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Elon Musk Announces Tesla and Samsung Sign $16.5 Billion Chip Supply Deal
Tesla CEO Elon Musk revealed that the electric vehicle manufacturer has entered into a $16.5 billion agreement with Samsung Electronics to secure semiconductor supplies. The deal is expected to provide a significant boost to Samsung’s struggling contract chipmaking business.
Following the announcement, Samsung’s shares surged as much as 6.8%, reaching their highest level since September 2023. Tesla’s stock also rose 1.9% in U.S. premarket trading.
Musk stated that Samsung’s upcoming Taylor, Texas, semiconductor plant will produce Tesla’s next-generation AI6 chips, potentially revitalizing a project that has faced delays due to Samsung’s challenges in securing major clients.
“Samsung has agreed to let Tesla assist in optimizing manufacturing efficiency. This is a crucial step, and I will personally oversee progress to accelerate timelines. The facility’s proximity to my residence is an added advantage,” Musk said in a post on X (formerly Twitter) on Monday.
He later added, “The $16.5 billion figure represents the minimum commitment—actual output could be several times higher.”
A Strategic Win for Samsung’s Foundry Business
Samsung’s Taylor fab had previously struggled to attract key customers, making the Tesla deal particularly significant, according to Ryu Young-ho, a senior analyst at NH Investment & Securities.
In October 2023, Reuters reported that Samsung had postponed equipment deliveries from ASML for its Texas facility due to a lack of major orders. The plant’s operational start has already been delayed to 2026.
While no specific timeline was provided for AI6 chip production, Musk has previously indicated that the AI5 chips—manufactured by TSMC—will enter production by late 2026, suggesting the AI6 chips would follow shortly after. Analysts, including Lee Dong-ju of SK Securities, estimate mass production could begin in 2027 or 2028, though Tesla has historically missed some targets.
Samsung’s Broader Foundry Ambitions
Samsung, the world’s leading memory chipmaker, also operates a foundry business producing logic chips for clients. The Texas facility is a cornerstone of Chairman Jay Y. Lee’s strategy to expand beyond memory chips into contract manufacturing.
However, Samsung trails far behind TSMC in the foundry market, holding just 8% global share compared to TSMC’s dominant 67%, per TrendForce data.
The company had earlier disclosed the $16.5 billion deal without naming Tesla as the client, citing confidentiality. The agreement is set to run through 2033. Three sources familiar with the matter confirmed to Reuters that Tesla is the buyer.
Pressure on Samsung’s Chip Business
The deal comes as Samsung prepares to report earnings amid mounting challenges in the AI chip race, where it lags behind rivals like TSMC and SK Hynix. This underperformance has negatively impacted its profits and stock price.
Earlier this month, Samsung projected a 56% year-on-year decline in Q2 operating profit, partly due to widening losses in its foundry division. Pak Yuak, an analyst at Kiwoom Securities, estimates the unit’s losses exceeded 5 trillion won ($3.6 billion) in the first half of 2024.
Analysts note that Samsung has faced client attrition, with many switching to TSMC for advanced chips, highlighting the firm’s technological hurdles in the capital-intensive semiconductor industry. TSMC’s client roster includes Apple, Nvidia, and Qualcomm.