The deal comes as an important lifeline for Samsung’s struggling contract chipmaking division, which has been losing billions. 

With this agreement, the tech giant now has a clearer path to sustainability and renewed relevance in the global semiconductor space.

The South Korean firm had previously faced challenges in securing major clients for its Texas plant, forcing delays and casting doubts over its viability. Now, the site has found purpose.

Samsung confirmed the agreement last week but had withheld the client’s identity due to a confidentiality clause. Tesla CEO Elon Musk, however, made it public in a pair of posts on X. 

“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,” he stated. In a follow-up, he added, “The $16.5B number is just the bare minimum. Actual output is likely to be several times higher.”

The chips in question, Tesla’s upcoming AI6 processors, are expected to build on the Dojo supercomputer architecture and will support Tesla’s next-gen Full Self-Driving (FSD) system, humanoid robots (Optimus), and AI data centres. 

Production is slated to begin between 2027 and 2028 using Samsung’s advanced 2nm process, which offers 25% better power efficiency and 12% higher performance compared to its 3nm predecessor.

Musk’s unusual level of involvement shows just how critical the AI6 chip is to Tesla’s vision. It also stresses a rare arrangement: a customer directly involved in the operations of a semiconductor foundry. 

This level of collaboration is almost unheard of in the chipmaking world and represents a major vote of confidence in Samsung’s process capabilities, despite its recent setbacks.

Samsung’s foundry division, which focuses on logic chips designed by external clients, posted a staggering loss of over $3.6 billion in the first half of 2025. The loss was attributed to underutilised capacity and the exodus of key clients, many of whom opted for rival TSMC due to superior process technology. 

Market research firm TrendForce estimates Samsung’s foundry market share has plunged to just 7.7%, while TSMC holds a commanding 67.6%.

“This order is quite meaningful,” said Ryu Young-ho, a senior analyst at NH Investment & Securities, pointing to the fact that Samsung’s Taylor plant had “virtually no customers” until now.

The Tesla contract is now Samsung’s largest foundry deal to date, accounting for roughly 7.6% of its annual revenue. Its importance goes beyond commercial value. 

The deal may bolster South Korea’s negotiations with Washington, as the country pushes for deeper tech alliances and exemption from looming 25% U.S. tariffs. It also aligns with the objectives of the U.S. CHIPS Act, which has helped subsidise the expansion of Samsung’s Texas fab.

Analysts believe the deal could help arrest the bleeding in Samsung’s foundry division. Pak Yuak of Kiwoom Securities noted it could reduce losses and provide much-needed credibility at a time when investors and stakeholders have raised concerns about the company’s future in advanced chip production.

TSMC still holds the upper hand technologically and commercially, supplying giants like Apple, Nvidia, and Qualcomm. But the Tesla-Samsung partnership introduces a new dynamic, one where deep collaboration and physical proximity (Musk lives near the Texas plant) could create an edge in speed, customisation, and oversight.

Analysts expect the South Korean tech giant to post an operating profit of 6.3 trillion won ($4.62 billion) for the April-June period, a steep 39% drop in Samsung Q2 profit, compared to the same quarter last year.

The second-quarter performance, if confirmed, would be Samsung’s lowest profit in a year and a half. It also worsens concerns about the company’s capacity to compete in the accelerating AI hardware space, where rivals like SK Hynix and Micron are gaining ground.

While Samsung has pushed aggressively to position its HBM3E chips at the heart of next-generation AI systems, execution has stumbled. 

Its 12-layer HBM3E stacks reportedly passed Nvidia’s bare-die tests but are still awaiting full-package certification. Meanwhile, both SK Hynix and Micron have already begun large-scale shipments of certified HBM3E chips to Nvidia, securing a head start in the booming AI memory market.

“HBM revenue likely remained flat in the second quarter, as China sales restrictions persist and Samsung has yet to begin supplying its HBM3E 12-high chips to Nvidia,” said Ryu Young-ho, senior analyst at NH Investment & Securities. He added that significant shipments to Nvidia this year are unlikely.

Samsung’s situation is further complicated by its exposure to China, which accounts for roughly 20% of its HBM sales. U.S. export restrictions on advanced chips have disrupted those flows, and more hurdles could be on the way. 

Washington is reportedly weighing the revocation of technology authorisations that allow companies like Samsung to receive American chipmaking tools at their Chinese plants.

That risk of regulatory tightening is making investors doubtful, particularly with the added threat of proposed U.S. tariffs, up to 25% on non-U.S.-made smartphones. 

Analysts warn the current surge in Samsung smartphone sales, driven by pre-tariff stockpiling in the U.S., may not last. If tariffs are enforced in the second half of 2025, demand for premium models like the Galaxy S25 and Z Fold 7 could slow sharply.

In the face of these challenges, Samsung has begun supplying its 36GB 12-layer HBM3E stacks to AMD. The U.S. chipmaker confirmed in June that its MI350 AI accelerators will integrate Samsung’s memory chips, an encouraging sign, but not enough to offset Nvidia-related delays.

Investors have taken notice. Despite a 19% rise in Samsung shares this year, the company is still the worst-performing major memory chip stock of 2025. The KOSPI index has climbed 27.3% over the same period, leaving Samsung trailing behind.

As of Monday morning in Seoul, Samsung Electronics shares were down nearly 2%, underperforming the market yet again.

As we await the official release of Samsung Q2 profit, the company has not commented on whether its chips have passed Nvidia’s certification process. The company’s silence, combined with ongoing delays and regulatory risks, has increased doubts about its competitiveness in a market where being first, and fast, matters more than ever.