Home / Business and Economy / Tesla Inks Landmark Chip Deal with Samsung, Boosting South Korean Tech Giant
Tesla Inks Landmark Chip Deal with Samsung, Boosting South Korean Tech Giant
28 Jul
Summary
- Tesla CEO Elon Musk announces chip supply deal with Samsung Electronics
- Samsung's $16.5 billion chip contract to run through 2033, details kept confidential
- Deal expected to help reduce losses in Samsung's foundry business
In a significant development, Tesla has announced a deal to source chips from Samsung Electronics. The announcement was made on Monday by Tesla CEO Elon Musk, providing a boost to Samsung's loss-making contract manufacturing business.
On Saturday, Samsung had revealed a $16.5 billion chip supply deal with a major global company, without naming the client. The company said the customer had requested confidentiality about the details of the deal, which will run through the end of 2033.
Three sources have now confirmed that Tesla was the customer for this landmark agreement. The deal is seen as crucial for Samsung, which has been struggling to keep up with rivals like TSMC and SK Hynix in the race to produce advanced artificial intelligence chips. This lag has weighed heavily on Samsung's profits and share price.
The Samsung-Tesla partnership is also significant for South Korea, as the country seeks to strengthen its U.S. collaborations in the chip and shipbuilding industries amid efforts to reach a trade deal and eliminate or reduce potential U.S. tariffs.
While the details of the chip order remain confidential, analysts suggest it is unlikely to involve Samsung's cutting-edge 2-nanometer technology, as the company is still grappling with production yield challenges. Nevertheless, the deal is expected to help reduce the losses in Samsung's foundry business, which were estimated to have exceeded 5 trillion won ($3.63 billion) in the first half of the year.
