Elon Musk announces $16.5 billion deal with Samsung for chips

In July 2025, the United States saw significant developments in the semiconductor market with Tesla CEO Elon Musk confirming a massive $16.5 billion deal with Samsung Electronics for chip sourcing. This decision is seen as a strategic move to support Samsung’s struggling contract manufacturing business, which has been facing mounting pressures and significant losses. The new chip factory being constructed in Taylor, Texas, will play a crucial role in producing Tesla's next-generation AI6 chip, addressing some of the ongoing supply chain challenges that have plagued both companies. The deal is projected to span until the end of 2033, indicating a long-term partnership that could align with emerging technologies in autonomous vehicles and artificial intelligence. Additionally, Samsung has recently encountered difficulties in attracting major clients for its foundry services, trailing behind competitors like TSMC in global market share. The Taiwan Semiconductor Manufacturing Company commands a dominant 67% share of the foundry market, while Samsung struggles with just 8%. By allowing Tesla to participate in optimizing the manufacturing process within the Texas facility, Samsung hopes to bolster operational efficiency and improve its market standing. Shares of Samsung saw a significant increase following the announcement, reflecting positive investor sentiment and a belief in the potential turnaround of its foundry business. Moreover, industry analysts have noted that Samsung's foundry segment has faced losses exceeding $3.6 billion in the first half of the year, exacerbating the need for this deal. As the industry evolves towards AI chip production, this agreement represents a critical juncture for Samsung in maintaining relevance and competitiveness in the semiconductor sector. Both companies look forward to leveraging this partnership to potentially create innovations in chip technology that could fuel advancements in various high-tech fields, particularly in automotive engineering and artificial intelligence applications.