Samsung Electronics has secured a $16.5 billion agreement to produce artificial intelligence semiconductors for Tesla, a contract that offers a major boost to the South Korean company’s struggling foundry division while bolstering Tesla’s push toward autonomous driving technology.
The 22.8 trillion won pact, announced Monday, will run through the end of 2033.
Production is planned at a facility under construction in Taylor, Texas, where Tesla’s upcoming AI6 chips will be manufactured.
Elon Musk, Tesla’s chief executive, confirmed the arrangement in a post on X, calling it “just the bare minimum” and suggesting the actual value of the deal could prove significantly higher.
Samsung’s shares surged nearly 7% in Seoul following the announcement, reaching their highest level since September. Suppliers such as Soulbrain Co. also rallied, with shares jumping 16%. A Samsung spokesperson declined to provide additional details, citing confidentiality clauses in the contract, according to Bloomberg.
Musk said he will personally walk the chip fabrication line and help optimize production. He noted that the AI6 chips will form the backbone of Tesla’s future self-driving technology. Samsung currently produces Tesla’s AI4 chips, while Taiwan Semiconductor Manufacturing Company (TSMC) has been tapped for the upcoming AI5 generation.
The deal marks Samsung’s first major contract win since Executive Chairman Jay Y. Lee was cleared of all remaining legal charges earlier this year. The company has been grappling with underutilization in its foundry business, which has faced mounting losses as it struggled to secure orders. The Texas facility’s completion has already been delayed to 2026 due to those challenges.
“Their foundry business has been loss-making and struggling with under-utilization, so this will help a lot,” according to Vey-Sern Ling, managing director at Union Bancaire Privée in Singapore. “Tesla’s business may also help them to attract other customers.”
TSMC, the world’s largest contract chipmaker, continues to dominate the global foundry market, controlling 67.6% in the first quarter of 2025, according to TrendForce. Samsung’s share fell to 7.7%, down from 8.1% the previous quarter.
Both companies are racing to deliver 2-nanometer fabrication technology, a milestone expected to define the next generation of semiconductors.
For Tesla, the partnership shows Musk’s insistence that the automaker’s future hinges on achieving fully autonomous driving. After a disappointing earnings report last week, Musk predicted Tesla would begin delivering true self-driving vehicles at scale in the second half of 2026, though analysts remain skeptical.
Musk’s remarks also hinted at a rapid succession of chip transitions from the current AI4 to TSMC’s AI5, and then quickly to Samsung’s AI6. That pace could reignite frustration among Tesla owners who were promised as far back as 2016 that their vehicles already had the necessary hardware for autonomy. Tesla stopped offering retrofits in 2023, citing costs and technical hurdles.