SEOUL: Samsung Electronics has signed a deal to supply chips to Tesla Inc, two people briefed about the matter told Reuters on Monday, in a significant boost to the South Korean tech giant’s loss-making contract manufacturing business.
On Saturday, Samsung announced a $16.5 billion chip supply deal with a major global company, without naming the client. It said the customer had requested confidentiality about the details of the deal, which will run through the end of 2033.
The deal comes as Samsung faces mounting pressure in the race to produce artificial intelligence chips, where it trails rivals such as TSMC and SK Hynix.
This lag has weighed heavily on its profits and share price.
Samsung, the world’s top memory chip maker, also makes logic chips designed by customers through its foundry business.
Pak Yuak, an analyst at Kiwoom Securities, said the latest deal would help reduce losses at Samsung’s foundry business, which he estimated exceeded more than 5 trillion won ($3.63 billion) in the first half of the year.
Analysts say Samsung had struggled with the defection of key clients to TSMC for advanced chips. TSMC counts Apple, Nvidia and Qualcomm among its customers.
The deal with Tesla comes as South Korea is seeking U.S. partnerships in chips and shipbuilding amid last-ditch efforts to reach a trade deal to eliminate or cut potential 25% U.S. tariffs.
It is not clear how the order would affect Samsung’s plan to start production at its new factory in Texas, which has been delayed as it had struggled to win major customers.
Samsung is grappling to boost production yields of its latest 2-nanometer technology, and the order is unlikely to involve the cutting-edge tech, Lee Min-hee, an analyst at BNK Investment & Securities, said.
Samsung has been losing market share to TSMC in contract manufacturing, underscoring technological challenges the firm faces in mastering advanced chip manufacturing to attract clients like Apple and Nvidia, analysts said.
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