Tesla Inks Chip Deal With Samsung Electronics, Says Elon Musk

Tesla has signed a multi-billion-dollar long-term deal to supply chips to Samsung Electronics, reportedly a milestone in the global semiconductor industry, and a possible rescue of its struggling foundry business. This happens as Samsung is increasingly feeling the pressure to bridge the technology difference with competitors such as TSMC and SK Hynix.

Tesla CEO Elon Musk confirmed that the automaker has made a deal with Samsung for chip sourcing, aligning with Samsung’s own disclosure of a $16.5 billion chip supply agreement with a global client. While Samsung did not name the customer, citing confidentiality, three sources confirmed Tesla is behind the decade-long agreement, which runs through 2033.

Samsung, the world’s leading memory chipmaker, has seen significant losses in its logic chip and foundry segment. “The latest deal would help reduce losses at Samsung's foundry business, which he estimated exceeded 5 trillion won ($3.63 billion) in the first half of the year,” said Pak Yuak, analyst at Kiwoom Securities.

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The transaction is also strategically geopolitical in that it would strengthen South Korea, enhance its qualification to strengthen chip-related relations with the US as it contends with a possible 25 per cent US tariff.

Technical hitches, especially over its 2 nanometer technology, and delays in completion of a new chip factory in Texas raise concerns about the deal production capacity of Samsung. “The order is unlikely to involve the cutting-edge tech,” noted BNK Investment & Securities analyst Lee Min-hee. As Samsung fights to regain share lost to TSMC, this high-profile partnership could signal a crucial turnaround for its contract chip manufacturing business.