Samsung Signs $16.5 Billion Chip Supply Contract With Tesla
The contract win comes as Samsung is struggling to catch up with TSMC in the global foundry business
- Samsung will manufacture semiconductors for Tesla in a $16.54 billion deal, which is 7.6% of Samsung’s 2024 revenue.
- Elon Musk confirmed on X that Samsung’s Texas facilities will make Tesla’s next-generation AI6 chip.
- Samsung’s shares rose as much as 3.5% following the announcement, as it tries to catch up with TSMC in the foundry business.
Samsung 005930 5.61%increase; green up pointing triangle Electronics will manufacture semiconductors for Tesla TSLA 3.52%increase; green up pointing triangle in a $16.54 billion multiyear deal, marking a major win for its sluggish foundry business.
The South Korean technology giant said in a regulatory filing Monday that the contract, equivalent to 7.6% of its 2024 revenue, will run until the end of 2033. It didn’t identify the client, citing a confidentiality agreement that also kept other terms undisclosed.
Tesla Chief Executive Elon Musk confirmed the deal with Samsung in a post on X, saying that Samsung’s new Texas fabrication facilities will be dedicated to making the U.S. EV maker’s next-generation AI6 chip. “The strategic importance of this is hard to overstate,” he wrote in the post.
Samsung’s shares rose as much as 3.5% on Monday, outperforming the benchmark Kospi’s slight decline. The stock was recently 3.2% higher, on course for its biggest one-day gain in a month.
The contract win comes as Samsung, the world’s largest memory-chip maker, is struggling to catch up with Taiwan Semiconductor Manufacturing Co. in the global foundry business despite years of investment. The foundry business involves making chips on a contract basis for customers such as Nvidia, Qualcomm and Apple, which design chips but don’t have their own factories to produce them.
TrendForce, a research firm tracking the semiconductor industry, reported last month that it estimates TSMC’s share of global foundry revenue increased to 67.6% in the first quarter from 67.1% in the previous quarter. Samsung’s share fell to 7.7% from 8.1% over the same period.
Some analysts say Samsung’s foundry business, relative to TSMC, is suffering from lower yields, which refer to the number of chips that can be harvested from a wafer. Samsung is also seen as struggling with slower-than-expected progress with its advanced manufacturing processes and insufficient demand from major customers.