$16.5 billion chip order! Tesla gave it to Samsung, Musk: I will personally participate in improving production efficiency

Samsung Electronics and Tesla have reached a $16.5 billion chip manufacturing agreement, with Musk confirming details of the collaboration, emphasizing that he will "personally participate in improving production efficiency" and noting that "this is just the minimum amount."

On July 28, media reports indicated that informed sources revealed Samsung announced a chip manufacturing contract worth 22.8 trillion won on Monday, with Tesla being the client that has business dealings with its foundry division.

Tesla CEO Musk disclosed the strategic layout of this collaboration in several posts on the social platform X, emphasizing that he will "personally participate in improving production efficiency."

Analysts believe that for Musk, the significance of this large chip order goes beyond hardware manufacturing, as AI is crucial for Tesla's future development in Musk's vision of a business empire, and AI chips are undoubtedly core infrastructure.

Additionally, media reports pointed out that this large order, which lasts until the end of 2033, not only marks an important breakthrough for Samsung in the fierce foundry competition but also provides Samsung with a significant opportunity to reprove itself in the AI chip manufacturing field.

Following the news, Samsung Electronics' stock price surged 6.8% in Seoul trading, closing at 70,400 won per share, the highest level since September last year.

Musk Confirms Collaboration Details, Says $16.5 Billion is Just the Minimum Amount

Musk detailed the strategic layout of this collaboration in several posts on the social platform X. He stated that Samsung's Texas factory will specifically manufacture Tesla's AI6 chips, while Samsung is currently responsible for producing AI4 chips, and TSMC will manufacture the recently designed AI5 chips.

Late on July 27, Tesla CEO Musk posted on the social platform X, stating that Samsung's Texas factory will produce Tesla's next-generation AI6 chips.

Musk also pointed out in another tweet, "Samsung has agreed to let Tesla assist in maximizing production efficiency. This is a critical moment, as I will personally step in to accelerate progress. Moreover, this factory is not far from my home, making transportation convenient."

Furthermore, Musk stated, $16.5 billion is just the minimum amount in the Samsung deal, and the actual output is likely to be several times higher. This means the actual value of this collaboration could far exceed the currently disclosed figures.

The Chip Cornerstone of a $30 Trillion Massive Business Empire

In fact, Samsung Electronics and Tesla have been collaborating in the chip field, primarily focusing on automotive chip design and foundry manufacturing, especially in the development of AI processing chips related to autonomous vehicles Analysis points out that behind this large chip order is Musk's grander business vision.

According to a previous article from Jianwen, during the "X Takeover" Tesla fan event on July 27 local time, Musk clearly stated that if Tesla can successfully execute its blueprint in the fields of humanoid robots "Optimus" and autonomous driving (Robotaxi), the company's valuation is expected to reach between $25 trillion and $30 trillion.

Musk positions the Optimus humanoid robot as Tesla's "greatest product" to date, predicting that global demand for such robots could reach hundreds of billions of units. He made a bold estimate: assuming Tesla produces 1 billion Optimus robots annually in the future, this single business could potentially generate up to $30 trillion in annual revenue.

In this crazy vision, AI chips are undoubtedly the core infrastructure. Musk describes the advancement of AI as a "supersonic tsunami," believing that computing power is the "ticket" for AI development. Reports indicate that Musk's artificial intelligence company xAI is advancing debt financing of up to $12 billion, primarily for chip procurement and data center construction.

Samsung's Foundry Business Needs a Boost

This contract is significant for Samsung's foundry business, which is struggling with underutilization of capacity. The Samsung foundry division has consistently struggled to secure enough orders to fully utilize its capacity. In contrast, chip manufacturing leader TSMC still cannot meet all demand.

According to TrendForce data, TSMC held a dominant share of 67.6% of the global foundry market in the first quarter of this year. Samsung's market share fell from 8.1% in the previous quarter to 7.7%.

This comparison highlights the challenges faced by Samsung's foundry business. As a company that both produces its own memory chips and provides foundry services for clients, Samsung's performance in the foundry sector has clearly fallen short of expectations.

Reports also indicate that both Samsung and TSMC are advancing next-generation semiconductor technology—2-nanometer process technology.

Bloomberg Intelligence analysts Masahiro Wakasugi and Takumi Okano stated that this contract with a large global enterprise signifies a recovery in Samsung's foundry business for 2-nanometer chip production.

The new agreement is seen as a signal of market confidence in Samsung's upcoming manufacturing technology. Analysts expect that this $16.5 billion contract covering 2025-33 could lead to a 10% annual growth in Samsung's foundry sales, while also likely driving other fabless chip companies to sign new contracts.

Intense Competition in AI Chips, Samsung Seeks to Catch Up

Analysis indicates that this large order comes at a crucial time for Samsung. The company is set to announce its financial results on Thursday, with second-quarter profits expected to decline by more than half year-on-year.

Previously, analysts indicated that disappointing expectations were primarily due to weak foundry business orders and the company's poor performance in competing for AI demand in its memory business In the field of high bandwidth memory (HBM) chips—an advanced memory type used in AI chipsets—Samsung has fallen behind competitors SK Hynix and Micron.

Analysis suggests that Tesla's large order provides Samsung with an important opportunity to reprove itself in the AI chip manufacturing sector and may also become a key turning point for the recovery of the company's foundry business.