Samsung has secured a massive $16.5 billion contract with Tesla to produce cutting-edge AI processors, marking one of the semiconductor sector’s most significant partnerships in recent years.
The agreement spans nearly a decade through 2033, with Samsung manufacturing Tesla’s next-generation AI6 chips at its brand-new facility in Taylor, Texas. Tesla CEO Elon Musk personally confirmed his company as the client, revealing that the Texas plant will focus entirely on creating these crucial semiconductors.
These chips will power Tesla’s upcoming electric vehicles and autonomous driving systems, representing a quantum leap in automotive artificial intelligence.
What makes this partnership extraordinary goes far beyond typical business relationships. Tesla engineers will collaborate directly with Samsung teams to fine-tune manufacturing processes—an unprecedented level of cooperation that showcases how vital these AI chips are for Tesla’s future.
Musk has emphasized his hands-on involvement in speeding up production, noting that the Texas facility’s proximity to his residence allows for direct supervision of operations.
Also Read: AI erased 80,000 tech jobs, it created huge salary boosts elsewhere
The financial impact cannot be overstated. This contract delivers Samsung approximately 7.6% of its total annual revenue and could increase foundry sales by 10% yearly. For a company whose foundry division has been bleeding money—losing over $3.6 billion in just the first half of 2025—this deal provides desperately needed financial relief.
Market reaction was swift and positive. Samsung’s stock jumped 3.5% during Seoul trading, recording its biggest intraday surge in nearly a month. The timing couldn’t be better for Samsung’s foundry business, which has watched its market share plummet to just 7.7% while competitor Taiwan Semiconductor Manufacturing Company commands a dominant 67.6% of the global market.
The AI6 chips represent the pinnacle of automotive computing technology. While Samsung currently produces Tesla’s AI4 processors and TSMC handles AI5 designs, this new contract positions Samsung as Tesla’s primary partner for future automotive AI innovations. These semiconductors will enable Tesla’s most sophisticated autonomous driving features and advanced vehicle computing capabilities.
Industry experts view this agreement as potentially transformative for Samsung’s foundry recovery efforts. The long-term nature provides stability and demonstrates confidence in Samsung’s technological capabilities, despite ongoing challenges with yield rates and 2-nanometer process development compared to TSMC’s offerings.
Also Read: TCS to cut workforce by 12,000 citing AI disruption and market uncertainty
This collaboration signals a fundamental shift in how automakers approach semiconductor partnerships. Tesla’s decision to work intimately with Samsung on chip design and manufacturing optimization suggests the industry is moving toward deeper, more strategic relationships rather than simple supplier arrangements.
The deal strengthens economic ties between the United States and South Korea in advanced manufacturing. With production occurring in Texas, the partnership supports domestic chip manufacturing objectives while giving Tesla enhanced control over its supply chain for critical AI components.
