Elon Musk has announced that Tesla has signed a $16.5 billion agreement with South Korean tech giant Samsung Electronics to manufacture advanced AI chips. This major deal, focused on chip production through Samsung’s foundry business, is set to strengthen both Tesla’s future AI capabilities and Samsung’s position in the semiconductor industry.
A Boost for Samsung’s Texas Foundry
The chips will be produced at Samsung’s underutilized chip manufacturing facility in Taylor, Texas, a plant that has faced operational delays and a lack of major clients since its development began. Musk highlighted the plant’s location as a factor in the partnership, noting, “The fab is conveniently located not far from my house.”
According to Musk, Samsung has agreed to allow Tesla to collaborate on improving manufacturing efficiency, which he described as “a critical point” for the success of the project. He further stated that while the $16.5 billion figure represents the base value of the contract, actual chip output may exceed that estimate significantly.
The partnership breathes new life into Samsung’s foundry, which had previously delayed its full operation to 2026 due to a lack of orders. Ryu Young-ho, a senior analyst at NH Investment & Securities, remarked that the Taylor facility “so far had virtually no customers, so this order is quite meaningful.”
Tesla’s AI Chip Roadmap and Industry Competition
Samsung already produces Tesla’s AI4 chips, used in the company’s Full Self-Driving (FSD) driver-assistance technology. TSMC (Taiwan Semiconductor Manufacturing Company), a key industry rival, is scheduled to produce the AI5 chips in Taiwan and Arizona. Tesla’s next-gen AI6 chip, expected to be produced under this new deal, is likely to launch around 2027 or 2028, although Musk’s timelines have often faced delays in the past.
Samsung’s foundry business has been under pressure due to fierce competition from TSMC, which controls 67% of the global foundry market, compared to Samsung’s 8%, according to TrendForce. The Samsung-Tesla deal is seen as a key strategy by Samsung’s chairman, Jay Y. Lee, to expand beyond the company’s traditional strength in memory chips and into contract chip manufacturing.
The agreement also comes at a time when Samsung’s foundry division is reportedly facing heavy financial losses, with some analysts estimating over $3.6 billion in losses during the first half of the year. Analysts suggest this Tesla contract could significantly offset those losses and reestablish Samsung as a contender in the logic chip market.
A Strategic Move Amid Global Tech Shifts
Though Samsung had initially kept the client confidential, multiple sources have now confirmed Tesla as the recipient. The deal extends until the end of 2033, marking a long-term commitment from both companies in advancing AI technology.
Whether this agreement is connected to broader trade negotiations between South Korea and the United States remains unclear. However, the timing aligns with South Korea’s push to secure strategic U.S. partnerships in critical industries like semiconductors and shipbuilding.
As Samsung prepares to report its quarterly earnings, this development is expected to shine a positive light on its long-term growth prospects in the semiconductor space.
