Musk's Tesla signs $16.5 billion chip supply deal with Samsung
Samsung shares soared nearly 7% after news of the deal on Monday which comes as the world's top memory chip maker faces mounting pressure in the race to produce artificial intelligence chips, where it trails rivals such as TSMC and SK Hynix.
Musk said Samsung's new chip factory in Taylor, Texas will make Tesla's next-generation AI6 chip, potentially re-energizing the project that has faced long delays amid Samsung's difficulties in retaining and attracting major clients.
"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," Musk said in a post on X on Monday.
"The $16.5B number is just the bare minimum. Actual output is likely to be several times higher," he said in another post.
Shares of Samsung jumped 6.8% to their highest since September last year, while Tesla shares were up 1.9% in U.S. pre-market trading.
According to a senior analyst at NH Investment Securities, Ryu Young-ho, Samsung's Taylor fab "so far had virtually no customers, so this order is quite meaningful," although the deal may represent a small portion of its logic chip revenue annually.
In October, Reuters reported that Samsung had postponed taking deliveries of ASML chipmaking equipment for its Texas factory as it had not yet won any major customers for the project. It has already delayed the plant's operational start to 2026.
It is not clear whether the Samsung-Tesla deal is related to ongoing trade talks between South Korea and the United States. Seoul is seeking U.S. partnerships in chips and shipbuilding amid last-ditch efforts to reach a trade deal to eliminate or reduce potential 25% U.S. tariffs.
A South Korean trade ministry official told Reuters he had not heard that the specific deal was part of the trade negotiations.
Potential production timeline
While no timeline was provided for AI6 chip production, Musk has previously said that next-generation AI5 chips will be produced at the end of 2026, suggesting AI6 would follow.
Lee Dong-ju, an analyst at SK Securities, expects production in 2027 or 2028, but Tesla has a history of missing its targets.
Samsung currently makes Tesla's AI4 chips, which power its Full Self-Driving driver assistant system, while TSMC is slated to make the AI5, initially in Taiwan and then Arizona, Musk has said.
Samsung, the world's top memory chip maker, also produces logic chips designed by customers through its foundry business. The Texas project is central to Samsung Chairman Jay Y. Lee's strategy to expand beyond its bread-and-butter memory chips into contract chip manufacturing.
It holds just 8% of the global foundry market, far behind industry leader TSMC, which has a 67% share, data from market researcher Trendforce show.
Samsung had earlier announced the $16.5 billion chip supply deal without naming the client, saying the customer had requested confidentiality about the details of the deal, which will run through the end of 2033.
Three sources briefed about the matter told Reuters that Tesla was the customer for the deal.
Help Samsung's foundry business
The deal with Tesla comes as Samsung, which is due to report its earnings on Thursday, faces mounting pressure in the race to produce artificial intelligence chips, where it trails rivals such as TSMC and SK Hynix. This lag has weighed heavily on its profit and share price.
Earlier this month, Samsung projected a 56% drop in second-quarter operating profit, partly due to widening losses of its foundry business.
Pak Yuak, an analyst at Kiwoom Securities, said the deal would help reduce losses at Samsung's foundry business, which he estimates exceeded 5 trillion won ($3.6 billion) in the first half of the year.
Analysts say Samsung has struggled to retain key clients, with many defecting to TSMC for advanced chips, underscoring technological challenges the firm faces in the race to stay relevant in the capital-intensive business.
