Samsung Electronics has landed a landmark $16.5 billion deal to produce artificial intelligence chips for Tesla, a development expected to significantly bolster the South Korean tech giant’s ailing foundry division while accelerating Tesla’s vision of full autonomy.
The massive agreement—equivalent to 22.8 trillion won—was disclosed on Monday and will span until the close of 2033.
Production will be based at Samsung’s upcoming manufacturing facility in Taylor, Texas, where Tesla’s next-gen AI6 chips are scheduled to be fabricated.
Elon Musk, CEO of Tesla, confirmed the collaboration on social platform X, calling it “just the bare minimum,” and hinted that the final value of the contract could surpass current estimates.
Following the announcement, Samsung’s stock price surged by nearly 7%, reaching its highest point since last September. Other players in Samsung’s supply chain, such as Soulbrain Co., also experienced a strong rally, with shares climbing 16%. The company, however, refrained from sharing more details, citing contractual confidentiality.
Musk revealed that he would personally inspect the fabrication line to help enhance the production process. He emphasised that these advanced chips would serve as the backbone of Tesla’s self-driving systems. While Samsung currently manufactures Tesla’s AI4 chips, Taiwan’s TSMC is responsible for producing the upcoming AI5 generation.
This contract marks a major win for Samsung following a difficult period for its chipmaking unit. The company’s foundry business has faced underperformance and low utilisation rates. Construction delays at the Texas plant had pushed its operational timeline to 2026.
“Their foundry business has been loss-making and struggling with under-utilisation, so this will help a lot,” according to Vey-Sern Ling, managing director at Union Bancaire Privée. “Tesla’s business may also help them to attract other customers.”
TSMC still dominates the global chip production market, with a 67.6% share in the first quarter of 2025, while Samsung’s market share slipped to 7.7%, down from 8.1% the previous quarter, as reported by TrendForce.
Both chipmakers are racing to introduce 2-nanometer chip technology, seen as the benchmark for next-generation semiconductors.
For Tesla, the partnership underscores Musk’s insistence that its future lies in achieving full autonomy. Despite disappointing recent earnings, Musk has predicted large-scale deployment of self-driving vehicles by mid-2026. However, analysts remain cautious about the timeline.
His recent comments also hinted at an accelerated transition between chip versions—from AI4 to AI5, and rapidly to AI6. That quick progression may stir dissatisfaction among customers who were told as far back as 2016 that their Teslas had the necessary hardware for autonomy. Tesla halted hardware retrofits in 2023, citing excessive costs and technical issues.
