Tesla signs a historical agreement from $ 16.5 billion chips with Samsung Electronics, Etbrandequity

tesla signs 16 5 billion chip supply deal with samsung

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Musk also observed that the figure of $ 16.5 billion was a minimal estimate and that effective production could be significantly higher.

Tesla has signed an agreement of $ 16.5 billion with Samsung Electronics per source of chip, a move that could support the production unit of contractual chips of the South Korean company, which has been under financial pressure, reported Reuters.The agreement arrives when Samsung, the largest chipmaker in the world, tries to increase its share in the foundry market where rivals such as Tasmc of Taiwan and SK Hynix of South Korea. According to Samsung, the agreement will be performed until the end of 2033, although initially retained the customer’s name by citing his confidentiality. Reuters, citing three sources that are familiar with the matter, confirmed Tesla as a client.

Production in texas

Elon Musk, CEO of Tesla, said that the new Samsung semiconductor plant in Taylor, Texas, will produce Viper Generation Chip AI6 of Tesla. “Samsung agreed to allow Tesla to help maximize production efficiency,” Musk said in an X post. “This is a critical point, since I will travel the line personally to speed up the rhythm of progress. And the Fab is located not far from my home,” he added.Musk also observed that the figure of $ 16.5 billion was a minimal estimate and that effective production could be significantly higher.

Samsung’s Taylor structure had faced delays and was missing important customers, leading to a postponement of the deliveries of equipment for ASML chipmaking, according to a Reuters Report from October. The start of production in the plant was postponed to 2026.

Ryu Young-Ho, NH Investment & Securities senior analyst, said that the order was significant for the Taylor Fab, which had “practically no customer”, although it can represent a relatively small part of the overall entrances of Samsung logic chip every year.

Strategic implications

While a temporal sequence for the production of AI6 chip had not been disclosed, Musk had previously stated that the AI5 chips would be produced by the end of 2026, suggesting that AI6 could follow in 2027 or 2028. It is expected that the current AI4 chips of Tesla, which feed its autonomous driving system, are produced by Samsung, while TSMC should produce the AI5 chip.

The agreement also highlights the strategy of the Tesla supplier and its involvement in the design of chips and production efficiency. The Business of the Samsung foundry, which produces logic chips for customers, currently holds only 8% of the global market compared to 67% of TSMC, according to trendforce data.

Pak Yuak, Kiom Securities analyst, estimated that Samsung foundry losses exceeded 5 trillion wins (about $ 3.6 billion) in the first half of the year. The Tesla agreement should reduce some of these losses.

It is not yet clear whether the agreement is linked to the current commercial discussions between South Korea and the United States. An official of the South Korean Ministry of Commerce said Reuters He was not aware of the fact that the agreement was part of any negotiation.

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  • Updated On Jul 29, 2025 at 01:40 PM IST
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  • Posted on 29 July 2025 at 13:40 Ist
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  • 2 min read
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