rewrite this title Tesla and Samsung Sign a Massive Chip Deal

Tesla has announced a significant $16.5 billion chip supply deal with Samsung Electronics. This agreement is a major boost for the South Korean tech giant’s struggling foundry business, which manufactures chips for other companies.

According to Tesla CEO Elon Musk, Samsung’s new factory in Taylor, Texas, will be dedicated to producing Tesla’s next-generation artificial intelligence chip, the AI6. Musk stated on X that he would be personally involved to speed up production, noting the factory’s proximity to his home.

The deal, which runs until the end of 2033, was confirmed by several sources to Reuters after Samsung had previously announced a large order without revealing the customer’s identity. Following the news, Samsung’s shares rose over 4%, marking their biggest daily gain in a month.

This isn’t the first collaboration between the two companies. Samsung already produces AI4 chips for Tesla. The new AI6 chips, also referred to as HW5 hardware, are designed to enable the full self-driving (FSD) capabilities of Tesla’s vehicles. The company claims that vehicles with HW4 hardware will make unsupervised FSD possible.

The agreement is particularly important for Samsung as it tries to overcome challenges in the AI chip market. The company has fallen behind competitors like TSMC and SK Hynix in producing advanced HBM (High Bandwidth Memory) chips. This new deal could help mitigate the losses of Samsung’s foundry unit, which reportedly exceeded $3.63 billion in the first half of this year. The $16.5 billion agreement is estimated to account for about 7.6% of Samsung’s 2024 revenue.

Samsung, while the world’s largest memory chip manufacturer, has seen its foundry business struggle to attract major clients like Apple, Nvidia, and AMD, who have instead gone to its main competitor, TSMC.

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