Topline
Tesla CEO Elon Musk announced late on Sunday that Samsung will manufacture the car maker’s next-generation AI chip at its upcoming Texas semiconductor plant as part of a deal worth $16.5 billion, in a significant boost for Samsung’s struggling chipmaking arm.
Tesla CEO Elon Musk announced that Samsung will manufacture Tesla’s next-generation AI chips.
Key Facts
In a post on X, Musk announced that “Samsung’s giant new Texas fab will be dedicated to making Tesla’s next-generation AI6 chip,” adding: “The strategic importance of this is hard to overstate.”
In a regulatory filing made in South Korea shortly before Musk’s announcement, the electronics giant announced it had secured a $16.5 billion contract with a “large global company.”
The multi-year deal will run through till the end of 2033, and Samsung’s semiconductor fabrication plant in Taylor, Texas, is scheduled to begin operations in 2026.
In a follow-up post, Musk said Samsung has agreed to “allow Tesla to assist in maximizing manufacturing efficiency,” but he didn’t specify whether this meant Tesla would assist in bringing the plant into operation.
Musk noted the Samsung fab “is conveniently located not far from my house” and claimed he would walk the production line “personally to accelerate the pace of progress.”
What Do We Know About Tesla’s Ai Chips?
Musk pointed out that Samsung currently manufactures Tesla’s AI4 chip, which the company previously referred to as the HW 4.0 or Hardware 4 chip. The chip, which was internally designed by Tesla, help’s power the car’s Autopilot feature on the company’s line of electric vehicles. The billionaire said his company has completed the design for the AI5 chip, which will be manufactured by TSMC, Samsung’s primary chipmaking rival. According to Musk, the AI5 chips will be first manufactured in Taiwan and then later at TSMC’s Arizona plant. Last month, Musk announced the chip’s name had changed from HW 5 to AI5 and claimed the Tesla AI5 computer would have around 10 times the capability of HW4 computer. The company has repeatedly touted the image processing capabilities of its chips as unlike competitors, Tesla’s self-driving technology only relies on cameras instead of other sensors like radars and lidars. The self-driving technology is a key component of Musk’s plan to manufacture self-driven Tesla Robotaxis—which is seen as critical to the company future as it faces flagging sales numbers.
How Have The Markets Reacted?
After the announcement, Samsung Electronics’ Seoul-traded shares surged 6.83% to $50.8 (KRW 70,400). Tesla shares were also up in premarket trading early on Monday, rising 1.58% to $321.
What Do We Know About Samsung’s Texas Plant?
Earlier this month, Nikkei Asia reported Samsung was delaying the completion of its chip fabrication facility in Taylor, Texas, as it struggled to find customers. The plant has received $4.74 billion in federal government funding under the Biden administration’s CHIPS Act. Samsung has announced plans to invest more than $37 billion in the plant to manufacture its cutting-edge 2-nanometer chips. The project was initially supposed to become operational in 2024, but the date has now been pushed to 2026. The Tesla deal could serve as a lifeline for the plant and potentially prevent further delays. Musk’s statement that the new fab “will be dedicated to making” Tesla AI6 chips suggests Tesla will be the sole customer for now.
Further Reading
Samsung to Make Tesla AI Chips in $16.5 Billion Multiyear Deal (Bloomberg)
Samsung delaying completion of US chip plant due to lack of customers (Nikkei Asia)
