terawatt of compute, a larger amount than the entire global supply currently available, according to the website.

SpaceX and Tesla both rank among the 11 largest companies in the world, as measured by market capitalization. Taken together, they boast a combined value of more than $3 trillion.

What's different about Elon Musk's new chip factory?

The factory will span 100 million square feet of manufacturing space, making it the largest facility of its type in the world, according to its website.

Beyond its size, the website said, the factory will be vertically integrated, meaning it will put each phase of the production process under one roof, including manufacturing, packaging and testing.

The facility will employ 3,000 people, many of whom will be from the local area surrounding the factory site, the website said.

In an effort to mitigate environmental impact, the factory will depend on water from a nearby reservoir rather than local groundwater, the website said.

The plant makes up a a part of Musk's aspiration to build space-bound data centers and other infrastructure in space.

"By building and operating the largest chip manufacturing facility on the planet, we're continuing down a path where future humans can compete over building the largest facilities in the solar system, and eventually the galaxy," the website said.

What's next for Elon Musk's new chip factory?

The multi-billion dollar investment announced by Musk marks the first phase of construction on the plant. A future potential expansion, the website said, could bring "total investment much higher."

In a statement last week, Texas Gov. Greg Abbott applauded the project and hinted at its ever-growing scale.

"Texas is where big ideas grow even bigger," Abbott said.