Samsung Electronics Co. has landed a huge $16.5 billion deal to manufacture next-generation AI semiconductors for Tesla Inc., marking a significant boost to its underperforming chip foundry business. The long-term agreement, announced Monday, will run through the end of 2033 and center around production at Samsung’s upcoming facility in Taylor, Texas.
South Korea’s largest company stated that the contract, worth 22.8 trillion won, is aimed at fabricating Tesla’s AI6 chip, a key component of the electric automaker’s future self-driving systems. Tesla CEO Elon Musk confirmed the development on X (formerly Twitter), referring to a Bloomberg News report and describing the deal’s value as “just the bare minimum,” with expectations that actual production could surpass initial estimates.
Strategic partnership strengthens Samsung’s AI semiconductor ambitions
This agreement marks one of the most high-profile wins for Samsung’s foundry division, which has faced mounting challenges in recent years, including underutilized capacity and delayed construction timelines. The company, known primarily for its memory chip dominance, has struggled to gain market share in contract manufacturing of advanced semiconductors, an area currently led by Taiwan Semiconductor Manufacturing Co. (TSMC).
Samsung’s shares on the Korea Exchange surged 6.8% following the announcement, their highest point since September. Several suppliers, including Soulbrain Co., saw even sharper gains, climbing as much as 16%.
While Samsung declined to comment on the specifics of the deal due to contractual confidentiality, analysts are already weighing in on its significance. “Their foundry business has been loss-making and struggling with under-utilization, so this will help a lot,” said Vey-Sern Ling, managing director at Union Bancaire Privée in Singapore. “Tesla’s business may also help them to attract other customers.”
Tesla’s AI6 chip to power future self-driving capabilities
The AI6 chip will serve as the backbone of Tesla’s upcoming autonomous driving hardware suite. According to Musk, Samsung is currently manufacturing the AI4 chip, and the upgraded AI6 model will take its place in Tesla vehicles over the next several years.
In a statement posted on X (formerly Twitter), Musk revealed that he will personally oversee parts of the fabrication process at the Taylor facility and will assist in optimizing chip production. His involvement underscores the strategic significance of the partnership to both companies.
A turning point for Samsung’s foundry division
Samsung’s contract with Tesla arrives at a pivotal time. The company’s foundry business has fallen behind rivals in terms of global market share. In Q1 2025, Samsung’s share dropped to 7.7%, compared to 8.1% in the previous quarter, according to market researcher TrendForce. In contrast, TSMC maintained a dominant 67.6% share during the same period.
However, Samsung is pushing forward with next-generation technologies, including plans for 2-nanometer chip production. Analysts say the Tesla contract could serve as a strong vote of confidence in Samsung’s fabrication roadmap, especially as Intel Corp. continues to face skepticism over its semiconductor turnaround strategy.
“This deal holds more than monetary value,” said Ryu Young-ho, an analyst at NH Investment & Securities Co. “It reinforces Samsung’s role as the most credible alternative to TSMC, while helping refine its process technologies for future clients.”
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