SEOUL – The CEO of Tesla, Elon Musk, has announced that the company has entered into a $16.5 billion agreement with Samsung Electronics to procure chips. This deal is seen as a way to support Samsung’s struggling contract manufacturing sector.
Following the announcement, Samsung’s stock surged nearly 7%, a positive response during a time when the leading memory chip manufacturer is under pressure in the competitive AI chip market, lagging behind companies like TSMC and SK Hynix.
Musk mentioned that Samsung’s new chip plant in Taylor, Texas will produce Tesla’s upcoming AI6 chip, which could revive a project that has experienced significant delays partly due to Samsung’s challenges in attracting major clients.
“Samsung has agreed to let Tesla help enhance manufacturing efficiency. I’m personally going to be involved to speed things along,” Musk expressed on social media, noting the factory’s proximity to his home. He also indicated that the $16.5 billion figure is just a baseline, with actual production expected to be much higher.
Samsung’s shares rose to levels not seen since last September, while Tesla’s stock grew by 1.9% in early trading.
According to an analyst from NH Investment & Securities, this deal is significant for Samsung, which had previously struggled to secure clients for the Taylor factory. However, the order might represent only a minor part of its annual logic chip revenue.
In October, there were reports that Samsung had delayed deliveries of chipmaking equipment for this factory due to a lack of major customers and had postponed its operational start until 2026.
It remains unclear if the deal between Samsung and Tesla is tied to ongoing trade discussions between South Korea and the U.S., particularly as Seoul is seeking partnerships in the chip sector amidst efforts to negotiate trade terms that could avoid or lessen impending tariffs from the U.S.
A South Korean trade official stated he was unaware of any connection between the deal and trade negotiations.
Regarding production timelines, there was no specific deadline provided for the AI6 chip, but Musk had mentioned that the AI5 chips are expected to be manufactured by the end of 2026, hinting that AI6 would subsequently follow. An analyst at SK Securities predicted production for the AI6 chip could occur in 2027 or 2028, though Tesla has a history of not meeting its production goals.
Currently, Samsung produces the AI4 chips that power Tesla’s Full Self-Driving system, while TSMC has plans to manufacture the AI5 chips in Taiwan and later in Arizona, according to Musk.
Samsung, being the top memory chip producer, also fabricates logic chips as part of its foundry business. The Texas factory is essential for Samsung’s chairman’s vision to branch out from its traditional memory chip production into contract chip manufacturing, a sector where it presently holds only 8% of the global market compared to TSMC’s significant 67% share.
Samsung previously announced the $16.5 billion deal without naming the client, citing a request for confidentiality. However, multiple sources revealed that Tesla is indeed the customer.
This agreement arrives at a challenging time for Samsung, which is set to release its earnings report soon and has seen a projected 56% decline in operating profit for the second quarter, partially due to ongoing losses in its foundry business.
An analyst highlighted that the deal would help mitigate losses at Samsung’s foundry division, which have reportedly exceeded $3.6 billion in the first half of the year. Many clients have shifted to TSMC for advanced chips, highlighting the technological hurdles Samsung faces in this capital-intensive industry.
