Tesla and Samsung sign $16 billion contract to produce AI6 chip

Tesla CEO Elon Musk has officially announced a deal with Samsung to produce the AI6 chip through Samsung, a contract that reportedly includes more than $16 billion worth of semiconductor production.

Musk shared that Samsung will complete this deal with its new Texas fab plant that will be dedicated to Tesla’s chip production. He mentioned that the Korean company will provide the EV maker with efficient production.

“This is a critical point, as I walk the line personally to accelerate the pace of progress. And the fab is conveniently located not far from my house,” Musk wrote on X while revealing about the deal.

Samsung currently produces AI4 chipsets for Tesla vehicles, which are installed in all of its models. This chip works as the brain of the Tesla vehicles and processes the live camera feed to navigate the car in real-time through FSD technology or Autopilot features. Musk said that TSMC is working on an AI5 chip, which is expected to be introduced by 2025. The initial production was commenced in Taiwan and will shift to its Arizona plant.

Tesla CEO Elon Musk announces Samsung deal to build AI6 chip

The contract will reduce Samsung’s growing worries in the semiconductor market after declining growth. It is currently focused on generating profit from the AI chipsets, but the recent business graph is going down due to intense competition from TSMC.

The Taiwanese chip maker currently holds three of the biggest clients—Apple, Nvidia, and Qualcomm. This trio helps TSMC to sprint ahead of its South Korean rival.

The Tesla deal will also impact Samsung’s new fab plant in Taylor, Texas, which has been in limbo since the company had a hard time finding new customers. Located less than 30 minutes from the Texas state capital of Austin, Samsung broke ground on the Taylor facility in 2022 with an initial investment of $17 billion, increased to $44 billion with additional operations such as an R&D facility.

Plans around the plant also received a setback over the CHIPS Act subsidy, which was reviewed and delayed during the Trump administration. The chip maker is now aiming to begin operations at the facility in 2026.

While talking about the amount, Musk said that the Samsung and Tesla AI6 chip deal would cost more than $16 billion.