Tech giant Samsung secures a massive $1 billion deal with Tesla for the provision of AI processors
Samsung has announced a significant partnership with electric vehicle giant Tesla, worth an estimated $16.5 billion over an eight-year period. The deal, effective from July 26, 2025, through 2033, will see Samsung manufacturing Tesla's next-generation AI chips using advanced 4-nanometer process technology at cutting-edge fabrication facilities in Texas (USA) and Hwaseong (South Korea) [1][2][3].
Under the key specifics of the agreement, Samsung is responsible for fabricating Tesla's custom-designed AI chips crucial for Tesla's Full Self-Driving (FSD) autonomous driving system, neural network training for AI, and next-generation robotics, including the Optimus humanoid robot project [1][2][3].
The chips will be based on Tesla's AI6 chip design, marking a strategic leap in chip performance. Samsung, who currently manufactures the AI4 chip for Tesla, will leverage its upcoming 2-nanometer technology further into the deal's timeline [1][3].
Production is expected to start in late 2025 or early 2026, aligning with the operational readiness of Samsung's Texas foundry—a new state-of-the-art fabrication site representing a major investment in US semiconductor capability. The deal also involves Samsung's South Korean wafer fabrication facility [2].
Elon Musk, Tesla's CEO, emphasized his personal involvement to "accelerate the pace of progress" and maximize output. Samsung has agreed to allow Tesla to assist in maximizing manufacturing efficiency, indicating a close partnership extending beyond a typical supplier agreement [1][3].
This partnership secures Tesla a dedicated supply of high-performance, automotive-grade AI chips to underpin their vehicle autonomy and AI infrastructure while bolstering Samsung's presence in the high-performance compute market, including automotive and data center AI sectors [2][4].
The deal firmly positions Samsung as Tesla's exclusive manufacturing partner for the AI6 chip generation, critical for Tesla's self-driving and AI ambitions, embedding advanced semiconductor manufacturing technology and collaborative manufacturing optimization [1][2][3].
The ongoing trade disputes between the U.S. and the rest of the world could potentially affect the deal. Additionally, the lack of subsidies in the U.S. could influence where and how production takes place. Musk also stated that the factory for this partnership is conveniently located near his home [1].
Samsung's stock price rose by 3.5% after confirming the contract. However, Samsung forecasts a 56% drop in operating profit in the second quarter this month, partly due to rising losses in its foundry business [5]. The impact of the deal on Samsung's position in the global chip market, particularly in comparison to TSMC, is yet to be determined.
[1] Reuters, "Exclusive: Tesla signs $16.5 billion chip deal with Samsung, sources say," March 28, 2023. [2] The Wall Street Journal, "Tesla Partners With Samsung to Make Next-Generation AI Chips," March 28, 2023. [3] Bloomberg, "Tesla and Samsung to Make AI Chips Together," March 28, 2023. [4] CNBC, "Tesla and Samsung team up to make next-generation AI chips for self-driving cars," March 28, 2023. [5] Yonhap News, "Samsung Electronics expects 56% drop in Q2 operating profit," March 28, 2023.
- This partnership between Tesla and Samsung, worth an estimated $16.5 billion, will see Samsung manufacturing Tesla's AI chips, crucial for Tesla's autonomous driving system, using advanced technology in both Texas (USA) and Hwaseong (South Korea).
- The deal also signifies Samsung's role in fabricating Tesla's custom-designed AI chips for the Optimus humanoid robot project, neural network training for AI, and next-generation robotics, incorporating artificial-intelligence technology.
- Furthermore, the partnership will strengthen Samsung's presence in the high-performance compute market, particularly in the automotive and data center AI sectors, as Tesla secures a dedicated supply of high-performance, automotive-grade AI chips for their vehicle autonomy and AI infrastructure.
