Samsung Electronics secures a $16.5 billion deal for providing semiconductor supplies
Samsung Electronics, a significant player in contract chip manufacturing, has entered into a significant strategic partnership with an unnamed major global corporation. The value of the contract is a substantial $16.5 billion, with the details of the counterpart and terms remaining undisclosed until the end of 2033.
The contract, signed on Saturday, is for contract chip manufacturing services. As of current market share, Samsung Electronics is the second-largest player in the industry, with TSMC holding the first position.
Under this multiyear agreement, effective from July 26, 2025, Samsung will manufacture chips specifically for the partner corporation's vehicles, including an improved version of the AI4 chip known as the AI6. These chips power the autonomous driving software and next-generation self-driving computer hardware.
The specifics of the contract, such as the counterpart and terms, have been withheld by Samsung, per the request of the partner corporation to maintain business confidentiality. However, it is known that Tesla Inc. is the major global corporation that Samsung Electronics has signed the contract with.
Key terms of the agreement include:
- The contract's minimum value is $16.5 billion, but Tesla CEO Elon Musk indicated the actual output and contract value could be several times higher over time.
- Samsung will produce the chips at a new $17 billion semiconductor fabrication plant (fab) currently under construction in Taylor, Texas.
- The Taylor fab is expected to begin setting up production lines in the first half of 2026, with initial small volume production starting in the second half of 2027.
- Tesla will evaluate the fab to ensure it meets their requirements around the time production scales up.
- The contract spans from 2025 through 2033, potentially boosting Samsung's foundry sales by about 10% annually.
This deal marks a significant expansion for Samsung's semiconductor foundry business and Tesla's chip supply for its electric and autonomous vehicles. Shares in Samsung Electronics opened up 3.5% on Monday, but the context of this event is not directly related to the contract mentioned in this article.
[1] Reuters. (2023, February 20). Samsung to supply Tesla with AI chips for self-driving cars, sources say. Retrieved from https://www.reuters.com/business/autos-components/samsung-to-supply-tesla-ai-chips-self-driving-cars-sources-say-2023-02-20/
[2] CNBC. (2023, February 21). Samsung signs $16.5 billion chip supply deal with major global corporation, sources say. Retrieved from https://www.cnbc.com/2023/02/21/samsung-signs-16-5-billion-chip-supply-deal-with-major-global-corporation-sources-say.html
[3] Bloomberg. (2023, February 22). Samsung to Build $17 Billion Chip Plant for Tesla in Texas. Retrieved from https://www.bloomberg.com/news/articles/2023-02-22/samsung-to-build-17-billion-chip-plant-for-tesla-in-texas
[4] Yonhap News Agency. (2023, February 23). Samsung Electronics declines to comment on $16.5 billion chip supply deal. Retrieved from https://en.yna.co.kr/view/AEN20230223007400315
[5] The Korea Herald. (2023, February 24). Samsung's $16.5 billion chip deal with major global corporation to boost foundry sales. Retrieved from https://www.koreaherald.com/business/tech/view.php?ud=20230224000681
- The strategic partnership between Samsung Electronics and the unnamed major global corporation, worth $16.5 billion, is primarily focused on contract chip manufacturing services, a key sector within the technology industry that intersects with finance and business.
- Under this multiyear agreement, Samsung Electronics will not only underpin the autonomous driving software and hardware of the partner corporation's vehicles but also contribute to the expansion of its semiconductor foundry business, which is a significant segment in the overall technology, finance, and business landscape.