TSMC counts Apple, Nvidia and Qualcomm among its customers.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Al Etihad
11 minutes ago
- Al Etihad
Tesla ordered by Florida jury to pay $243 million in fatal Autopilot crash
2 Aug 2025 09:18 (THE NEW YORK TIMES NEWS SERVICE)A Florida jury found Friday that flaws in Tesla's self-driving software were partly to blame for a crash that killed a 22-year-old woman in 2019 and severely injured the driver. The verdict is a significant setback for the carmaker, which is staking much of its future on developing self-driving jury verdict, if upheld on appeal, would require Tesla to pay as much as $243 million in punitive and compensatory damages to the parents of the woman and the jury found that Tesla bore 33% responsibility for the crash, and blamed the driver, George Brian McGee, for the rest. McGee had previously settled with the family for an undisclosed said it would appeal.'Today's verdict is wrong and only works to set back automotive safety and jeopardise Tesla's and the entire industry's efforts to develop and implement lifesaving technology,' the company said in a said it expected the damages to be reduced on appeal.'Florida law is explicit that punitive damages have been all but eliminated in product liability cases such as this one,' the company said. 'We are confident that the punitive damage award at a minimum, and likely this whole verdict, will be overturned by the appellate court.'The decision comes just weeks after Tesla began limited testing of autonomous taxis in Austin, Musk, the company's CEO, said in a conference call with investors in July that the service could cover half the population of United States by the end of the has said that Tesla's growth hinges on revenue from autonomous taxis and humanoid robots rather than car sales, which have been trial, in US District Court for the Southern District of Florida in Miami, focused attention on the safety of Tesla's driver-assistance system, known as was the first federal jury trial stemming from a fatal accident involving Autopilot. Tesla has won at least one similar case filed in a California court and settled several others. At least five more are pending, according to lawyers for the plaintiffs. McGee was approaching a T-intersection with Tesla's Autopilot software activated when he dropped his phone and bent to look for it. The Tesla blew through the intersection at more than 50 mph and crashed into a black SUV legally parked on the far side, according to testimony. McGee told police after the crash that he did not notice the intersection or the stop sign said on the witness stand that he thought Autopilot would protect him and prevent a serious crash if he made a lawyers blamed McGee for the crash. Federal safety officials were aware of at least 211 accidents from 2018 to 2023 involving Tesla cars operating with Autopilot engaged, according to evidence presented during the trial.
Khaleej Times
2 hours ago
- Khaleej Times
US President Trump orders firing of labour official over 'rigged' jobs data
President Donald Trump said Friday (August 1) he has ordered the firing of a key economic official, accusing her of manipulating employment data for political reasons after a new report showed cracks in the US jobs market. US job growth missed expectations in July, Labor Department data showed, and revisions to hiring figures in recent months brought them to the weakest levels since the Covid-19 pandemic. Without providing evidence, Trump lashed out at the department's commissioner of labor statistics, writing on social media that the jobs numbers "were RIGGED in order to make the Republicans, and ME, look bad." In a separate post on his Truth Social platform, he charged that Commissioner Erika McEntarfer had "faked" jobs data to boost Democrats' chances of victory in the recent presidential election. "McEntarfer said there were only 73,000 Jobs added (a shock!) but, more importantly, that a major mistake was made by them, 258,000 Jobs downward, in the prior two months," Trump said, referring to latest data for July. "Similar things happened in the first part of the year, always to the negative," Trump said, insisting that the world's biggest economy was "booming" under his leadership. He later told reporters "we need people that we can trust," accusing the economic official of inflating hiring figures under former president Joe Biden's administration. 'Dangerous precedent' The US added 73,000 jobs last month, while the unemployment rate rose to 4.2 percent from 4.1 per cent, said the Department of Labour earlier Friday. Hiring numbers for May were revised down from 144,000 to 19,000. The figure for June was shifted from 147,000 to 14,000. This was notably lower than job creation levels in recent years. During the pandemic, the economy lost jobs. The employment data points to challenges in the key labor market as companies took a cautious approach in hiring and investment while grappling with Trump's sweeping — and rapidly changing — tariffs this year. The numbers also pile pressure on the central bank as it mulls the best time to cut interest rates. With tariff levels climbing since the start of the year, both on imports from various countries and on sector-specific products such as steel, aluminum and autos, many firms have faced higher business costs. Some are now passing them along to consumers. William Beach, who previously held McEntarfer post at the Bureau of Labor Statistics, warned that her firing "sets a dangerous precedent and undermines the statistical mission of the Bureau." The National Association for Business Economics (NABE) condemned her dismissal, saying large revisions in jobs numbers "reflect not manipulation, but rather the dwindling resources afforded to statistical agencies." "Firing the head of a key government agency because you don't like the numbers they report, which come from surveys using long established procedures, is what happens in authoritarian countries, not democratic ones," slammed Larry Summers, former US Treasury secretary under Democratic president Bill Clinton. 'Gamechanger' Heather Long, chief economist at the Navy Federal Credit Union, said Friday's jobs report was a "gamechanger." "The labor market is deteriorating quickly," said Long, noting that of the growth in July, "75 per cent of those jobs were in one sector: health care." "The economy needs certainty soon on tariffs," Long said. "The longer this tariff whiplash lasts, the more likely this weak hiring environment turns into layoffs." It remains unclear when the dust will settle, with Trump ordering the reimposition of steeper tariffs on scores of economies late Thursday, which are set to take effect in a week. A sharp weakening in the labor market could push the Federal Reserve toward slashing interest rates sooner to shore up the economy. On Friday, the two Fed officials who voted this week against the central bank's decision to keep rates unchanged warned that standing pat risks further damaging the economy. Both Fed Vice Chair for Supervision Michelle Bowman and Governor Christopher Waller argued that the inflationary effects of tariffs were temporary. They added in separate statements that the bank should focus on fortifying the economy to avert further weakening in the labor market. Putting off an interest rate cut "could result in a deterioration in the labor market and a further slowing in economic growth," Bowman said.
