Tesla and Samsung Electronics agree to supply chips

Ilon Musk has announced a multi-billion dollar deal between Tesla and Samsung Electronics: the largest US automaker will buy $16.5 billion worth of chips from the South Korean giant. The contract runs until the end of 2033 and is designed to strengthen Samsung’s position in contract semiconductor manufacturing.

Samsung Electronics has agreed a deal with Tesla to buy $16.5 billion worth of chips from the South Korean giant.

Manufacturing for Tesla will be rolled out in the U.S.

Musk said Monday on social network X that Samsung’s new factory in Texas will produce AI6 chips, the next generation of processors for Tesla cars. He said the plant will be a key element in the two companies’ strategic collaboration: “The significance of this cannot be overemphasized,” he wrote.

Samsung’s new factory will be a key part of the two companies’ strategic collaboration.

The project in Taylor, Texas, which has previously run into difficulties due to the loss of major customers and delays, is apparently in question. Musk emphasized that Tesla will help Samsung improve production efficiency, and he will personally oversee the work: “The plant is close to my home, and I will walk the production line myself to speed up progress.”

The deal will bolster Samsung’s loss-making business

Before Musk’s announcement, Samsung had already reported signing a $16.5 billion agreement, without disclosing the name of the customer at the customer’s request. According to Reuters, sources familiar with the situation confirmed that Tesla was involved.

Samsung shares rose more than 4% on the news. Analysts expect the contract to cut losses at Samsung’s contract division, Samsung Foundry, which Kiwoom Securities estimates exceeded 5 trillion won ($3.63 billion) in the first half of the year.

Samsung Foundry’s contract division is expected to post a loss of more than 5 trillion won ($3.63 billion) in the first half of the year.

Experts note that Samsung has been losing ground in manufacturing advanced chips in recent years, losing ground to TSMC, whose customers include Apple, Nvidia and Qualcomm. The new agreement with Tesla could strengthen the South Korean company’s position in the battle for market share in the AI processor market.

A new agreement with Tesla could strengthen the South Korean company’s position in the battle for AI processor market share.

The significance of the deal goes beyond business

The deal also has political-economic significance: it could strengthen South Korea’s position in negotiations with the U.S. over the reduction of possible 25 percent tariffs. Against this backdrop, Seoul is actively seeking ways to expand technology cooperation with U.S. companies.

At the same time, analysts doubt that Tesla’s order will be made using the most advanced process technologies, including 2nm technology, which Samsung is having trouble mastering.

Nevertheless, Musk summed it up succinctly: “We have a deal. I think it’s a good deal for everybody.”

Material Tesla and Samsung Electronics agree on chip supply was first published on ITZine.ru.