Surprise! Intel has teamed up with Elon Musk and his Terafab project, to 'help refactor silicon fab technology' to give SpaceX and Tesla 1 TW per year of AI compute

With a social media post out of the blue, Intel has confirmed it has joined forces with Elon Musk's Terafab project, using its foundries and packaging facilities to "help refactor silicon fab technology". The exact details and nature of the agreement aren't yet clear, but Intel is unlikely to get as big a foundry order as this from any other partnership.

Intel CEO Lip-Bu Tan retweeted the X post within a matter of minutes, adding, "Elon has a proven track record of reimagining entire industries. This is exactly what is needed in semiconductor manufacturing today. Terafab represents a step change in how silicon logic, memory and packaging will get built in the future. Intel is proud to be a partner and work closely with Elon on this highly strategic project."

What exactly is Terafab? Well, it's a project that Musk has put together to essentially provide the mountain of AI processors required for xAI and SpaceX (the two companies only recently merging) and Tesla, with a goal of achieving '1 TW of compute per year'. No, not teraflops, terawatts. And yes, I know that's not a unit of computational power, but that's the odd world that AI lives in.

Reuters has reported that Intel's share price climbed by a rather modest 3% at the news, but this is understandable, given the lack of details so far. For example, we have no idea as to precisely what Intel will be doing in this partnership: designing the chips, fabricating them, packaging them, a little bit of each, or doing the full shebang?

As Intel doesn't have a huge list of customers using its foundry and packaging services, I'd be surprised if Lip-Bu Tan hasn't agreed to them being used heavily for the Terafab project. That said, Musk has previously said that Tesla's foundry in Austin will be the first location to start creating chips for the project, so it's very unclear where Intel fits into the picture.

Another unanswered question is whether or not Intel actually has the capacity to meet the demands of Terafab, especially given that it uses TSMC to manufacture a significant number of parts for its own processors. But these are armchair musings, and Tan will obviously know exactly what Intel can and can't do.

My only real concern is what would happen if the project really takes off, and Intel ends up in the same situation as Samsung, SK hynix, and Micron; i.e. the majority of its production output is to serve the AI market, resulting in a reduction in the supply of consumer products.

There has already been warnings about CPU shortages and price rises, and while it will take a while for the Intel-Musk venture to garner any momentum, just what exactly would happen to the PC market if processors quadrupled in price like DRAM and SSDs have? You know what, let's not even think about that.