Tesla taps Samsung for AI6 Chips in $16.5 billion deal, Elon Musk says
SEOUL (AFP)Tesla CEO Elon Musk said Monday that tech giant Samsung Electronics will provide his company with its next-generation AI6 chips, following the South Korean firm's announcement of a $16.5 billion deal.Samsung said Monday it had secured an eight-year agreement, without naming the client, describing it only as a "major global company" in a regulatory filing.Under the deal, the partnership -- effective from last Thursday -- runs through the end of 2033."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 on X."Samsung agreed to allow Tesla to assist in maximising manufacturing efficiency," he added, calling it a "critical point" in striking the deal."I will walk the line personally to accelerate the pace of progress," he said, noting Samsung's Texas plant was "conveniently located not far from my house".The deal represents about 7.6 percent of Samsung's projected annual sales for 2024, the company said.It declined to confirm the client was Tesla, even after Musk's message, citing confidentiality.The agreement is expected to provide a major boost to Samsung, which has faced headwinds in its foundry business, lagging rivals in the race for cutting-edge artificial intelligence chips.Samsung Electronics is the flagship unit of South Korea's Samsung Group, by far the largest of the family-run conglomerates that dominate Asia's fourth-largest economy.The company said this month that it expected operating profit to fall 56 percent on-year and 31 percent from the previous quarter, citing a slump in its core semiconductor division.
Experts have attributed the decline to weaknesses in its foundry operations, which involve contract-based manufacturing of chips designed by other companies.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Al Etihad
9 hours ago
- Al Etihad
EU defends Trump trade deal facing backlash
28 July 2025 17:55 BRUSSELS, BELGIUM (AFP)The European Union on Monday vehemently defended its trade deal with President Donald Trump, with EU capitals and businesses sharply divided on an outcome some branded a "capitulation"."I'm 100 percent sure that this deal is better than a trade war with the United States," top EU trade negotiator Maros Sefcovic told Commission President Ursula von der Leyen clinched the framework accord with Trump Sunday after dashing to Scotland as the August 1 deadline loomed for steep levies that threatened to cripple Europe's exports are now set to face across-the-board tariffs of 15 percent -- higher than customs duties before Trump returned to the White House, but much lower than his threatened 30 27-nation bloc also promised its companies would purchase energy worth $750 billion from the United States and make $600 billion in additional investments -- although it was not clear how binding those pledges would be."This is clearly the best deal we could get under very difficult circumstances," Sefcovic details of the agreement — and crucially, which sectors could be exempt from the 15-per cent levy — will be announced in the coming days, although the EU states it has avoided steeper tariffs on key exports, including cars and the reaction from European capitals -- which gave von der Leyen the mandate to negotiate -- ranged from muted to outright Prime Minister Francois Bayrou said it was a "dark day" for Europe and said the accord was tantamount to "submission".Speaking for Europe's biggest economy, German Chancellor Friedrich Merz gave a warmer welcome to a deal he said had avoided "needless escalation".Industry groups in both countries made plain their disappointment however, with Germany's main auto sector body saying the 15-percent levy "burdens" carmakers while its VCI chemical trade association said the rates were "too high".Hungary's Prime Minister Viktor Orban attacked the deal in blunt terms, saying "Trump ate Ursula von der Leyen for breakfast". 'Not only about trade' "It looks a bit like a capitulation," said Alberto Rizzi of the European Council on Foreign Relations (ECFR)."The EU accepted a fairly unbalanced deal," he added, saying it delivered a "political victory for Trump".Von der Leyen had faced intense pressure from EU states to strike a deal quickly with the bloc's biggest partner and protect a $1.9-trillion trading Brussels' approach, Sefcovic warned that a no-deal scenario -- meaning a 30-percent tariff and the prospect of further escalation -- would have risked up to five million jobs in the months-long talks, Brussels prioritised stability and maintaining good relations with Washington over line of thinking has support: Italian Prime Minister Giorgia Meloni, a Trump ally, said the deal had avoided "potentially devastating" in Asia and Europe welcomed the certainty and rose following the announcement -- reflecting the 4.4 billion euros ($5.1 billion) worth of daily transatlantic goods and services trade that were at over the negotiations was the risk to other areas of cooperation -- like Ukraine -- if the EU descended into a trade war with its closest security partner."It's not only about the trade -- it's about security, it's about Ukraine," Sefcovic told reporters Funk Kirkegaard of the Peterson Institute for International Economics acknowledged it was "clearly an imbalanced deal" if judged purely on trade terms."But if you're trying to avoid worse national security outcomes, well then maybe the deal is not so bad," he said. Cautious approach The EU had sought to ramp up the pressure in the final stretch of talks, fearing a bad deal and higher levies, with countries approving a $109-billion package of counter-tariffs at the last states led by France were pushing for a more robust response, including the option to deploy the trade "bazooka" known as the anti-coercion the threat of retaliation was consistently framed by Brussels as a last resort should talks fail, and experts suggested the hardening stance may have come too late to make a real difference. "If the EU had played hardball at the very beginning, it probably could have got a better deal," ECFR's Rizzi told AFP.
Khaleej Times
10 hours ago
- Khaleej Times
Musk's Tesla signs $16.5 billion chip supply deal with Samsung
Tesla CEO Elon Musk said the U.S. automaker had signed a $16.5 billion deal to source chips from Samsung Electronics, a move expected to bolster the South Korean tech giant's loss-making contract manufacturing business. 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.
Gulf Today
10 hours ago
- Gulf Today
Musk's Tesla signs $16.5 billion chip supply deal with Samsung
Tesla CEO Elon Musk said the US automaker had signed a $16.5 billion deal to source chips from Samsung Electronics, a move expected to bolster the South Korean tech giant's loss-making contract manufacturing business. Samsung shares soared nearly 7 per cent 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-energising 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 maximising 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 per cent to their highest since September last year, while Tesla shares were up 1.9 per cent in US 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 US partnerships in chips and shipbuilding amid last-ditch efforts to reach a trade deal to eliminate or reduce potential 25 per cent US tariffs. A South Korean trade ministry official told Reuters he had not heard that the specific deal was part of the trade negotiations. 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 per cent of the global foundry market, far behind industry leader TSMC, which has a 67 per cent 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. 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 per cent 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. Reuters
