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Why Tesla’s US$16.5 Billion Deal with Samsung Is a Game-Changer for Tesla's AI and Manufacturing

  • Oriental Tech ESC
  • 12 hours ago
  • 4 min read

Updated: 4 minutes ago

Tesla’s recent $16.5 billion multiyear agreement with Samsung to manufacture its next-generation AI6 chipset in Texas is more than just a Chipset Outsourcing deal— it’s a strategic move that could redefine the future of Tesla's AI, Autonomy, and Semiconductor manufacturing. Announced on 27th July 2025, this partnership positions Tesla as a pioneer in vertical integration while offering Samsung a lifeline for its struggling foundry business. Here’s why this deal is generating so much buzz (but most media might miss the core value of this deal):


1. A Unique Collaboration

  • Unlike traditional customer-supplier relationships, Tesla is deeply involved in the manufacturing process. Tesla engineers will work alongside Samsung’s team at the 2nm production line in Taylor, Texas, gaining hands-on exposure to process optimization, yield challenges, and fab-floor best practices.

  • This approach, as Elon Musk noted, allows Tesla to “assist in maximizing manufacturing efficiency,” with Musk personally overseeing progress to accelerate outcomes.

  • This hands-on role sets a new standard for tech companies, moving beyond passive outsourcing to active co-development.


2. Boosting Samsung’s Foundry Business

  • Samsung’s foundry division has struggled, holding only a 7.7% market share compared to TSMC’s 67.6% in Q1 2025 (more than 85% if considered all high-end Chipset manufacturing). This deal could be a turning point, with analysts estimating a 10% annual increase in foundry sales, addressing losses exceeding US$3.6 billion in the first half of 2025.

  • The market reacted strongly, with Samsung’s shares surging 6.8% to their highest since September 2024, and Tesla’s shares rising 1.9% in premarket trading.


3. Strategic Importance for Tesla

  • The AI6 chip is critical for Tesla’s AI and autonomy ambitions, powering Full Self-Driving (FSD) systems, Optimus humanoid robots, and Dojo supercomputers. Its 5 exaflops of mixed-precision performance and 3x energy efficiency over previous generations make it a cornerstone of Tesla’s ecosystem.

  • By securing a dedicated supply chain, Tesla mitigates risks from global semiconductor shortages and geopolitical tensions, ensuring scalability for its AI initiatives.


4. Yield Optimization as a Learning Playground

  • Samsung’s initial 2nm yield could be just 20-40%, which is typical for the 1st round of testing production, even for TSMC. After the 2nd and 3rd rounds of production, TSMC can usually achieve a yield rate of over 80%-90%, making it profitable. Anything below 50% is considered substandard, unless losing billions of dollars is not a concern.

  • Elon Musk is so confident that he can help Samsung improve its production yields. Even Samsung's experts have been unable to do so in the past 3-4 years, which is why Samsung lost a significant portion of the market share to TSMC. Tweaking process parameters, fine-tuning defect control, or streamlining test flows does not sound an easy job.

  • Even if Samsung doesn’t reach target yields, Tesla owns the AI6 design and can pivot to TSMC’s proven 2nm node, which is set to produce Tesla’s AI5 chips starting in late 2026.

  • This experience provides Tesla with priceless foundry know-how, applicable to future chip designs like AI7 or AI8.


5. Driving Down Future Chip Costs

  • Direct involvement in manufacturing uncovers cost-cutting opportunities—materials sourcing, lithography tweaks, and wafer handling efficiencies—that would remain hidden in a traditional outsourcing model.

  • These insights could lower per-unit costs for AI accelerators, benefiting Tesla’s vehicles, robots, and data centers, and strengthening its competitive edge.


6. Geopolitical and Economic Impact

  • The deal supports U.S. manufacturing, with Samsung’s Texas facility receiving US$4.75 billion under the Chips Act, potentially creating thousands of jobs.

  • It aligns with global efforts to strengthen domestic semiconductor supply chains, reducing reliance on foreign manufacturing and enhancing national security.


7. Expert Opinions

  • Billionaire investor Chamath Palihapitiya praised Tesla’s unique position, stating it’s “the only company today combining physical AI and software AI at scale,” positioning Tesla as a leader in this race.

  • Analysts like Vey-Sern Ling from Union Bancaire Privee noted that the deal could attract other clients to Samsung, enhancing its foundry credibility.


8. Risks and Challenges

  • Samsung’s foundry has faced delays and client retention issues, and the AI6 chip’s performance is critical for both Tesla’s FSD roadmap and Samsung's Foundry future.

  • However, Tesla’s active involvement and Musk’s personal oversight — Elon's direct response “I will walk the line personally to accelerate the pace of progress”—could mitigate these risks. If it were any other CEOs, they might simply say "Samsung is a great partner, they will eventually succeed."



Conclusion

This US$16.5 billion deal is a Win-Win: Tesla gains control over its AI-hardware destiny, learning chip manufacturing intricacies, while Samsung revitalizes its foundry business. As Elon Musk stated, “The strategic importance of this is hard to overstate”. Regardless of whether Samsung’s fabrication achieves an 80% yield or Tesla reverts to TSMC, this collaboration elevates Tesla’s technological capabilities to new heights and establishes a model for other technology-driven enterprises to emulate.


It’s often those who’ve never built a successful business from scratch who are quickest to brand the wealthy as exploiters. But let’s be honest—if you’re fair, you can’t ignore that Elon Musk’s energy, vision, and manufacturing brilliance are on a level that only a handful of the world’s business icons can claim.




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