Tesla signs $16.5B chip manufacturing contract with Samsung – News

Tesla Inc. will pay Samsung Electronics Co. at least $16.5 billion to produce chips for its vehicles.

Elon Musk announced the deal today in a series of posts on X. He suggested that the contract’s value could grow significantly over time. “The $16.5B number is just the bare minimum,” Musk wrote in one of the posts. “Actual output is likely to be several times higher.”

Samsung already makes the custom AI4 chip that Tesla uses to power its vehicles’ autonomous driving software. Under the newly signed contract, the electronics giant will produce an improved iteration of the processor known as the AI6. It will make the chip at a $17 billion fab that it’s currently building in Taylor, Texas.

The contract represents a major win for Samsung, which reportedly put construction of the fab on hold last year because of lackluster customer demand. As of March, the facility was reportedly about 92% complete. It’s believed Samsung has completed the plant’s structure, but hasn’t yet moved in any manufacturing equipment.

Citing a South Korean news outlet, Tom’s Hardware reported today that Samsung will start setting up production lines in its Taylor fab during the first half of 2026. The facility is expected to start making chips in small volumes during the second half of 2027. Around the same time, Tesla will carry out an evaluation to determine whether the plant meets its requirements.

The automaker is reportedly seeking a production yield of 60% to 70%. Yield is a metric used to describe what percentage of the chips produced at a fab are usable. “Samsung agreed to allow Tesla to assist in maximizing manufacturing efficiency,” Musk wrote on X. “This is a critical point, as I will walk the line personally to accelerate the pace of progress.”

The AI6 is one of two upcoming vehicle chips that Tesla has in the works. It will be preceded by the AI5, which is set to enter mass production next year. The AI5 will be made by Taiwan Semiconductor Manufacturing Co. using an unspecified manufacturing node.

Earlier this year, TSMC debuted a version of its 3-nanometer node optimized for use in vehicles. Chips made using the process can withstand temperatures ranging from -40 degrees to 257 degrees Fahrenheit. Additionally, they will undergo more extensive reliability testing than standard silicon to comply with an auto industry standard called AEC-Q100 Grade-1.

It’s unclear whether Tesla will use a vehicle-optimized version of Samsung’s manufacturing technology for the AI6. The electronics giant offers multiple automotive-grade chips that includes more extensive reliability optimizations than its mobile processors.

Samsung makes Tesla’s current-generation AI4 chips using its 7-nanometer node. It’s believed the Taylor fab will use the company’s 2-nanometer node, which is significantly more advanced. The performance and power-efficiency improvements provided by the latter technology could help Tesla enhance its vehicles’ autonomous driving capabilities.

The automaker started piloting a self-driving taxi service in Austin last month. It currently provides access to about a dozen Model Y SUVs. Over the coming months, Tesla plans to make 1,000 more taxis available to customers and bring the service to additional cities. 

Photo: Samsung