Samsung Elec signs chip supply deal with Tesla, sources say
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Musk says Tesla, Samsung Electronics sign chip supply deal
Tesla CEO Elon Musk said on Monday that the U.S. automaker has signed a deal to source chips from Samsung Electronics. The move is expected to bolster 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. 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 (000660.KS) The order is unlikely to involve the cutting-edge tech, an analyst at BNK Investment & Securities said.
Item 1 of 2 A Tesla Cybercab is displayed at the Los Angeles Auto Show, in Los Angeles, California, U.S., November 21, 2024. REUTERS/David Swanson/File Photo
Summary
Companies Samsung signs $16.5 billion chip supply deal, shares rise 3.5%
Samsung struggles with AI chip competition, losing market share to TSMC
SEOUL, July 28 (Reuters) – Tesla CEO Elon Musk said on Monday that the U.S. automaker has signed a deal to source chips from Samsung Electronics (005930.KS) , opens new tab , a move expected to bolster 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.
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Three sources briefed about the matter told Reuters that Tesla (TSLA.O) , opens new tab was the customer for the deal.
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 (000660.KS) , opens new tab . 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 5 trillion won ($3.63 billion) in the first half of the year.
The Samsung-Tesla deal is also significant for South Korea, which is seeking U.S. partnerships in chips and shipbuilding amid last-ditch efforts to reach a trade deal to eliminate or reduce 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 struggles 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.
($1 = 1,378.7000 won)
Reporting by Heekyong Yang and Hyunjoo Jin, Wen-Yee Lee, Jack Kim, Additional reporting by Jihoon Lee; Editing by Ed Davies and Himani Sarkar
Our Standards: The Thomson Reuters Trust Principles. , opens new tab
Musk says Tesla, Samsung Electronics sign chip supply deal
Tesla CEO Elon Musk said on Monday that the U.S. automaker has signed a deal to source chips from Samsung Electronics. The move is expected to bolster 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. 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 (000660.KS) The order is unlikely to involve the cutting-edge tech, an analyst at BNK Investment & Securities said.
Item 1 of 2 A Tesla Cybercab is displayed at the Los Angeles Auto Show, in Los Angeles, California, U.S., November 21, 2024. REUTERS/David Swanson/File Photo
Summary
Companies Samsung signs $16.5 billion chip supply deal, shares rise 3.5%
Samsung struggles with AI chip competition, losing market share to TSMC
SEOUL, July 28 (Reuters) – Tesla CEO Elon Musk said on Monday that the U.S. automaker has signed a deal to source chips from Samsung Electronics (005930.KS) , opens new tab , a move expected to bolster 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.
Sign up here.
Three sources briefed about the matter told Reuters that Tesla (TSLA.O) , opens new tab was the customer for the deal.
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 (000660.KS) , opens new tab . 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 5 trillion won ($3.63 billion) in the first half of the year.
The Samsung-Tesla deal is also significant for South Korea, which is seeking U.S. partnerships in chips and shipbuilding amid last-ditch efforts to reach a trade deal to eliminate or reduce 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 struggles 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.
($1 = 1,378.7000 won)
Reporting by Heekyong Yang and Hyunjoo Jin, Wen-Yee Lee, Jack Kim, Additional reporting by Jihoon Lee; Editing by Ed Davies and Himani Sarkar
Our Standards: The Thomson Reuters Trust Principles. , opens new tab