Record deal signals trust in Samsung’s 2nm tech amid race with TSMC, Chinese chipmakers
Samsung Electronics will be producing Tesla’s next-generation artificial intelligence chip, known as AI6, under a record-breaking $16.5 billion contract deal.
Tesla CEO Elon Musk said in a social media post Monday that Samsung’s chip manufacturing facility in Texas will be dedicated to producing his company’s chips. His post on X came shortly after Samsung announced a foundry deal, disclosing only that the customer is a “global conglomerate.”
“Samsung’s giant new Texas fab will be dedicated to making Tesla’s next-generation AI6 chip. The strategic importance of this is hard to overstate,” Musk wrote.
“Samsung currently makes AI4. TSMC will make AI5, which just finished design, initially in Taiwan and then in Arizona,” he added.
In a regulatory filing earlier in the day, the chipmaker reported that it had secured a foundry deal worth $16.5 billion, accounting for 7.6 percent of its projected 2024 sales, running through the end of 2033. Samsung did not disclose the customer's identity, citing business confidentiality.
While the disclosed contract marks the largest single-client deal for Samsung’s semiconductor division, the total volume may grow further. In a reply post, Musk stated that "the $16.5 billion number is just the bare minimum," adding that the actual output is likely to be several times higher.
Musk also stated in a separate post, “Samsung agreed to allow Tesla to assist in maximizing manufacturing efficiency,” suggesting further collaboration as the project moves forward.
“This is a critical point, as I will walk the line personally to accelerate the pace of progress. And the fab is conveniently located not far from my house.”
Samsung is currently constructing a chip manufacturing plant in Taylor, Texas, about an hour’s drive from Austin, where Musk lives. The chip giant reportedly revised its plans to accelerate equipment installation at the Taylor fab, aiming to start mass production in the second half of next year.
Backed by the news of the deal, Samsung's shares closed at 70,400 won, up 6.83 percent from the previous trading day. It marked the first time in nearly 10 months that the stock ended above the 70,000 won mark. The last time was Sept. 4, 2024, when it closed at 70,000 won.
The deal is expected to provide a much-needed boost for Samsung’s foundry business, which has been logging multi-trillion-won yearly losses and affecting the tech giant’s overall performance.
In an earnings guidance for the April-June period this year, Samsung reported an operating profit of 4.6 trillion won ($3.32 billion), nearly halved from a year earlier. Analysts estimate the company’s Device Solutions division, which oversees its semiconductor business, generated less than 1 trillion won in operating profit, with the combined foundry and logic chip business predicted to post losses of around 2 trillion won.
Amid continuous losses from the foundry unit, speculation of a potential spin-off has surfaced in the market. Samsung Electronics Chairman Lee Jae-yong, however, dismissed the rumors, saying he has “no interest in spinning off the division.”
Given the nature of the foundry business, where securing clients directly translates into revenue, the Tesla deal marks a significant step for Samsung. The company has been under pressure as the gap with market leader TSMC continues to widen and competition from Chinese players intensifies.
According to market tracker TrendForce, Samsung held a 7.7 percent share of the global foundry market in the first quarter, far behind TSMC’s 67.6 percent. China’s SMIC closely followed with 6 percent.
Experts say the large-scale deal shows growing trust in Samsung’s advanced process technology and could lead to additional orders.
“The latest contract is significant as the chip giant has been struggling with heavy losses in the foundry business. Winning an order from a major company like Tesla suggests strong trust in Samsung’s technology,” said Lee Jong-hwan, a system semiconductor engineering professor at Sangmyung University.
“This could pave the way for other big tech companies to place orders as well.”
As the deal is likely based on Samsung’s next-generation 2-nanometer process nodes currently under development, the utmost priority for Samsung will be securing production yield, Lee explained. While Samsung was quick to introduce a 3-nanometer process in 2022, it faced yield issues and struggled to commercialize the technology.
“Even if the factory is set up and production starts next year, the business could be unprofitable if input costs remain high due to low yields.”
The AI chips Musk mentioned are Tesla’s Full Self-Driving chips. The AI6 chip Samsung will supply is reportedly adopting a 2-nanometer process, while the AI5 chip that TSMC is making adopts 3nm technology.
herim@heraldcorp.com
