Intel CEO says he can think of no better partner than Elon Musk to explore unconventional chip manufacturing improvements — TeraFab partnership aims to rethink production to cut costs

At a glance:

• Intel CEO Lip-Bu Tan confirmed a strategic partnership with Elon Musk’s TeraFab, Tesla, and SpaceX during Intel’s Q1 2026 earnings call, praising Musk as the ideal partner to challenge chip manufacturing status quos.
• TeraFab is the first major customer for Intel’s upcoming 14A process node, with the partnership expected to explore 14A licensing, supply chain optimization, and unconventional efficiency improvements to cut production costs.
• Intel’s shares rose 19% in after-hours trading to $79.74 per share after closing at $66.78 on Thursday, as investors reacted positively to the TeraFab partnership announcement amid ongoing foundry losses (-45% operating margin in Q1 2026).

Partnership confirmed across Tesla and Intel earnings calls

The partnership between Intel and Elon Musk’s ventures was first revealed on Wednesday during Tesla’s quarterly earnings call, before Intel CEO Lip-Bu Tan expanded on the collaboration during Intel’s own earnings call on Thursday. Tan explicitly name-checked Musk as a critical partner, stating he "could think of no better partner than Elon Musk" to drive unconventional improvements in chip manufacturing. The collaboration centers on TeraFab, a Musk-linked entity tied to Tesla and SpaceX, with both parties aiming to rethink core semiconductor production processes to reduce costs and improve efficiency.

Tan framed the partnership as a natural extension of Intel’s six-decade history of taking measured risks to drive step-function improvements in transistor density, cost, power consumption, and performance. He noted that both he and Musk share a conviction that global semiconductor supply is failing to keep pace with rapidly accelerating demand across industries. The CEO emphasized that the two parties will explore innovative ways to refactor silicon process technology, prioritizing unconventional manufacturing efficiency improvements to shift the economics of semiconductor production.

While Tan declined to share granular details of the arrangement during the earnings call, he confirmed that TeraFab is the first major customer secured for Intel’s upcoming 14A process node. Industry speculation suggests TeraFab may license the 14A node from Intel, allowing the Musk-linked firm to bring production online faster than developing a custom node from scratch. Neither Intel nor Musk has formally confirmed whether the deal is strictly a licensing arrangement, with Tan describing the relationship as "very broad" and promising further updates as the collaboration progresses.

Financial context and market reaction

The partnership announcement comes as Intel’s Foundry business continues to struggle with declining revenue and persistent losses. The company reported a -45% operating margin for Q1 2026, an improvement from the -71.7% margin low recorded in Q2 2025, but still deep in unprofitable territory. Securing TeraFab as a major 14A customer is a rare win for the foundry unit, which has faced intense competition from TSMC and Samsung in recent years, as it seeks to scale production of advanced nodes for external clients.

Investors reacted sharply to the partnership news, with Intel’s stock price jumping 19% in after-hours trading to $79.74 per share after closing at $66.78 at market close on Thursday. The surge suggests strong market confidence in the TeraFab collaboration, even as Tan provided limited concrete details about the scope of the deal. Analysts note that any partnership that accelerates 14A adoption and fills foundry capacity could help narrow Intel’s operating losses faster than current projections.

Tan noted during the call that Intel is engaging with multiple other customers for its foundry services, but framed the TeraFab partnership as a particularly exciting strategic win. The CEO declined to specify timelines for when 14A production for TeraFab would ramp, or how much revenue the deal is expected to generate for Intel’s foundry unit. He reiterated that both parties will share learnings from the collaboration to shorten the time to full production, addressing the broader supply-demand gap plaguing the global semiconductor industry.

Unanswered questions and next steps

Key details of the TeraFab partnership remain unclear, despite Tan’s enthusiastic remarks about the collaboration. It is not yet confirmed whether the arrangement is a pure licensing deal for the 14A node, a joint manufacturing venture, or a combination of both. Musk has not publicly commented on the partnership beyond the initial mention during Tesla’s earnings call, leaving industry observers to speculate on how TeraFab will integrate Intel’s 14A node into its supply chain for Tesla’s automotive chips and SpaceX’s aerospace hardware.

Intel has not shared specifics on which products TeraFab plans to produce using the 14A node, or whether the partnership will include co-development of custom process improvements tailored to Musk’s ventures. Tan hinted that the collaboration could go beyond standard foundry arrangements, citing shared goals to refactor silicon process technology in unconventional ways. The company has committed to providing regular updates as the partnership progresses, but gave no timeline for when further details will be disclosed.

For now, the partnership represents a high-profile vote of confidence in Intel’s 14A node, which is a critical part of the company’s roadmap to regain leadership in advanced semiconductor manufacturing. The 14A node is expected to deliver significant improvements in transistor density and power efficiency over Intel’s previous 18A node, targeting demand from AI, automotive, and aerospace clients. If the TeraFab collaboration succeeds in cutting manufacturing costs and accelerating production timelines, it could serve as a template for future Intel foundry partnerships with other high-volume customers.