Samsung-Tesla chip alliance reignites South Korea’s tech titan
Shares of Samsung Electronics surged nearly 7% on Monday following confirmation from Tesla CEO Elon Musk that the South Korean firm will produce next-generation AI6 chips at its Taylor, Texas plant, in a deal worth $16.5 billion (R293 billion). The chips will power Tesla’s advanced autonomous driving systems and Optimus humanoid robots.
“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 posted on X (formerly Twitter).
Musk gets hands-On: “I will walk the line personally”
Confirming his personal investment in the success of the project, Musk told his 223 million followers:
“Samsung agreed to let Tesla help maximize manufacturing efficiency… I will walk the line personally to accelerate progress. The fab is conveniently near my house 😃.”
While Samsung currently produces Tesla’s AI4 chips, TSMC will produce the AI5 version. The AI6 system—slated for delivery around 2027-2028—is expected to enable real-time AI inference for Tesla’s robotaxis and FSD (Full Self-Driving) platforms.
Big win for a foundry in crisis
Once a juggernaut in semiconductor manufacturing, Samsung’s foundry business has lagged significantly behind TSMC, whose 67.6% global market share dwarfs Samsung’s 7.7%. Industry insiders view the Tesla deal as a validation of Samsung’s 2-nanometer fabrication push.
“Their foundry business has been loss-making and struggling with under-utilization, so this will help a lot,” said Vey-Sern Ling, MD at Union Bancaire Privee.
The deal marks the first major win since Samsung Executive Chairman Jay Y. Lee was cleared of all legal charges, a pivotal moment that has refocused the company’s long-term strategy.
Global ripples and geopolitical undercurrents
As Starlink parent company SpaceX recently withdrew from South African regulatory hearings, analysts speculate the Samsung-Tesla pact may be a strategic hedge by Musk. The agreement could also ease U.S.-South Korea tensions over looming 25% tariffs.
“Tesla’s support for Samsung’s Texas fab gives both sides political leverage,” noted Pak Yuak of Kiwoom Securities.
South African concerns have intensified over Musk’s influence, particularly with criticism surrounding Starlink’s B-BBEE compliance and Musk’s increasingly erratic behavior online.
AI chips, not EVs, are Tesla’s future
Tesla’s core electric vehicle business continues to face challenges, including declining sales and regulatory scrutiny. Yet Musk remains bullish on the company’s AI prospects.
“AI is Tesla’s future,” he said during Tesla’s Q2 earnings call. “AI is Tesla’s future,” he said during Tesla’s Q2 earnings call. “This chip deal is just the bare minimum. Actual output is likely to be several times higher.”
Looking ahead: Google next?
Reports suggest Samsung is also in talks with Alphabet to co-develop AI chips for Google’s cloud and edge infrastructure, part of Samsung’s broader pivot beyond memory chips.
