Tesla signs $16.5B chip deal with Samsung
Tesla has finalized a significant $16.5 billion agreement with Samsung Electronics to source chips, a move anticipated to enhance Samsung's struggling contract manufacturing sector. Following the announcement, Samsung's shares surged by 6.8%, reaching their highest level since the previous September. The deal will see Samsung's new chip factory in Taylor, Texas, produce Tesla's next-generation AI6 chip, revitalizing a project that has faced delays due to Samsung's challenges in attracting major clients.
Currently, Samsung manufactures Tesla's A14 chips, which are integral to the Full Self-Driving system, while TSMC is set to produce the AI5 chips. Elon Musk emphasized that Tesla will assist in optimizing manufacturing efficiency at Samsung's facility, which is conveniently located near his residence. He noted that the $16.5 billion figure represents a minimum estimate, with actual production likely to exceed this amount.
Analysts have highlighted the significance of this order for Samsung's Taylor factory, which previously had no major customers. The factory's operational start has been postponed to 2026 due to a lack of clients. While no specific timeline for AI6 chip production has been disclosed, Musk has indicated that the AI5 chips are expected to be ready by late 2026, suggesting that AI6 production may follow in 2027 or 2028.
Samsung, the leading memory chip manufacturer, is striving to expand its foundry business, which currently holds only 8% of the global market, significantly trailing TSMC's 67% share. The deal with Tesla is seen as a crucial step in reducing losses in Samsung's foundry operations, which analysts estimate exceeded 5 trillion won ($3.6 billion) in the first half of the year.
