Tesla CEO Elon Musk has confirmed that the electric vehicle maker has signed a $16.5 billion chip supply agreement with South Korean tech giant Samsung Electronics.
The deal will remain in effect until December 31, 2033 and was disclosed in a regulatory filing by Samsung, though the counterparty was initially unnamed.
Musk revealed the identity of the client 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," the billionaire-investor wrote.
He further added, "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."
Samsung shares surged more than 4 per cent following Musk’s public confirmation.
In its initial filing, Samsung cited confidentiality concerns requested by the second party, stating that the "main contents of the contract have not been disclosed due to the need to maintain business confidentiality" and warned investors to "invest carefully" considering potential changes or termination.
Bloomberg News and CNBC had earlier reported that Tesla was the likely customer, citing sources and expert speculation.
Three sources also confirmed to Reuters that Tesla was the customer.
Samsung’s foundry business has been struggling with customer retention and rising competition from Taiwan Semiconductor Manufacturing Company (TSMC) and SK Hynix.
According to Pak Yuak, an analyst at Kiwoom Securities, the foundry business may have incurred losses exceeding 5 trillion won (approx. $3.63 billion) in the first half of the year.
Analysts note that Samsung has fallen behind in advanced chip technologies and lost key clients like Apple and Nvidia to TSMC, which dominates the contract chipmaking market.
Samsung is also trailing in the high-bandwidth memory (HBM) segment used in AI chipsets, where SK Hynix currently leads and supplies major players like Nvidia.
Despite plans to commence 2-nanometer mass production, industry analysts such as Lee Min-hee of BNK Investment & Securities believe the Tesla order is unlikely to involve Samsung's cutting-edge node, citing ongoing challenges with yield and technological complexity.
Still, the Tesla partnership could rejuvenate Samsung’s ambitions in the US, particularly with its upcoming chip plant in Taylor, Texas—believed to be the facility referred to by Musk.
The US-South Korea tech collaboration also arrives as both nations explore broader trade partnerships, including potential tariff reductions.
Samsung is expected to release its earnings later this week, amid concerns over weak demand in its memory and foundry businesses.
