Do not pave the way for competitors

The central question for TSMC is whether the Terafab project represents a major customer seeking advanced chip supply or a future competitor aiming to acquire semiconductor manufacturing capabilities. Terafab is described as a highly vertically integrated facility, bringing together various chip production stages, including 2-nanometer-class process capabilities, for Tesla, SpaceX, and xAI.

While Musk's project requires TSMC's expertise in process integration, yield ramp-up, and mass production discipline, the nature of the partnership is critical. If TSMC maintains majority ownership and operational control, it would align with existing business models. However, if Terafab holds a controlling stake and TSMC provides its core manufacturing capabilities, the foundry's competitive moat could be redefined.

Taiwan's focus extends beyond the transfer of advanced process technology overseas to who controls the fab and whether a partner gains access to manufacturing capabilities rather than just production capacity. Preserving Taiwan's ecosystem of research, process integration, key talent, and supply chain collaboration is highlighted as essential. The outcome could either secure a long-term customer or facilitate the development of a powerful competitor.