Tesla taps Samsung in US$16.5B deal to manufacture AI6 chips until 2033

SINGAPORE: On Monday, Tesla said it has signed a US$16.5 billion (S$21.25 billion) deal with Samsung Electronics to produce its next-generation AI6 chips, following Samsung’s regulatory filing on Monday after securing an eight-year agreement with a “major global company,” as reported by AFP.

The agreement, which began last Thursday, will run until the end of 2033.

However, the company declined to confirm the client was Tesla, even after Tesla CEO Elon Musk posted on X that the chips would be made by Samsung.

“Samsung’s giant new Texas fab will be dedicated to making Tesla’s next-generation AI6 chip,” he said on X, adding that the strategic importance of the deal is hard to overstate.

He noted that the company allowed Tesla to assist in maximising manufacturing efficiency—a critical point in striking the deal. He also said he would be personally involved to accelerate the pace of progress, noting that the Texas plant was “conveniently located” not far from his house.

Samsung Electronics is the flagship unit of South Korea’s Samsung Group, the largest family-run conglomerate in Asia’s fourth-largest economy.

The deal would account for about 7.6% of Samsung’s projected annual sales for 2024, boosting the company’s foundry business, which lagged behind other firms like SK hynix and TSMC in making cutting-edge artificial intelligence (AI) chips.

Earlier this month, Samsung said it expected a 56% drop in operating profit compared to the same period last year and a 31% decline from the previous quarter, citing weak demand in its semiconductor division.

Experts have pointed to weaknesses in Samsung’s foundry business—which manufactures chips designed by other companies under contract—as the main reason for the decline. /TISG

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