Tesla Partners with Samsung for $16.5 Billion Chip Production Deal

In a significant development within the semiconductor industry, Tesla has announced that it will collaborate with Samsung to produce its upcoming AI6 processor. This partnership marks a major contract valued at approximately $16.5 billion, extending over several years, and highlights Samsung's return to securing large-scale orders.

The announcement followed Samsung's initial report to South Korean authorities regarding the contract, which required disclosure due to its substantial monetary value. Tesla's CEO confirmed that Samsung would be the manufacturer of the AI6 processor, as reported by various sources including Reuters.

The AI6 is set to be the next-generation processor designed for Tesla's advanced driver-assistance systems, with aspirations for full self-driving capabilities. Tesla has been promising advancements in its full self-driving technology for several years, and this new chip is a crucial component of that effort.

Currently, Samsung is engaged in the production of the AI4 processor, previously referred to as Hardware 4 (HW4), utilizing 4-nanometer technology. In a shift, Tesla has opted to work with TSMC for the AI5 processor, which is anticipated to utilize 3-nanometer technology. This transition to TSMC will delay the AI5's production timeline, now projected to begin in late 2026 or early 2027. Consequently, the AI6 is not expected to be available until 2029, although the agreement with Samsung extends through to the end of 2033, potentially allowing for even more advanced 2-nanometer technology by then.

For Samsung, this marks a pivotal moment as it secures its first major client in years, particularly since it has struggled to attract high-profile customers for its 3-nanometer chip generation. Historically, Samsung's chip manufacturing division faced challenges regarding reliability, attributed to low yields during production. As TSMC has recently increased its prices, interest in Samsung's offerings has begun to rise.

Reportedly, Samsung is providing Tesla with considerable flexibility in this collaboration. Tesla's CEO has expressed intentions to enhance production efficiency, stating a personal commitment to expedite the manufacturing process. Production of the AI6 will take place at Samsung's new semiconductor facility in Taylor, Texas, although this may not significantly alter timelines given the lengthy lead time for the project.