Samsung Electronics has entered a $16.5 billion semiconductor supply contract with Tesla that will run through December 2033. According to Bloomberg, Samsung initially disclosed the agreement on Monday without naming Tesla as the counterparty, citing confidentiality requirements.

Tesla CEO Elon Musk confirmed the partnership on X, revealing that Samsung's Texas facility in Taylor will manufacture Tesla's next-generation AI6 chips. "Samsung's giant new Texas fab will be dedicated to making Tesla's next-generation AI6 chip. The strategic importance of this is hard to overstate," Musk wrote. The contract begins with order receipts on July 26, 2025, and extends through the end of 2033.

Musk noted that Samsung currently produces Tesla's AI4 system, while TSMC handles AI5 chip production. The new AI6 chips will form the foundation of Tesla's future driving hardware systems. Samsung agreed to allow Tesla to assist in maximizing manufacturing efficiency, with Musk stating he would personally walk the production line to accelerate progress.

Why This Deal Matters For Both Companies

The agreement provides Samsung's struggling foundry division with a major boost after years of losses and underutilization. Tech Startups reports that Samsung's foundry business lost over $3.6 billion in the first half of 2025, with the Taylor facility previously having virtually no major customers.

Samsung shares jumped 6.8% to their highest level since September following the announcement, while Tesla stock rose more than 1% in early trading. The contract could boost Samsung's foundry revenue by approximately 10% annually according to analyst estimates. For Tesla, the deal secures domestic chip production that avoids potential tariffs while supporting its autonomous vehicle ambitions.

The timing proves beneficial for Tesla as the company faces challenging quarters ahead. Musk recently warned of "a few rough quarters" until Tesla can deliver autonomous vehicles at scale. The AI6 chips will be critical for Tesla's Full Self-Driving technology and robotaxi services currently being tested in Austin.

Semiconductor Industry Competition Intensifies

Samsung's win comes as the company fights to remain competitive in the global foundry market dominated by Taiwan's TSMC. PatentPC data shows TSMC controls 67% of the global foundry market compared to Samsung's 8% share in recent quarters.

The deal represents Samsung's first major contract victory after Executive Chairman Jay Y. Lee was cleared of legal charges. Samsung has struggled to attract high-profile clients like Apple and Nvidia, who have largely chosen TSMC for advanced chip manufacturing. The company hopes its 2-nanometer process technology and Gate-All-Around transistors will provide competitive advantages in power-sensitive applications.

Chinese foundry SMIC has been gaining ground, potentially threatening Samsung's position as the second-largest foundry. Samsung's Texas facility gives the company a strategic advantage in serving US clients while avoiding geopolitical risks associated with Asian manufacturing. The partnership aligns with Washington's push to rebuild domestic semiconductor production through the CHIPS Act.

Further Reading

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