Samsung secures USD 16.5 billion deal to manufacture Tesla’s Next-Gen AI Chips

SEOUL: Samsung Electronics has landed a record $16.5 billion deal to produce Tesla’s next-generation AI chips, known as the AI6, reports Korea Herald.

Tesla CEO Elon Musk announced on X (formerly Twitter) that Samsung’s chip plant in Taylor, Texas, will be dedicated to manufacturing the AI6 chips. This confirmation came shortly after Samsung revealed a major foundry contract with an undisclosed global client.

“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.” He added that Samsung currently manufactures Tesla’s AI4 chips, while TSMC will produce the AI5 chips in Taiwan and later in Arizona.

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.

Samsung currently makes AI4.

TSMC will make AI5, which just finished design, initially in Taiwan and then Arizona.

— Elon Musk (@elonmusk) July 28, 2025

Samsung’s regulatory filing also confirmed the $16.5 billion deal, which runs through 2033 and accounts for 7.6 per cent of the company’s projected 2024 revenue. While Samsung did not officially name Tesla, Musk’s post on “X” effectively confirmed the identity of the client. Musk also hinted that the total value of the contract could increase, calling the USD 16.5 billion “just the bare minimum.”

Samsung is currently accelerating construction of its Taylor facility, aiming for mass production to begin in the second half of 2026. News of the deal sent Samsung’s stock up 6.83 per cent, closing at 70,400 won, the first time in nearly a year the stock surpassed 70,000 won. The deal is a major win for Samsung’s struggling foundry business, which has been incurring large annual losses and dragging down overall profits.

In its latest earnings guidance, Samsung reported a 4.6 trillion won ($3.32 billion) operating profit for Q2 2025, down nearly 50 per cent year-over-year, with its Device Solutions division earning under 1 trillion won. The foundry and logic chip operations alone are expected to post losses of around 2 trillion won.

There has been speculation about spinning off the loss-making foundry division, but Samsung Chairman Lee Jae-yong dismissed the idea, stating he has “no interest” in such a move.

Industry analysts view the Tesla contract as a vote of confidence in Samsung’s chip-making capabilities. Despite trailing far behind TSMC, which holds 67.6 per cent of the global foundry market compared to Samsung’s 7.7 per cent, experts say this deal could attract more clients to Samsung’s 2-nanometer process technology.

“The latest contract is significant as the chip giant has been struggling with heavy losses in the foundry business. Winning an order from a major company like Tesla suggests strong trust in Samsung’s technology,” said Lee Jong-hwan, a system semiconductor engineering professor at Sangmyung University.

“This could pave the way for other big tech companies to place orders as well.” (ANI)