Tesla CEO Elon Musk announced on Monday that Tesla has signed a strategic agreement with Samsung Electronics to manufacture next-generation chips. The deal, said to be worth $16.5 billion (approximately Rs 140 crore), will see the South Korean technology group’s foundry arm produce AI6 chips at its Texas factory, which will then be used in Tesla electric vehicles to power full self-driving (FSD), other autonomous systems and sensor suites.
Samsung wins Tesla contract
The news first broke on Monday morning when a regulatory filing by Samsung was discovered. At the time, it was reported that the technology giant had secured a chipset manufacturing and supply contract worth KRW 22.8 trillion (approximately Rs. 142 crore) from a multinational company. However, the tech giant did not reveal the name of the customer.
Hours later, billionaire Elon Musk announced that his car company Tesla had begun a strategic partnership with Samsung’s money-losing manufacturing unit.
“The importance of this strategy cannot be overstated,” the Tesla CEO said in a post on X (formerly Twitter).
Samsung’s giant new factory in Texas will be dedicated to producing Tesla’s next-generation AI6 chips. Its strategic importance cannot be overstated.
Samsung is currently producing AI4.
TSMC will first produce the AI5, which has just completed its design, in Taiwan and then in Arizona.
— Elon Musk (@elonmusk) July 28, 2025
The partnership will see Samsung manufacture “next-generation” AI6 chips at its Texas factory. Currently, the technology giant also manufactures AI4 chips for Musk’s companies. It is used in Hardware 4 (HW4) to power FSD and other sensor systems in Tesla’s electric vehicle (EV) fleet.
Tesla will also be allowed to assist Samsung in maximizing the manufacturing efficiency of its chips, a progress that Musk himself will oversee.
The billionaire said in a subsequent post: “This is a critical point because I will be walking the line myself to speed up the progress. And the fab is not far from my home and is easily accessible.”
The contract between Tesla and Samsung was signed on July 26, but starts on July 24 and runs until December 31, 2033, according to regulatory filings. Musk further revealed that the AI5 chip, which has “just finished” the design process, will be produced by TSMC first in Taiwan and then also in Arizona.
The development comes at a time when Samsung’s manufacturing unit has been suffering heavy losses. Reuters quoted Kiwoom Securities analyst Pak Yuak as saying that Samsung foundry’s losses in the first half of 2025 exceeded US$3.63 billion (approximately Rs. 310 million). Tesla’s latest deal with the technology group could help mitigate some of its losses.
