Samsung Electronics has signed a $16.5 billion chip foundry agreement with Tesla, marking one of the largest semiconductor deals in the industry and a major boost to Samsung's struggling contract manufacturing business.

According to a regulatory filing submitted on July 24, the agreement will run through the end of 2033 and represents approximately 7.6% of Samsung's projected 2024 revenue. While Samsung initially withheld the name of the client citing confidentiality, Tesla CEO Elon Musk confirmed the partnership on social media platform X, stating the chips will power Tesla's next-generation AI6 systems.

"Samsung's giant new Texas fab will be dedicated to making Tesla's next-generation AI6 chip. The strategic importance of this is hard to overstate," Musk wrote. He added that Tesla will assist Samsung in maximizing manufacturing efficiency, noting, "I will walk the line personally to accelerate the pace of progress."

The collaboration is expected to revive Samsung's $17 billion chip plant project in Taylor, Texas, which had faced delays due to a lack of anchor customers. The facility, now slated to begin operations in 2026, is seen as central to Samsung's ambition to expand its foundry business beyond memory chips.

Samsung currently manufactures Tesla's A14 chips used in its Full Self-Driving (FSD) driver assistance system. TSMC is handling production of the upcoming A15 chips, while the AI6 chips are expected to follow. The companies have previously cooperated on AI chip design and manufacturing, particularly in automotive applications. Since 2019, Samsung has produced Tesla's first-generation FSD chip using 14nm process technology and has been involved in evaluation of more advanced 5nm and 4nm nodes for future iterations.

Despite recent reports of Tesla relying on TSMC's 7nm technology, industry analysts suggest that Tesla is pursuing a diversified supply chain strategy, leaving room for continued collaboration with Samsung.

The news helped lift Samsung's share price by over 6% on Monday, reaching its highest level since September 2024. Analysts view the deal as a much-needed win for Samsung's foundry division, which is estimated to have posted losses exceeding $3.6 billion in the first half of 2025 due to weak demand and the defection of major clients to TSMC.

Globally, Samsung holds just 8% of the foundry market, far behind TSMC's 67% share, according to TrendForce. The company plans to begin mass production using its 2nm process node and secure major orders in the coming years, amid growing competition in AI and high-performance computing chips.

While Samsung remains a leader in memory chips, it has lagged behind rivals such as SK Hynix and Micron in high-bandwidth memory (HBM) used for AI applications. Efforts to certify its latest HBM version with Nvidia have reportedly been delayed to at least September.

The broader implications of the Samsung-Tesla deal could also tie into ongoing U.S.-Korea trade discussions, with Seoul seeking deeper semiconductor and technology partnerships with Washington.