What just happened? Samsung Electronics has landed a landmark $16.5 billion deal to manufacture semiconductor chips for Tesla, a move that could reshape the competitive landscape in advanced chipmaking and help revive Samsung’s struggling foundry division. The multi-year contract, representing 7.6 percent of the company’s projected 2024 revenue, will run through the end of 2033.
The deal was first revealed in a South Korean regulatory filing on July 26, 2025. Although Samsung did not name the customer due to confidentiality agreements, Tesla CEO Elon Musk later confirmed on X that the electric vehicle maker was indeed behind the agreement. He underscored the strategic significance of the partnership, stating that Samsung’s new semiconductor fabrication plant in Taylor, Texas, will be dedicated to producing Tesla’s next-generation AI6 chips.
These chips are expected to power Tesla’s upcoming autonomous driving systems, robotics platforms, and AI training clusters. Production will ramp up once the Taylor facility becomes operational, which is projected for 2026.
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 😃
– Elon Musk (@elonmusk) July 28, 2025
Samsung’s foundry division, which manufactures chips for external clients, has long lagged behind industry leader TSMC. While TSMC dominates the market by serving major customers like Apple, Nvidia, and Qualcomm, Samsung has faced persistent challenges, including lower yields in advanced manufacturing and difficulty retaining clients.
Experts see Tesla’s decision as a major vote of confidence for Samsung, especially at a time when the company has lost high-profile contracts and posted operating losses in its foundry segment over the past year.
According to Kiwoom Securities analyst Pak Yuak, Samsung’s foundry business posted losses exceeding $3.6 billion in the first half of 2025, primarily due to delays in securing large customers and slow progress with its 2-nanometer technology.
Industry watchers suggest the Tesla deal could mark a turning point. Some experts believe that producing chips for a global player like Tesla at its Texas facility could help Samsung improve its production yields and attract additional top-tier clients. However, questions remain about the profitability of the deal, as analysts speculate that Samsung may have offered aggressive pricing to secure Tesla’s business.
However, Daniel Kim of Macquarie emphasized that the deal is strategically significant, even if short-term profit margins are limited, as it allows Samsung to gain experience with advanced manufacturing and strengthen its presence in the US market.
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