Samsung Electronics has clinched a $16.5 billion contract to supply chips to Tesla through 2033, marking a crucial victory for the South Korean giant’s struggling foundry division that has been hemorrhaging money while losing ground to Taiwan Semiconductor Manufacturing Co.
Tesla CEO Elon Musk confirmed the deal on social media platform X after Samsung disclosed the contract Monday without naming the customer. Samsung shares jumped as much as 6.8% to their highest level since September following the announcement.
The contract centers on Samsung’s new fabrication facility in Taylor, Texas, which will produce Tesla’s next-generation AI6 chip. Musk noted that Samsung currently makes Tesla’s AI4 chips, while TSMC will manufacture the AI5 generation, highlighting the competitive dynamics in advanced semiconductor production.
Samsung’s foundry business has faced mounting pressure as analysts estimate losses exceeding 5 trillion won ($3.63 billion) in the first half of 2025. The division’s market share has declined to 7.7% in the first quarter, down from 11% a year earlier, as customers including Apple and Nvidia have migrated to TSMC due to yield issues.
Samsung’s market share is projected to drop below 10% in 2025 as the company struggles with what industry observers describe as technical challenges and massive unrecoverable capital expenditures. The Tesla partnership represents a lifeline for Samsung’s ambitions to compete in contract manufacturing.
Bloomberg Intelligence estimates the deal could boost Samsung’s foundry sales by 10% annually over the contract period, though the chips are unlikely to utilize Samsung’s most advanced 2-nanometer technology initially.
