Tesla has entered a $16.5 billion agreement with Samsung Electronics to supply chips for its next-generation vehicles, a deal that marks a significant win for the South Korean firm’s underperforming foundry business and underscores the growing complexity of the electric vehicle supply chain.
The agreement was revealed by Tesla CEO Elon Musk in a series of online posts, where he confirmed that Samsung’s chip manufacturing facility in Taylor, Texas, would produce Tesla’s forthcoming AI6 chip. The chip is expected to support advanced self-driving features, though no official production timeline has been announced.
Samsung’s shares rose sharply following the news, reaching their highest level since September of last year. Investors reacted to what analysts say is a much-needed order for Samsung’s foundry division, which has struggled to secure major clients and stem losses.
The Taylor plant, originally intended to bolster Samsung’s presence in the U.S. semiconductor market, has faced repeated delays. Reports last year indicated that the company had postponed receiving key equipment due to a lack of confirmed customers. The facility’s full operations have now been pushed to 2026.
While Musk did not specify when production of the AI6 chip would begin, analysts suggest it could start by 2027 or 2028. Tesla has previously said its A15 chips, a generation earlier, are slated for production by the end of 2026. The company has a history of missing internal deadlines, raising questions about the feasibility of the schedule.
Samsung already manufactures Tesla’s A14 chips, which support the company’s Full Self-Driving software. Meanwhile, competitor TSMC is set to produce the AI5 chip, beginning with production in Taiwan before expanding to Arizona, according to Musk.
The new agreement marks a strategic moment for Samsung’s foundry ambitions. The company currently holds only 8 percent of the global contract chipmaking market, far behind TSMC’s 67 percent share. The Taylor project is part of Samsung Chairman Jay Y. Lee’s long-term plan to diversify beyond memory chips, where the company remains a dominant player.
Three sources familiar with the matter told Reuters that Tesla was the unnamed client in Samsung’s earlier announcement of a major deal through 2033. At the time, Samsung did not disclose the buyer, citing a confidentiality agreement.
The partnership also comes at a pivotal time for Samsung. The company is under pressure to improve its capabilities in artificial intelligence chip production, an area where it trails both TSMC and SK Hynix. Analysts estimate the foundry division has lost over $3.6 billion in the first half of this year alone.
