New Delhi: Tesla has signed a massive semiconductor deal with Samsung Electronics worth $16.5 billion, with plans to manufacture its next-generation AI6 chips at Samsung’s upcoming factory in Texas. This agreement could give Samsung’s struggling foundry business a much-needed lift while also helping Tesla build more AI power into its cars and systems.
Elon Musk confirmed the deal in a post on X, adding that he will personally walk the production line and has been allowed to help with improving manufacturing speed. Samsung had earlier announced the deal without naming Tesla, citing confidentiality, but Reuters confirmed the electric carmaker’s involvement through three sources briefed on the matter.
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
Samsung gets a big client after tough quarters
For Samsung, this deal couldn’t have come at a better time. The South Korean tech major has been falling behind in the global chip race, especially in the foundry segment. While Samsung remains the world’s biggest memory chip maker, its contract chip manufacturing business has been losing ground to Taiwan’s TSMC.
According to TrendForce, TSMC controlled 67.6 percent of the global foundry market in the first quarter of 2025, while Samsung’s share dropped to 7.7 percent from 8.1 percent. This shows just how far behind it is. Experts have pointed out that Samsung has been struggling to bring in enough customer orders to run its foundry at full capacity.
Vey-Sern Ling, managing director at Union Bancaire Privée in Singapore, told Bloomberg News, “Their foundry business has been loss-making and struggling with under-utilization, so this will help a lot. Tesla’s business may also help them to attract other customers.”
Tesla’s next-gen AI6 chip to be made in Texas
Tesla’s new chip, called the AI6, will be manufactured at Samsung’s facility in Taylor, Texas. The project had been delayed earlier as Samsung held back on completing construction, but this deal now gives it new life. Elon Musk added 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.”
He also mentioned how close the plant is to his home, calling it “conveniently located” and said, “I will walk the line personally to accelerate the pace of progress.” Musk said Tesla has also been allowed to help “in maximizing manufacturing efficiency,” which is not common in chip supply deals.
The deal runs through the end of 2033, giving both companies a long-term arrangement that could shape their futures in AI hardware. The plant is expected to begin operations in 2026.
A key moment for South Korea–US tech ties
Beyond business, this agreement could also help South Korea strengthen its partnership with the United States. As per Reuters, the two countries are looking for deeper cooperation in chips and shipbuilding, especially as talks continue around possible U.S. tariffs on South Korean goods. With Tesla becoming one of Samsung’s biggest semiconductor clients, the deal could help ease those trade tensions.
Samsung had earlier remained tight-lipped about the identity of its client. A company spokesperson declined to comment, pointing to contract confidentiality, but Musk’s public confirmation cleared the air.
What this means going forward
With this deal, Tesla becomes a high-profile customer for Samsung’s foundry, which could give the South Korean firm an edge as it tries to catch up with TSMC. On the other hand, Tesla gets a dedicated production line for its custom AI chips, possibly leading to faster development and scaling of its autonomous driving and in-car computing tech.
It’s not every day that an automaker CEO says he’ll personally monitor the chip production line, but then again, this is Elon Musk.