Kristina Roberts
Tesla, the famous electric car company led by Elon Musk, has signed a huge deal worth $16.5 billion with Samsung Electronics. This agreement is about making special computer chips that Tesla needs for its new artificial intelligence (AI) technology. These chips will be made at Samsung’s new chip factory in Texas, USA. This partnership is important because it brings together two big companies that want to lead in technology and innovation.
Elon Musk announced this deal himself on his social media platform, X (formerly Twitter). He shared that the new chips, called AI6, will be built by Samsung at their large chip factory in Texas. “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,” Musk posted. This shows how important these chips will be for Tesla’s future cars and technology.
Right after this news came out, Samsung’s stock price jumped by more than 6%. Investors seemed very happy, and they believe this deal will help Samsung a lot, especially since its chip-making business hasn’t been doing very well lately.
Samsung’s chip factory in Taylor, Texas, has faced many delays over the past year. The company had trouble getting new customers and was even delaying the delivery of expensive chip-making machines. But now, this new deal with Tesla gives Samsung a big reason to get the factory up and running faster.
Elon Musk also said something interesting about the factory’s location. He mentioned, “Samsung agreed to allow Tesla to assist in maximizing manufacturing efficiency. This is a critical point, as I will walk the line personally to accelerate the pace of progress. And the fab is conveniently located not far from my house.” This shows how serious Musk is about the project, and he’s even ready to visit the factory himself to make sure everything moves quickly.
While we don’t know exactly when the new AI6 chips will be made, Musk had earlier said that Tesla’s A15 chips (which are the ones that come before AI6) would start production by the end of 2026. So, it’s likely that AI6 will come after that, possibly in 2027 or later. Right now, Samsung makes Tesla’s A14 chips, which help power Tesla’s Full Self-Driving system. Another company, TSMC, is making the AI5 chips in Taiwan and later in Arizona.
The deal between Tesla and Samsung is also part of Samsung’s larger plan. Samsung wants to grow beyond just making memory chips (which store data). It wants to be a leader in making advanced logic chips too. These chips are designed by customers like Tesla but made by companies like Samsung. This kind of work is called “contract chip manufacturing” or the “foundry business.”
At the moment, Samsung is far behind its competitor TSMC in this field. Samsung only has about 8% of the world market in contract chip making, while TSMC has around 67%. That’s a big difference, and Samsung hopes deals like this one with Tesla will help it catch up.
Samsung had earlier shared that it had made a $16.5 billion chip deal but didn’t say who the client was. Now we know that client is Tesla, thanks to three sources who shared this information with Reuters. The deal will last until the end of 2033, which means the two companies will be working together for many years.
This agreement also comes at a time when Samsung is facing tough competition in the AI chip business. It’s trying to catch up with other companies like TSMC and SK Hynix. These challenges have hurt Samsung’s profits and caused its share price to drop. According to Pak Yuak, an analyst from Kiwoom Securities, Samsung’s foundry business may have lost more than $3.6 billion in just the first half of the year. He believes the Tesla deal will help reduce some of those losses.
Another big problem for Samsung has been losing major customers. Important companies like Apple, Nvidia, and Qualcomm have chosen to work with TSMC instead. This is because TSMC has better technology and is more reliable when it comes to making very advanced chips. So, the fact that Tesla chose Samsung this time is a big win for the South Korean tech giant.
It’s not clear if this new deal between Samsung and Tesla has anything to do with trade discussions between South Korea and the United States. Right now, South Korea is trying to make stronger partnerships with the U.S. in areas like chip manufacturing and shipbuilding. These talks are very important because there is a risk that the U.S. could add high tariffs, or taxes, on products from other countries.
Some experts say that Samsung is struggling with making the most advanced chips, which is why it has been losing clients to TSMC. This new deal might help Samsung improve its chip-making skills and gain the trust of more companies in the future.
In conclusion, the $16.5 billion deal between Tesla and Samsung is a big step forward for both companies. For Tesla, it means they will have the high-tech chips they need for their next generation of AI-powered vehicles. For Samsung, it’s a chance to bounce back in the contract chip-making business and prove that it can compete with the world’s best. And for the chip factory in Texas, it might finally mean progress after long delays.
Both companies have big dreams, and this partnership might just help them achieve them. With Elon Musk personally involved and Samsung ready to give its best, the future of AI chips in the U.S. looks very exciting.
