Samsung wins $16.5 billion deal to make Tesla's A16 chips

In a landmark deal worth 22.8 trillion won ($16.5 billion), Samsung has secured a long-term contract to manufacture Tesla’s forthcoming A16 chip, a cornerstone of the electric vehicle company’s Full Self-Driving (FSD) future. The agreement, which will run through 2033, marks a significant shift in Samsung’s chipmaking fortunes — and places Elon Musk squarely in the middle of its execution.

Although Samsung had initially filed the contract with regulators under an unnamed client, Musk confirmed Tesla’s involvement via a post on X, stating that “Samsung’s giant new Texas fab will be dedicated to making Tesla’s next-generation AI6 chip.” The factory in question, located in Taylor, Texas, had previously seen its opening pushed back to 2026 due to a lack of demand. That situation appears to have changed dramatically.

"This is a critical point, as I will walk the line personally to accelerate the pace of progress," Musk added in a separate post, noting the factory’s proximity to his home in Austin, Texas.

The A16 chip will power Tesla’s future self-driving hardware and represents a leap forward from the current A14 chip, which Samsung already manufactures. However, Tesla’s intermediate A15 chip was awarded to rival TSMC, a move that sparked speculation about Tesla's long-term supplier strategy. Musk clarified that the A15 chip design was recently completed, but did not indicate it would see mass production at the same scale.

Samsung’s new deal comes with a caveat: Tesla will be directly involved in the manufacturing process. “Samsung agreed to allow Tesla to assist in maximizing manufacturing efficiency,” Musk wrote. This level of involvement is unusual in the contract chipmaking industry, where clients typically focus on design, not factory operations.

The partnership gives Samsung a powerful foothold in the advanced AI chip market, especially after recent losses to competitors like TSMC and Intel. For Tesla, it secures a trusted domestic supply chain for a critical component in its autonomous driving roadmap — one that Musk himself views as essential to the company’s future.

With the Taylor plant now set to become the nerve center of Tesla’s next-generation AI chip development, both companies are betting big on the decade ahead.