Samsung clinches $16.5 billion chipmaking deal from Tesla

Samsung Electronics Co., the world’s top memory chipmaker, has clinched a landmark contract chipmaking deal worth $16.5 billion from Tesla Inc., raising hopes of a turnaround for its underperforming foundry business, which has struggled with persistent losses in recent quarters.

The South Korean tech giant announced in a regulatory filing on Monday that it has signed a long-term wafer fabrication deal with a “large global company,” effective from July 24 of this year until the end of 2033.

Samsung didn’t identify the client, citing its confidentiality agreement.

However, Elon Musk, chief executive of Tesla, said in a post on his social media platform X that Samsung will produce next-generation A16 chips for the electric vehicle maker at its fabrication facility in Texas.

“Samsung’s giant new Texas fab will be dedicated to making Tesla’s next-generation A16 chip. The strategic importance of this is hard to overstate,” Musk said on X.

According to his post, Samsung currently manufactures the A14 chip, while TSMC will produce the A15 – the design of which was recently finished – initially in Taiwan and then in the US state of Arizona.

The contract amounts to 7.6% of Samsung’s 2024 annual sales revenue of 300.9 trillion won ($217.7 billion), making it one of the largest foundry orders the company has ever won from a single client.

Industry officials and some media reports have said that Samsung could be supplying its artificial intelligence semiconductors to Tesla for the US firm’s full self-driving (FSD) chips.

Samsung's $37 billion chip fabrication plant in Taylor, Texas is scheduled to begin operations in the second half of 2026.

LONG-AWAITED INFLECTION POINT

Analysts said the deal could mark a long-awaited inflection point for Samsung’s foundry business, which competes directly with Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest foundry chipmaker.

Despite years of heavy investment, Samsung has been struggling to close the gap with its Taiwanese rival in terms of technology leadership and customer confidence, particularly in cutting-edge nodes.

“This contract suggests that Samsung’s yield on its advanced nodes, particularly 2-nanometer technology, is finally reaching viable levels,” said a semiconductor executive close to the matter. “It also signals renewed customer trust and a possible shift in market momentum.”

Although Samsung’s overall second-quarter operating profit reached 4.6 trillion won, its mainstay chip unit – the Device Solutions (DS) Division – is said to have generated less than 1 trillion won in profit, partly due to continued losses in the foundry business.

The latest foundry contract, analysts said, would generate about 2.5 trillion won a year until the end of 2033 – about 10% of Samsung’s estimated annual foundry revenue – and provide the scale needed to improve economies of production.

The chips to be produced under the new contract are expected to leverage Samsung’s advanced 2 nm process.

The company plans to soon begin volume output of 2 nm chips under contract chipmaking for mobile applications and expand to high-performance computing and automotive clients afterwards.

RAMPING UP PREPARATIONS AT TALYOR PLANT

Samsung is also known to be ramping up preparations at the Texas site, resuming equipment imports and planning new staff deployments to accelerate readiness.

If successful, the Taylor facility could help Samsung diversify production beyond its home base in Korea, and further embed itself in the US semiconductor supply chain – a strategic priority as Washington pushes to bolster domestic chipmaking capacity.

“This deal is more than just about revenue,” said an industry analyst. “It’s a bet on Samsung’s ability to deliver next-generation silicon and reposition itself in the AI era. If they get it right, this could be a watershed moment.”

The news also comes as rivals such as Intel and TSMC court major US customers, including Nvidia, Google and Amazon, all of which are racing to secure leading-edge capacity amid the AI boom.

Analysts said Samsung’s success in clinching a multi-year, high-value deal may open doors to additional orders – and help it shake off years of skepticism surrounding its foundry ambitions.

Write to In-Soo Nam, Eui-Myung Park and Yeonhee Kim at isnam@hankyung.com

Jennifer Nicholson-Breen edited this article.