Samsung Signs $16.5 Billion Chip Supply Deal with Tesla, Boosting Its Foundry Business Amid Profit Challenges

Samsung’s Major Chip Contract with Tesla

Samsung Electronics has secured a $16.5 billion multiyear contract to manufacture AI chips for Tesla at its new fabrication facility in Taylor, Texas. This agreement, which will run until the end of 2033, marks a significant boost to Samsung’s foundry business, which has struggled to attract major clients and faced operational challenges.

Details of the Deal and Production

The contract involves production of Tesla’s next-generation AI6 chip, anticipated for use in humanoid robots, self-driving cars, and AI data centers. Samsung currently produces Tesla’s AI4 chips, while TSMC handles the AI5 chip production.

Elon Musk emphasized the strategic importance of the deal, noting that Samsung allows Tesla to assist in maximizing manufacturing efficiency. The Texas plant is expected to begin operations in 2026.

Market Impact

Following the deal announcement, Samsung’s shares surged by up to 6.8%, reaching their highest level since September 2024. Tesla’s shares also rose by 1.9% in premarket trading.

Samsung’s Business Context

Samsung, the world’s largest memory-chip maker, has been striving to close the gap in the foundry market dominated by Taiwan Semiconductor Manufacturing Co. (TSMC), which holds a 67% market share. Samsung’s foundry market share has declined to 7.7% amidst production yield issues and slower progress in advanced manufacturing.

Despite this, the Tesla deal is expected to diversify Samsung’s customer base from primarily smartphone-focused clients to include applications in AI data centers and robotics, potentially reducing previous losses in the foundry segment.

Challenges and Financial Performance

Samsung recently reported a sharp 56% drop in operating profit for Q2 2025, primarily due to inventory writedowns related to U.S. export restrictions on AI chips destined for China.

The company faces pressure in the AI memory chip market, losing ground to competitors like SK Hynix and Micron Technology, especially post the rise of AI applications like ChatGPT.

Conclusion

The $16.5 billion chip supply deal with Tesla represents a critical opportunity for Samsung to revive its foundry business and strengthen its position in the competitive AI chip market amid ongoing financial and operational challenges.