TLDR
- Elon Musk confirmed Tesla signed a $16.5 billion semiconductor contract with Samsung Electronics, running from July 26, 2025 to December 31, 2033
- Samsung’s new Texas facility will be dedicated to manufacturing Tesla’s next-generation AI6 chips, with Musk promising personal oversight to accelerate production
- Samsung shares jumped over 6% following the announcement, reaching their highest levels since September 2024
- The deal provides a major boost to Samsung’s struggling foundry business, which has fallen behind competitors like SK Hynix and TSMC in AI chip production
- Samsung expects second-quarter profits to more than halve, making this Tesla contract particularly crucial for the company’s recovery
Samsung Electronics shares surged over 6% on Monday following confirmation of a massive $16.5 billion semiconductor deal with Tesla. The contract represents one of the largest foundry agreements in recent memory.
Elon Musk confirmed Tesla as the counterparty after Samsung initially kept the customer’s identity confidential. The deal runs from July 26, 2025 through December 31, 2033.
Samsung’s giant new Texas fab will be dedicated to making Tesla’s next-generation AI6 chip. The strategic importance of this is hard to overstate.
Samsung currently makes AI4.
TSMC will make AI5, which just finished design, initially in Taiwan and then Arizona.
— Elon Musk (@elonmusk) July 28, 2025
Samsung’s stock reached its highest level since September 2024 on the news. The timing couldn’t be better for the South Korean tech giant.
The company has been struggling with its foundry business lately. Samsung expects second-quarter profits to more than halve compared to the previous year.
Samsung’s Texas Facility Gets Tesla Focus
Musk revealed that Samsung’s new Texas fabrication plant will be dedicated to producing Tesla’s next-generation AI6 chips. The facility is located in Taylor, Texas.
The Tesla CEO said he would personally walk the production line to accelerate progress. “Samsung agreed to allow Tesla to assist in maximizing manufacturing efficiency,” Musk posted on X.
The Texas plant has faced delays as Samsung struggled to win major customers. This Tesla deal changes everything for the facility’s prospects.
Musk suggested the partnership could grow even larger than the announced $16.5 billion. He emphasized the strategic importance of the arrangement.
Samsung currently manufactures Tesla’s AI4 chips. TSMC will handle AI5 production initially in Taiwan, then Arizona.
Foundry Business Needs a Win
Samsung ranks as the world’s second-largest foundry service provider behind Taiwan Semiconductor Manufacturing Company. The company manufactures chips based on designs from other companies.
Samsung has fallen behind competitors in the AI chip race. SK Hynix and TSMC have pulled ahead in recent months.
The company particularly struggles with high-bandwidth memory chips used in AI applications. SK Hynix leads this market and supplies chips to Nvidia.
Samsung has been trying to get its latest HBM chips certified by Nvidia. Reports suggest these plans have been pushed back to at least September.
Local media reports indicate Qualcomm might also order chips using Samsung’s 2-nanometer technology. The company aims to start mass production of 2-nanometer chips soon.
In semiconductor technology, smaller nanometer sizes mean more compact designs. This leads to better processing power and efficiency.
Samsung stated in April it wanted to secure major orders for next-generation technology. The Tesla deal delivers exactly that opportunity.
The foundry business has been a weak spot for Samsung recently. Weak orders have hurt the division’s performance.
Samsung has struggled to capture AI demand across both its foundry and memory businesses. Competitors have moved faster to serve this growing market.
The company plans to deliver second-quarter earnings on Thursday. Analysts expect disappointing results due to foundry struggles.
This Tesla contract provides much-needed momentum for Samsung’s foundry operations. The deal spans over eight years, providing long-term revenue visibility.
Samsung requested to keep contract details confidential until 2033 to protect trade secrets. The company warned investors about possible contract changes or termination.
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