Samsung lands $16.5B Tesla AI chip deal through 2033

Samsung has secured a $16.5 billion contract to manufacture Tesla’s AI chips through 2033, with production set to take place at Samsung’s new Texas fabrication facility. The deal represents a strategic partnership that will see Samsung produce Tesla’s next-generation AI6 chips specifically designed for the company’s self-driving vehicle technology.

What you should know: This massive chip manufacturing agreement solidifies Samsung’s role as Tesla’s primary AI processor supplier for nearly a decade.

• The contract was initially spotted in regulatory filings on July 27 for an unnamed consumer tech company before Elon Musk, Tesla’s CEO, confirmed Tesla as the client on X.
• Samsung will produce Tesla’s AI6 chips at its new Texas fabrication plant, which was originally scheduled to open in 2024 but has been delayed until potentially 2026.
• According to Musk, “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.”

The big picture: This partnership addresses Samsung’s struggle to find sufficient customers for its new Texas facility while securing Tesla’s chip supply chain for its autonomous vehicle ambitions.

• Samsung has been building the Texas plant but reportedly struggled to justify opening it due to insufficient customer demand, according to a July report from Nikkei Asia.
• The deal ensures continuity in Tesla’s chip production strategy, with Samsung previously manufacturing the A14 chip while TSMC, a major semiconductor manufacturer, handled the A15 generation.

Key details: Tesla will actively participate in optimizing Samsung’s production processes at the Texas location.

• Musk confirmed he will personally walk the fabrication line and noted the facility’s proximity to his home.
• The contract covers production of the A16 chip and likely extends to the A17 and subsequent generations through 2033.
• Musk suggested the actual output could exceed the $16.5 billion minimum, stating on X that “actual output is likely to be several times higher.”

Why this matters: The timing coincides with Tesla’s expanding autonomous vehicle testing program across multiple markets.

• Tesla’s self-driving cars debuted last month in Austin, Texas, with safety drivers included during limited testing phases.
• The company recently expanded testing to the United Kingdom, with vehicles operating in London and Swindon, including challenging roundabout navigation scenarios.
• These AI chips will be crucial for processing the complex computational requirements of Tesla’s full self-driving technology as it scales globally.