Samsung secures $16.5 billion Tesla chip contract

Samsung has secured a massive ₩ 22.8 trillion won (approx $16.5 billion) contract to make Tesla’s next-generation of AI6 semiconductor chips. 

The deal is a huge win for Samsung’s chip business, which has been loss-making and struggling to find chip buyers.

The South Korean tech giant will likely use a novel 2 nanometer design kit for the AI6 semiconductor chips. That should cut power draw and raise a key metric for in-car AI: TOPS per watt.

Tesla CEO Elon Musk called it “the bare minimum” and said real output could be “several times higher.”

Production is slated to begin next year at Samsung’s production facility in Taylor, Texas, which Musk noted is “conveniently located not far from my house”. This means Tesla has a partner producing chips in the US, which will also help the EV giant cut unwanted supply chain complexity. 

Musk noted in another X post that a critical point of the deal is that Samsung will let Tesla help in maximizing manufacturing efficiency. He added that he will “walk the line personally to accelerate the pace of progress”. 

Samsung stock jumped 6.8% after the announcement, its best day in over a year. 

The CHIPS Act  backdrop

In December, the US Department of Commerce (DoC) announced $4.75 billion in funding to Samsung under the CHIPS Incentives Program’s Funding Opportunity for Commercial Fabrication facilities. The DoC said the funding would support Samsung’s $37 billion investment to turn its presence in Central Texas to a “comprehensive ecosystem for the development and production of leading-edge chips in the United States”. 

What about TSMC?

As Musk stated in his post on X, Taiwan’s TSMC will make Tesla’s AI5 chips, which have “just finished design”. Those chips will first be made in Taiwan and then in Arizona.