Samsung's $16.5B Tesla Chip Deal Boosts Foundry Hopes
Samsung Electronics Co.'s foundry business, which manufactures chips for other companies, has received a significant boost with a surprise $16.5 billion chipmaking deal with Tesla Inc. This multi-year agreement, running through 2033, is set to breathe new life into a division that many investors had all but written off due to struggles with profitability and customer retention.
The deal involves Samsung manufacturing Tesla's next-generation AI6 chips at its upcoming facility in Taylor, Texas, and also utilizing its Hwaseong, South Korea facility. This is a crucial win for Samsung, whose foundry market share had slipped to 7.7% in Q1 2025, significantly behind industry leader TSMC's 67.6%. The contract provides a clear pathway to scale operations at the Texas fab, which had faced delays in securing major orders.
Elon Musk, CEO of Tesla, confirmed the deal on social media, emphasizing its strategic importance and stating that Samsung's Texas fab would be dedicated to producing the AI6 chip. These next-generation inference processors are critical for powering Tesla's autonomous vehicles and humanoid robots, specifically the Optimus project. Musk also indicated that Tesla would assist in maximizing manufacturing efficiency, even offering to "walk the line personally to accelerate the pace of progress."
For Tesla, this agreement represents a strategic move to diversify its chip supply chain and strengthen its resilience against potential geopolitical tensions and global semiconductor shortages. While TSMC has manufactured Tesla's AI5 generation chips, the AI6 contract with Samsung indicates a split-sourcing model for future AI chip generations, reducing dependency on a single supplier. This move also signals Tesla's deeper commitment to vertical integration, embedding itself within one of the world's largest semiconductor ecosystems by co-developing chip manufacturing processes with Samsung.
The $16.5 billion deal, which could potentially be several times higher based on Musk's comments, is a substantial long-term commitment. It provides Samsung's struggling foundry division with a much-needed anchor client and validates its advanced manufacturing capabilities, particularly its progress in 2nm gate-all-around (GAA) chip fabrication, with yields now surpassing 40%. This partnership is expected to narrow the financial losses in Samsung's foundry business, which were estimated to have surpassed 5 trillion won (approximately $3.63 billion) in the first half of 2025.
The deal also aligns with broader U.S. efforts to revitalize domestic semiconductor manufacturing, supported by initiatives like the CHIPS and Science Act. Samsung is set to receive up to $9 billion in U.S. funding and tax incentives for its Texas operations, which aims to reduce dependency on overseas suppliers and strengthen American tech supply chains.
Despite the positive outlook from this significant deal, Samsung's foundry business still faces challenges. Analysts note that while margins are expected to improve, it's too early to see a meaningful impact on near-term earnings, citing factors like long manufacturing cycle times and rigorous customer quality controls. Furthermore, a recent development saw Groq, another AI semiconductor startup and Samsung foundry partner, significantly lower its 2025 revenue forecast, citing data center delays, which presents an unexpected obstacle for Samsung's foundry business.
Nevertheless, the Tesla deal is a major step for Samsung, signaling confidence in its next-generation chip technology and potentially serving as a launchpad to secure more U.S. and global clients. It positions Samsung as a key player in the high-growth AI chip market, which is projected to reach USD 295.56 billion by 2030, expanding at a CAGR of 33.2% from 2025.