SEOUL, July 30 (UPI) — Samsung Electronics has just landed a massive eight-year contract worth $16.5 billion to supply semiconductors. The full details will be revealed on January 3, 2033, much to everyone’s curiosity.
However, the suspense didn’t last long. Just hours after the announcement, Elon Musk, CEO of Tesla, officially confirmed that it’s Tesla receiving these chips. He shared that Samsung’s upcoming factory in Texas will be focused on producing the next-gen AI processor, the A16 chip, specifically for Tesla.
To give some context, Samsung had already been making A14 chips and recently missed out on the A15 deal to their major competitor, TSMC. But now, they’ve hit the jackpot with the A16 chips. This new Texas foundry is part of Samsung’s ambitious plan to invest over $37 billion in the U.S. by 2030.
Elon Musk made an interesting comment on his post on X, stating, “Samsung agreed to let Tesla help maximize production efficiency. This is key, and I’ll personally ensure we keep pushing for rapid progress.” His words stirred investors into action, leading to a notable surge in Samsung’s stock price, which jumped over 11% on the Seoul market. Samsung has faced some challenges lately in the advanced high-bandwidth memory sector, affecting its performance.
There’s even more optimism from Musk, who asserted that the $16.5 billion figure might be the ‘bare minimum’, suggesting that the real output could be “several times higher.” This has sparked talk about Samsung potentially snagging further orders from Tesla, possibly for the Dojo 2 chips that train neural networks crucial for self-driving cars.
As analyst Ryu Young-ho from NH Investment & Securities pointed out, Musk’s comments hint at possible additional chip orders in the pipeline.
The sheer size of this contract is believed to greatly enhance Samsung’s foundry business, positioning it better against TSMC, the current market leader.
Current stats show that TSMC held a 67.6% market share in global foundry services for Q1, while Samsung remained at a mere 7.7%. This has resulted in Samsung’s foundry division suffering from massive annual losses. They need every win they can get.
Moreover, this deal with Tesla could shake up the competition for mastering next-gen 2-nanometer technologies. Reports suggest that TSMC has a 70% success rate in the 2-nm process, while Samsung is below 60%. Yield rate, essentially the percentage of usable and up-to-standard chips from one wafer, plays a crucial role in semiconductor manufacturing.
Samsung appears to be improving in this area, as noted by SungKyunKwan University’s semiconductor professor, Choi Byoung-deog. He mentioned, “The Tesla contract indicates that Samsung’s 2-nm yield has significantly improved. If they land more big contracts with firms like Qualcomm and Apple, they might close the gap with TSMC.”
In agreement, Korea Advanced Institute of Science and Technology professor Kim Joung-ho stated that Samsung needs to prove its prowess with Tesla before other major companies also consider working with them.
Regarding Samsung Electronics’ stock, experts point out that breaking into the lucrative HBM market, where they face tough competition from local rival SK Hynix, is crucial. Economic commentator Kim Kyeong-joon noted that should Samsung manage to supply cutting-edge HBMs to Nvidia, it could greatly boost their stock value.
Your three-way partnership involving Nvidia, SK Hynix, and TSMC is mightily strong, but as Kim highlighted, there’s potential for Nvidia to diversify its HBM suppliers, creating an opening for Samsung.
It’s worth noting that this Tesla order came right on the heels of Samsung’s Chairman Lee Jae-yong being exonerated from extensive legal issues linked to past corporate actions involving accounting fraud. The Supreme Court verdict marks a fresh start for him and the company.
