Summary
- Elon Musk revealed a $16.5b chip supply agreement between Tesla and Samsung Electronics, running through 2033.
- Samsung’s Texas fabrication plant will manufacture Tesla’s next-generation AI6 chips, with full customization designed by Tesla.
- The deal aims to boost Samsung’s struggling foundry business and cements Tesla’s semiconductor supply chain for AI-powered vehicles and robotics.
- Samsung confirmed the contract in a regulatory filing, but did not disclose Tesla as the contract partner; Musk publicly confirmed Tesla’s role.
- Musk stated that Tesla will be allowed to assist in optimizing manufacturing, with Musk promising direct involvement in facility operations.
- Analysts highlight the deal’s significance for Samsung amid losses and stiff competition from TSMC and SK Hynix.
- The partnership supports South Korea’s efforts to deepen US industrial ties, especially as it negotiates over potential new trade tariffs.
- Samsung’s shares rose sharply following news of the agreement.
- Existing and future Tesla chip designs will be handled by both Samsung (AI4 and AI6) and TSMC (AI5).
Tesla and Samsung Electronics have sealed a landmark $16.5b, multi-year agreement in which Samsung will supply advanced AI chips for Tesla’s next-generation vehicles and robotics, as confirmed by both regulatory filings and public statements from CEO Elon Musk on July 28, 2025. The deal represents a pivotal win for both companies amid fierce global competition in semiconductor manufacturing.
What Did Elon Musk and Tesla Confirm About the Deal?
As reported by Reuters’ Joyce Lee, Tesla CEO Elon Musk announced that the company had “finalized a $16.5 billion agreement to procure chips from Samsung Electronics,” emphasizing the profound significance of the partnership. Musk further clarified via social media:
“Samsung agreed to allow Tesla to assist in maximizing manufacturing efficiency. This is a critical point, as I will walk the line personally to accelerate the pace of progress. And the fab is conveniently located not far from my house.”
Musk specifically highlighted that Samsung’s new Texas fabrication plant would be dedicated to producing Tesla's next-generation AI6 chip. He stated:
“Samsung's vast new fabrication facility in Texas will focus on producing Tesla’s next AI6 chip. The significance of this cannot be overstated”.
How Has Samsung Described the Contract?
According to a Samsung regulatory filing cited by Bloomberg’s Sohee Kim and Reuters, the chipmaker reported a 22.8tr won ($16.5b) contract to manufacture chips for a “major global corporation,” with the contract running from July 24, 2025, to December 31, 2033. Samsung did not name Tesla in official filings, citing a confidentiality clause, but Musk’s confirmation and anonymous sources confirmed Tesla’s role as the partner.
Samsung also noted that, under the terms of the contract, the company would provide “contract chip manufacturing” services, marking one of its largest ever foundry deals.
Why Is This Important for Samsung’s Chip Business?
Samsung’s foundry business—responsible for manufacturing logic chips designed by external clients—has faced persistent losses and strong competition from archrival TSMC, whose client roster includes Apple, Nvidia, and Qualcomm. Industry analyst Pak Yuak of Kiwoom Securities told Reuters, “This latest agreement would help mitigate losses in Samsung’s foundry segment.” Analysts estimate foundry business losses of up to $450m in the first half of the year.
Lee Min-hee, an analyst at BNK Investment & Securities, suggested to Reuters and Bloomberg that the deal isn’t likely to involve Samsung’s most advanced manufacturing technology, but the sheer size of the agreement is expected to improve Samsung’s market share in contract manufacturing and boost its global credibility. The Times of India noted that Samsung is currently producing Tesla’s AI4 chip, while TSMC is responsible for the AI5, initially produced in Taiwan and Arizona, with AI6 now going to Samsung’s Texas facility.
How Will the Chip Deal Impact Tesla?
The deal ensures a steady, large-scale supply of artificial intelligence chips for Tesla, a critical resource for the company’s ambitions in autonomous driving, robotics (such as the Optimus humanoid project), and potentially other AI-integrated technologies. With Samsung dedicating an entire fabrication facility to Tesla’s needs, the automaker secures a strategic semiconductor partner close to its US operations.
Musk’s insistence on direct involvement in the chip facility’s optimization underlines how vital this customization is for Tesla’s next leap in AI technology and manufacturing competitiveness.
What Does This Mean for the US–South Korea Tech Partnership?
As reported by Reuters, Bloomberg, and The Korea Economic Daily, the chip agreement reinforces South Korea’s goal of expanding high-tech cooperation with the US—an effort growing more urgent as both nations weigh new trade tariffs and global supply chain vulnerabilities. For Samsung, a major contract with an American innovator like Tesla strengthens its hand as it negotiates both regulatory and commercial challenges at home and abroad.
How Have Markets Reacted?
Samsung Electronics’ shares spiked by over 4% following the deal’s confirmation, a reflection of investor optimism that the multibillion-dollar contract could help stem recent losses in its contract manufacturing division and reaffirm its position as a leader in global semiconductor supply.
What Exactly Are Tesla’s New AI Chips?
Elon Musk and The Times of India clarified that Samsung’s Texas facility will now focus on cutting-edge AI6 chips fully customized for Tesla’s requirements. While earlier Tesla chips were based on Samsung’s existing product lines, the new deal signifies deeper collaboration in both design and manufacturing, with Tesla playing an active on-site role in driving efficiency.
Musk added,
“Samsung will manufacture Tesla's next-generation A16 (AI6) chipset at their new Texas fab. This marks a crucial win for Samsung as the company was reportedly struggling with losses and stiff competition”.
Why Is This Significant in the Global Semiconductor Industry?
As Sohee Kim highlighted for Bloomberg, Samsung has long lagged behind TSMC in contract chip manufacturing market share, even as it dominates the global memory chip sector. This Tesla contract could signal Samsung’s recovery in the advanced chip market and underscores the vital role of foundry services in powering the AI revolution in automotive and robotics applications.
Tesla, by locking in dedicated supply lines for its custom AI chips, seeks to secure a technological advantage in self-driving, robotics, and various AI-adapted platforms. Industry experts see this as a major step for both companies in reshaping their fortunes in a fast-evolving global semiconductor landscape.