Tesla Signs $16.5 Billion Deal With Samsung for Fabrication of AI6 Chips at Texas Plant

Tesla has signed a strategic pact with Samsung Electronics for the fabrication of next generation chips, CEO Elon Musk announced on Monday. The deal is said to be worth $16.5 billion (roughly Rs. 1.4 lakh crore) and will see the South Korean tech conglomerate’s foundry division manufacture AI6 chips at its Texas plant, which will then be used in Tesla EVs for powering full self-driving (FSD), other autonomous systems, and sensor suites.

Samsung Bags Tesla Contract

The news first broke out on Monday morning when a regulatory filing by Samsung was discovered. At the time, it was known that the tech giant had bagged a contract from a global company worth 22.8 trillion KRW (roughly Rs. 1.42 lakh crore) for manufacturing and supply of chipsets. However, the tech giant did not reveal the name of the client.

A few hours later, billionaire Elon Musk announced that it was his automotive company Tesla which had embarked on the strategic partnership with Samsung’s loss-making manufacturing division.

“The strategic importance of this is hard to overstate”, the Tesla CEO said in a post on X (formerly Twitter).

This partnership will see Samsung Foundry’s Texas plant manufacture “next generation” AI6 chips. Currently, the tech giant also fabricates the AI4 chips for the Musk-owned company. This is used in the Hardware 4 (HW4) to power FSD and other sensor systems in Tesla’s fleet of electric vehicles (EVs).

Tesla has also been allowed to assist Samsung in maximising the manufacturing efficiency of the chips and Musk himself will oversee the progress.

“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”, the billionaire said in a subsequent post.

As per the regulatory filing, the contract between Tesla and Samsung was signed on July 26 but has a start date listed as July 24. It runs through December 31, 2033. Musk further revealed that the AI5 chips, whose design process has “just finished”, will be manufactured by TSMC initially in Taiwan and then in Arizona too.

This development comes at a time when Samsung’s manufacturing division has been dealing with heavy losses. Citing Pak Yuak, an analyst at Kiwoom Securities, Reuters reported that Samsung Foundry’s losses exceeded $3.63 billion (roughly Rs. 0.31 lakh crore) in the first half of 2025. The latest deal signed between Tesla and the tech conglomerate could help mitigate some of the losses.