The National
10 hours ago
- The National
AI chip smuggling 'gets more airtime than it should', White House official says
The idea of high-performance AI chips being smuggled into potentially nefarious hands gets more attention than it should, a White House official has said. Michael Kratsios, who serves as director for the Trump administration's Office of Science and Technology Policy, said on Wednesday that there are a lot of misconceptions and misguided fears about the 'physical diffusion' of artificial intelligence technology developed by the US. 'We're not talking about like a bag of diamonds or something,' he said during a discussion at the Centre for Strategic and International Studies think tank about Mr Trump's recently announced AI Action Plan. Some politicians have expressed concerns about the potential for recently announced US AI partnerships overseas to be exploited by countries like China to try to acquire powerful American-made technology. 'These are like massive racks that are tonnes in weight and you're not going to put it on a forklift or back it into a truck, or something," he explained, adding that the idea of chip smuggling "probably gets more airtime than it should." Mr Kratsios also said the hypothetical scenario of the US partnerships with other countries leading to the misuse of data centres by countries like China for 'training runs' to access the centres was overblown. 'What you're most worried about is large-scale runs that are for training sophisticated models and those are actually pretty easy to flag,' he said, adding that the US will make sure to implement what's known in IT circles as Know Your Customer policies to prevent bad actors from gaining access to data centres powered by US technology. Mr Kratsios said that Mr Trump's predecessor, Joe Biden, put too many chip export restrictions on allies, and that the export of US technology to countries with peaceful AI aspirations was critical to an overall AI strategy. During Mr Trump's visit to the Gulf in May, he announced the US-UAE AI Acceleration Partnership framework that will eventually lead to the construction of a 5GW UAE-US AI Campus in Abu Dhabi. 'The [Biden administration] limits made no sense at all,' he said, referring to President Biden's policies aimed at limiting the powerful CPUs and GPUs available to certain countries. Those policies were largely aimed at preventing the diffusion of US technology to China. It proved controversial, with companies like Microsoft and Nvidia claiming the policies hurt US efforts more than helping. Some US AI companies like Anthropic, however, have sought to keep the export controls. 'In some cases, smugglers have employed creative methods to circumvent export controls, including hiding processors in prosthetic baby bumps and packing GPUs [graphics processing units] alongside live lobsters,' read an April policy letter from Anthropic. That letter later came under criticism over what some called the oversimplification of how AI data centres work. Regardless, in keeping with that theme of reversing the Biden export policy, the Trump White House recently announced plans that would allow for Nvidia to resume sales of its H20 graphics processing unit to China. That decision, however, has come under criticism from several technology analysts and politicians. A group of Democratic senators this week sent a letter to Commerce Secretary Howard Lutnick urging him to reverse course. At the CSIS event, Mr Kratsios said the concerns from Democratic senators were oversimplified, adding that the H20 was designed to comply with US concerns about giving China too much computing power, among other things. 'It's not a free-for-all sale,' he said, referring to White House's H20 announcement. 'Any sale that Nvidia wants to make to China is one that's going to require an export licence.' Mr Kratsios added that the Commerce Department's Bureau of Industry and Security would be evaluating each of those licence applications and 'weight the costs' before giving Nvidia approval.
