Samsung and Tesla have announced a $16.5 billion deal for Samsung to produce Tesla's A16 chips at its new fabrication plant in Taylor, Texas, marking a significant strategic move for both companies.
Elon Musk confirmed the deal on X, emphasizing that Samsung agreed to allow Tesla to assist in maximizing manufacturing efficiency, and he personally will oversee the process to accelerate progress.
The agreement, which runs through 2033, will see the A16 chip manufactured at Samsung's Texas facility, which had previously struggled to attract customers.
Samsung’s shares surged nearly 7% following the announcement, reaching their highest level since September of the previous year, while Tesla’s shares rose 1.9% in U.S. pre-market trading.
Samsung currently manufactures Tesla’s AI4 chips, which power its Full Self-Driving system, while TSMC is set to produce the AI5 chips in Taiwan and Arizona. Musk has indicated that AI5 production is targeted for late 2026, with AI6 production likely to follow in 2027 or 2028.
The deal is a critical win for Samsung, which has been under pressure in the competitive AI chip market, trailing behind rivals like TSMC and SK Hynix. The Taylor facility, central to Samsung’s strategy to expand its foundry business.
Samsung, the world’s leading memory chip maker, is seeking to expand its foundry business under Chairman Jay Y. Lee’s leadership. However, it holds only an 8% share of the global foundry market, significantly trailing TSMC’s 67% dominance. The company’s foundry division has faced mounting losses, estimated at over $3.6 billion in the first half of the year, making the Tesla deal a critical step toward reducing financial strain.