Tesla CEO Elon Musk mentioned the U.S. automaker had signed a $16.5 billion deal to supply chips from Samsung Electronics, a transfer anticipated to bolster the South Korean tech large’s loss-making contract manufacturing enterprise.
Samsung’s shares jumped as a lot as 6.8 per cent to their highest since September final yr after information of the deal. Tesla shares had been up 1.9 per cent in U.S. premarket buying and selling.
Musk mentioned Samsung’s new chip manufacturing facility in Taylor, Texas will make Tesla’s next-generation AI6 chip, probably re-energizing the challenge that has confronted lengthy delays amid Samsung’s difficulties in retaining and attracting main purchasers.
“Samsung agreed to permit Tesla to help in maximizing manufacturing effectivity. This can be a important level, as I’ll stroll the road personally to speed up the tempo of progress. And the fab is conveniently situated not removed from my home,” Musk mentioned in a publish on X on Monday.
“The $16.5B quantity is simply the naked minimal. Precise output is prone to be a number of occasions greater,” he mentioned in one other publish.
In keeping with a senior analyst at NH Funding & Securities, Ryu Younger-ho, Samsung’s Taylor fab “up to now had nearly no prospects, so this order is sort of significant”.
In October, Reuters reported that Samsung had postponed taking deliveries of ASML chipmaking tools for its Texas manufacturing facility because it had not but gained any main prospects for the challenge. It has already delayed the plant’s operational begin to 2026.
Potential product timeline
Whereas no timeline was supplied for AI6 chip manufacturing, Musk has beforehand mentioned that next-generation AI5 chips can be produced on the finish of 2026, suggesting AI6 would observe.
Lee Dong-ju, an analyst at SK Securities, expects manufacturing in 2027 or 2028, however Tesla has a historical past of lacking its targets.
Samsung at present makes Tesla’s AI4 chips, which energy its Full Self-Driving driver assistant system, whereas TSMC is slated to make the AI5, initially in Taiwan after which Arizona, Musk has mentioned.
Samsung, the world’s prime reminiscence chip maker, additionally produces logic chips designed by prospects via its foundry enterprise. The Texas challenge is central to Samsung Chairman Jay Y. Lee’s technique to broaden past its bread-and-butter reminiscence chips into contract chip manufacturing.
It holds simply 8 per cent of the worldwide foundry market, far behind trade chief TSMC, which has a 67 per cent share, information from market researcher Trendforce present.
Samsung had earlier introduced the $16.5 billion chip provide deal with out naming the consumer, saying the shopper had requested confidentiality concerning the particulars of the deal, which is able to run via the tip of 2033.
Three sources briefed concerning the matter informed Reuters that Tesla was the shopper for the deal.
Assist Samsung’s foundry enterprise
The take care of Tesla comes as Samsung, which is because of report its earnings on Thursday, faces mounting stress within the race to provide synthetic intelligence chips, the place it trails rivals equivalent to TSMC and SK Hynix. This lag has weighed closely on its revenue and share worth.
Earlier this month, Samsung projected a 56 per cent drop in second-quarter working revenue, partly as a result of widening losses of its foundry enterprise.
Pak Yuak, an analyst at Kiwoom Securities, mentioned the deal would assist scale back losses at Samsung’s foundry enterprise, which he estimates exceeded 5 trillion gained ($3.6 billion) within the first half of the yr.
Analysts say Samsung has struggled to retain key purchasers, with many defecting to TSMC for superior chips, underscoring technological challenges the agency faces within the race to remain related within the capital intensive enterprise.
TSMC counts Apple, Nvidia and Qualcomm amongst its prospects.
It’s not clear whether or not the Samsung-Tesla deal is expounded to ongoing commerce talks between South Korea and the USA. Seoul is searching for U.S. partnerships in chips and shipbuilding amid last-ditch efforts to achieve a commerce deal to eradicate or scale back potential 25 per cent U.S. tariffs.
