Tesla taps Samsung for AI6 Chips in $16.5 billion deal, Elon Musk says

Tesla CEO Elon Musk said Monday that tech giant Samsung Electronics will provide his company with its next-generation AI6 chips, following the South Korean firm's announcement of a US$16.5 billion deal.

Samsung said Monday it had secured an eight-year agreement, without naming the client, describing it only as a "major global company" in a regulatory filing.

Under the deal, the partnership -- effective from last Thursday -- runs through the end of 2033.

"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," Musk said on X.

'Critical point'

"Samsung agreed to allow Tesla to assist in maximising manufacturing efficiency," he added, calling it a "critical point" in striking the deal. 

"I will walk the line personally to accelerate the pace of progress," he said, noting Samsung's Texas plant was "conveniently located not far from my house". 

The deal represents about 7.6% of Samsung's projected annual sales for 2024, the company said.

It declined to confirm the client was Tesla, even after Musk's message, citing confidentiality.

The agreement is expected to provide a major boost to Samsung, which has faced headwinds in its foundry business, lagging rivals SK hynix and Taiwan's TSMC in the race for cutting-edge artificial intelligence chips.

Samsung Electronics is the flagship unit of South Korea's Samsung Group, by far the largest of the family-run conglomerates that dominate Asia's fourth-largest economy.

The company said this month that it expected operating profit to fall 56 percent on-year and 31 percent from the previous quarter, citing a slump in its core semiconductor division.

Experts have attributed the decline to weaknesses in its foundry operations, which involve contract-based manufacturing of chips designed by other companies.