Source item

@elonmusk remarks at the latest Tesla shareholder meeting validate my previous analysis and predictions regarding his semiconductor strategy. The following brief analysis will focus on why Musk wants Tesla to build its own chip production plants. 1. Musk said, “So I’m hopeful that we can within less than a year of AI5 starting production, we can actually transition in the same fab to AI6 and double all of the performance metrics.” I previously projected that AI6 would enter mass production in 2027. Many questioned whether only a one-year gap between AI5 and AI6 was realistic, but Musk’s comments validate that timeline (setting aside whether the plan ultimately executes as stated). 2. Musk wants Tesla to build its own chip production plants. This also validates my earlier view that a key reason for shifting AI6 orders to Samsung was to gain real-world foundry experience at an exceptionally low cost. It’s clear Musk expects that experience to help Tesla stand up chip production plants of its own. Musk is worried about future chip supply, hence his comment: “But even when we extrapolate the best case scenario for chip production from our suppliers, it’s still not enough.” However, I don’t think chip supply is the core issue—at least not at TSMC. TSMC is unlikely to be the primary bottleneck. TSMC CEO C.C. Wei has told Musk before, “If you’re willing to pay, there will be chips.” While TSMC is known for its cautious approach to capacity expansion and often runs tight when demand is strong, history shows it has rarely been the primary bottleneck in the supply chain. When more information emerges, I’ll provide a tighter quantitative read on TeraFab’s supply–demand balance. For now, I’ll leave aside whether Tesla can successfully build its own chip production plant and focus on why Musk still wants a Tesla chip production plant even if TSMC’s supply isn’t the constraint: The first factor is geopolitics. Musk has publicly voiced concerns about the concentration of advanced node capacity in Taiwan. Even by 2030, TSMC’s advanced-node and advanced-packaging capacity in the U.S. will remain limited—especially on the packaging side, likely no more than about 10% of its global capacity. I believe Musk realizes this as well, which is why he said, 'And then you go to solve memory and packaging too.' The second factor is R&D support and production flexibility. It's expected that Tesla has significant growth potential, but within TSMC today it is still a second-tier customer relative to the likes of Apple and Nvidia. That naturally means less priority on R&D support and production flexibility—one of the main reasons Tesla moved AI6 to Samsung. The ultimate remedy is to control its own chip production plant. Finally, there's the integration advantage. Musk's new technologies and products are often at the cutting edge. The ability to customize key design and manufacturing segments to his specific needs—with chip production being a critical one—enables a highly integrated final product and maximizes the benefits of vertical integration. References: 1. Tesla's 2025 Annual Shareholder Meeting Transcript https://t.co/stoK3Zwq0J 2. TSMC CEO C.C. Wei told Elon Musk, "If you’re willing to pay, there will be chips." https://t.co/IuqqXewSRj 3. Musk has publicly voiced concerns about the concentration of advanced node capacity in Taiwan. https://t.co/K7UXdHZT5J