Seoul: Tesla has signed a $16.5 billion chip supply agreement with South Korea’s Samsung Electronics, CEO Elon Musk confirmed on Monday.
The chips will be produced at Samsung’s forthcoming facility in Taylor, Texas, which had been plagued by delays and a lack of major clients. Musk announced that the facility would be solely dedicated to manufacturing Tesla’s next-generation AI6 chips, which are expected to play a central role in the company’s future autonomous driving systems.
“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 on X.
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.
Samsung currently makes AI4.
TSMC will make AI5, which just finished design, initially in Taiwan and then Arizona.
— Elon Musk (@elonmusk) July 28, 2025
The partnership is seen as a win-win: it strengthens Tesla’s chip supply chain and enhances its AI capabilities, while helping Samsung gain ground in the global contract chip manufacturing market, where it lags far behind industry leader TSMC.
Samsung shares surged more than 6% after the announcement, as investors welcomed what could be a transformative deal for its foundry business. The contract is expected to run through 2033, with production ramping up once Tesla’s current A15 chip rollout concludes in 2026.
“Samsung agreed to allow Tesla to assist in maximizing manufacturing efficiency,” Musk noted, adding that he would be personally involved in expediting progress at the Texas plant, located near his residence.
The Taylor facility is central to Samsung Chairman Jay Y. Lee’s strategy to expand beyond memory chips and challenge TSMC in the lucrative contract manufacturing space.
Samsung agreed to allow Tesla to assist in maximizing manufacturing efficiency.
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 😃
— Elon Musk (@elonmusk) July 28, 2025
Samsung currently manufactures Tesla’s A14 chips, which power the automaker’s Full Self-Driving (FSD) platform. The AI5 chip is being made by TSMC in Taiwan and later in Arizona, Musk previously confirmed. The new AI6 chips mark the next step in Tesla’s efforts to achieve full vehicle autonomy.
The timing of the deal may also carry diplomatic weight. South Korea is engaged in critical trade talks with the United States and is seeking to eliminate or reduce potential 25 percent tariffs on Korean exports, particularly in the semiconductor and shipbuilding sectors.
Samsung’s foundry arm has struggled in recent years, losing major clients such as Apple and Nvidia to TSMC due to production challenges and slower adoption of cutting-edge nodes. The Tesla partnership could help reverse that trend and demonstrate the company’s readiness to compete at the highest level of chip manufacturing.
