Elon Musk’s Tesla has signed a major chip supply agreement with Samsung Electronics, securing a deal reportedly valued at $16.5 billion that will run through 2033. The partnership is a significant move for both companies, with Samsung set to manufacture Tesla’s next-generation A16 chip at its new Texas fabrication plant, marking a crucial advancement in Tesla’s AI hardware ambitions.
Tesla CEO Elon Musk confirmed the deal via a post on X (formerly Twitter), highlighting Samsung’s flexibility in allowing “full customisation of Tesla-designed chips.” He also revealed that Tesla will play a hands-on role in manufacturing optimization. “Samsung agreed to allow Tesla to assist in maximising manufacturing efficiency. This is a critical point, as I will walk the line personally to accelerate the pace of progress. And the fab is conveniently located not far from my house,” Musk wrote.
This new agreement is especially critical for Samsung, whose semiconductor foundry division has been facing financial challenges and strong competition from major rivals like TSMC. Industry analysts believe this deal will help reduce operating losses, which reportedly surpassed $3.6 billion in the first half of 2025. It also marks a strategic victory for Samsung’s contract chip-making business, which has struggled to match TSMC’s scale and technological edge.
Currently, Samsung manufactures the A14 chip for Tesla, while TSMC has been tasked with producing the A15 chipset in Taiwan and later in Arizona. Musk confirmed that, “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. Samsung currently makes AI4. TSMC will make AI5, which just finished design, initially in Taiwan and then Arizona.”
For Tesla, the deal ensures a steady supply of custom chips designed to support its expanding AI stack, essential for powering autonomous driving and in-car AI functionalities.
Beyond business benefits, the agreement also has geopolitical implications, strengthening technology cooperation between South Korea and the United States, especially amid ongoing trade tensions and discussions about future tariffs.
This landmark deal marks a significant step in both Tesla’s technological roadmap and Samsung’s resurgence in the global semiconductor race.
