Advanced chip manufacturing is a very costly but also very lucrative business, and for TSMC, business has been extremely good. However, that's not been the case for Samsung, the world's second-largest chip maker after TSMC, as it has been struggling to bring in new customers. There is some good news on that front, though, as Elon Musk has announced a deal with Samsung, in which it will manufacture the next generation of processors [[link]] for Tesla cars at its US plant in Texas.
Samsung’s giant new Texas fab will be dedicated to making Tesla’s next-generation AI6 chip. The strategic importance of this is hard to overstate.Samsung currently makes AI4. TSMC will make AI5, which just finished design, initially in Taiwan and then Arizona.
"The $16.5B number is just the bare minimum. Actual output is likely to be several times higher," said Musk on X. "Samsung agreed to allow Tesla to assist in maximizing manufacturing efficiency."
While TSMC never directly says how much AMD, Intel, and Nvidia pay for their chips, it's clear that this is an exceptionally large order—to the point where Telsa has probably filled the order books at the Texas plant. It's had thrown at it to bring in customers, but until now, no company of significance has shown any serious interest.
Tesla itself has [[link]] been struggling of late, with , and operating income significantly down compared to this time last year. Reuters reports that Samsung had announced the deal, without naming Telsa, and said that [[link]] the contract will run through to the end of 2033, so it must have faith in the car company turning its fortunes around.
But whatever happens over the coming years, I suspect that Intel will be looking at this as a missed opportunity. Just like Samsung, Intel has been faced with empty order books for its foundries, and there appears to be nothing on the horizon to help bail out the beleaguered chip giant. Whether it was a case that Intel's process nodes just weren't suitable for Tesla's needs or the prices were just too high, having an American car company use an American chip manufacturer would surely have gone down well.
If Telsa's next A16 processor proves to be a major step forward for the company, it could help reignite Samsung's fortunes in the semiconductor industry, as other fabless companies will certainly be looking to see how well it performs, what the yields are like, and so on. At the very least, Tesla will avoid any with its A16 chip, and its new A14 model, which will be made by TSMC in Arizona.
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