EV major Tesla Inc. and South Korean chip maker Samsung Electronics Co. Ltd. have entered into a contract worth around 22.76 trillion Korean Won or $16.54 billion for semiconductor contract manufacturing. Tesla founder and CEO Elon Musk in a post on the social media platform confirmed that Samsung will be making Tesla's next-generation AI6 chip.
Following the news, Samsung shares gained as much as 6.8% and closed at around 4% higher in South Korean trading. Tesla shares are currently gaining 1.4% to trade at $320.61 on the Nasdaq.
The agreement, effective from July 24, will last until December 31, 2033. According to a regulatory filing, the contract represents approximately 7.6% of Samsung's 2024 revenue of 300.87 trillion won.
Earlier, Samsung shared the news without mentioning the identity of the involved party, just saying that its a major global company.
Meanwhile, Musk, in a post on X platform, confirmed the news and said, "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. Samsung currently makes AI4. TSMC will make AI5, which just finished design, initially in Taiwan and then Arizona."
Musk further said, "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."
He added that the $16.5 billion number is just the bare minimum, and that actual output is likely to be several times higher. Musk reportedly said earlier that Tesla's next-generation AI5 chips will be produced by TSMC at the end of 2026.
Samsung, which currently makes Tesla's AI4 chips that power its Full Self-Driving driver assistant system, earlier reported that details of the latest contract will remain confidential until the end of the withholding period on December 31, 2033.
The deal, which is considered Samsung's largest-ever chip order, marks a major boost to its loss-making contract semiconductor manufacturing business.
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