Tesla enters deal with Samsung
Samsung shares rose more than 4.0 per cent after the news.
"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," Musk said in a post on X yesterday.
If he was referring to Samsung's upcoming plant in Taylor, Texas, the deal could revive the project that has faced delays amid Samsung's struggles to retain and win major customers.
"Samsung agreed to allow Tesla to assist in maximising manufacturing efficiency.
"This is a critical point, as I will walk the line personally to accelerate the pace of progress. The fab is located not far from my house."
Samsung earlier announced the US$16.5 billion chip supply deal without naming the client, who it said requested confidentiality about the details of the deal, which will run through the end of 2033.
Three sources briefed about the matter said Tesla was the customer for the deal.
Samsung faces mounting pressure as it trails rivals such as TMSC and SK Hynix in the race to produce artificial intelligence chips.
This lag has weighed heavily on its profits and share price.
Samsung, the world's top memory chip maker, also makes logic chips designed by customers through its foundry business.
Kiwoom Securities analyst Pak Yuak said the latest deal would help reduce losses at Samsung's foundry business, which he estimated exceeded US$3.63 billion in the first half of the year.
The Samsung-Tesla deal may also be significant for South Korea, which is seeking US partnerships in chips and shipbuilding amid last-ditch efforts to reach a trade deal to eliminate or reduce potential US tariffs.
Samsung is grappling to boost production yields of its latest two-nanometer technology, but the order is unlikely to involve the cutting-edge tech, said Lee Min-hee, an analyst at BNK Investment & Securities.
It has lost market share to TSMC in contract manufacturing, underscoring technological challenges the firm faces in mastering advanced chip manufacturing to attract clients like Apple and Nvidia, analysts said.
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