Elon Musk has officially confirmed that Tesla has entered a long-term chip supply agreement with Samsung Electronics worth $16.5 billion. This deal, which stretches through 2033, secures the production of Tesla’s next-generation AI6 chips at Samsung’s newly constructed manufacturing plant in Taylor, Texas. The contract marks one of the largest strategic moves by both companies in recent years, signaling a major shift in the global semiconductor landscape.

Samsung’s Foundry Unit Gets a Vital Lifeline

Samsung’s share price surged nearly 7% on the news—the company’s biggest single-day rally in nearly a year. Investors responded positively to what is now Samsung’s largest-ever contract in its foundry business. For Tesla, the partnership promises secure access to the custom AI chips that will support its growing ambitions in autonomous vehicles, robotics, and AI-powered systems.

The Taylor facility, which had faced repeated operational delays and struggled to attract high-profile customers, will now become a central player in Samsung’s efforts to reclaim market share from global leader TSMC. The new deal not only fills Samsung’s order books but also demonstrates renewed confidence in its ability to meet the demands of large-scale, advanced chip fabrication.

Tesla to Use AI6 Chips for Self-Driving Tech and Beyond

The agreement centers on Samsung manufacturing Tesla’s sixth-generation AI chips—internally referred to as AI6. These processors are expected to serve as the backbone of Tesla’s Full Self-Driving (FSD) software, AI inference systems, robotics applications, and supercomputing clusters.

According to Musk, Tesla will be heavily involved in optimizing the chip production process alongside Samsung. “They’ve allowed our engineers to collaborate directly to improve throughput. I’ll personally oversee the production line at key stages to ensure progress stays on track,” Musk shared in a post. He also clarified that the $16.5 billion deal represents a baseline estimate, and actual spending may surpass that figure as Tesla ramps up its operations.

When Will AI6 Chips Be Ready?

While specific production timelines remain undisclosed, industry analysts and Musk’s previous statements offer some guidance. Tesla’s AI5 chips are set to debut by late 2026. Based on this schedule, the rollout of AI6 chips is projected to begin around 2027 or 2028.

This extended timeline gives Samsung ample opportunity to refine its manufacturing techniques at the Texas plant, while allowing Tesla to integrate earlier chip versions into its product ecosystem and gather performance feedback. Nonetheless, given Tesla’s history with production delays, timelines could shift further depending on design revisions or supply chain hurdles.

Samsung’s Foundry Arm Eyes Market Comeback

This multibillion-dollar contract could significantly turn the tide for Samsung’s struggling chip foundry division. Despite being the world’s second-largest semiconductor company by revenue, Samsung has lagged behind rivals like TSMC in terms of foundry market share and technological consistency. Currently, Samsung commands just 8% of the global foundry market, compared to TSMC’s overwhelming 67%.

Samsung posted losses exceeding $3.6 billion in the first half of 2025, much of it stemming from its chipmaking segment. With this major supply contract now in hand, the company expects to alleviate pressure on its bottom line and reinvigorate investor interest.

“This partnership is a turning point,” noted analysts from SK Securities. “Not only does it validate Samsung’s manufacturing capabilities, but it could also serve as a gateway to future deals with other AI-focused companies.”

U.S.–South Korea Trade Context and Strategic Timing

While officials declined to link this deal directly to ongoing trade talks between Seoul and Washington, the agreement aligns with broader diplomatic efforts to strengthen bilateral cooperation in critical sectors. South Korea has sought to protect its export-driven economy from potential tariffs by promoting advanced manufacturing partnerships, particularly in semiconductor and shipbuilding industries.

From the U.S. perspective, keeping chip production onshore—particularly through a Texas-based fab—reduces dependence on Asian supply chains, which have proven vulnerable to geopolitical tensions in recent years. As such, the Tesla-Samsung agreement aligns well with current American industrial policy goals.

The Deal’s Long-Term Financial Impact

Although the $16.5 billion headline figure has grabbed attention, the financial impact on Samsung’s revenue will unfold gradually over the contract’s lifespan. Experts suggest that initial volumes will be modest as Tesla finalizes chip design and ramps up production. However, if Tesla expands its product offerings across AI, robotics, and computing, annual orders could eventually grow, pushing the deal’s total value even higher.

Some analysts believe the partnership may exceed $20 billion in value over the next decade, depending on how extensively Tesla uses AI6 chips across its hardware lineup.

Investor Response and Market Movement

Tesla’s stock gained approximately 1.9% in pre-market trading after the news broke, while Samsung’s share price rose significantly in South Korea. This investor optimism reflects belief in the mutual benefits of the partnership—Samsung gets a headline client with massive growth potential, and Tesla secures a dedicated supply of cutting-edge chips designed to power its AI ambitions.

The boost to Samsung’s share price is particularly noteworthy. It reflects market confidence that the chipmaker can now regain lost ground against industry titan TSMC and reestablish its credibility in delivering high-performance chips at scale.

Challenges Ahead for Both Companies

Despite the excitement, both companies face significant execution risks. Tesla must ensure that its AI6 design meets performance and power efficiency targets, while Samsung must deliver consistent quality at scale. Previous efforts by Samsung to mass-produce advanced chips have encountered yield problems—issues that could re-emerge if production isn’t tightly managed.

Moreover, Tesla’s rapid expansion into AI hardware brings new technical demands. The company is increasingly competing with AI chip specialists like Nvidia, AMD, and even custom-silicon divisions of other tech giants. Its success will depend on whether its chips can rival industry standards for speed, energy efficiency, and reliability.

Conclusion: A Game-Changing Alliance

The $16.5 billion semiconductor deal between Tesla and Samsung represents more than just a large-scale business contract. It’s a strategic alliance poised to reshape the global chipmaking landscape. For Samsung, it’s a chance to reinvigorate its foundry division and demonstrate its viability as an alternative to TSMC. For Tesla, it solidifies control over one of the most critical components of its future: AI hardware.

While much will depend on execution and timelines, the scale and ambition of the deal point to a bold vision for both firms. As AI continues to drive innovation across industries, their partnership could serve as a model for how carmakers and chip manufacturers can collaborate to lead the next wave of technological transformation.