By Heekyong Yang and Hyunjoo Jin

SEOUL (Reuters) – Tesla CEO Elon Musk said the U.S. automaker had signed a $16.5 billion deal to source chips from Samsung Electronics, a move expected to bolster the South Korean tech giant’s loss-making contract manufacturing business.

Samsung’s shares jumped as much as 6.8% to their highest since September last year after news of the deal.

Musk said Samsung’s new chip factory in Taylor, Texas will make Tesla’s next-generation AI6 chip, potentially re-energizing the project that has faced long delays amid Samsung’s difficulties in retaining and attracting major clients.

“Samsung agreed to allow Tesla to assist in maximizing manufacturing efficiency. This is a critical point, as I will walk the line personally to accelerate the pace of progress. And the fab is conveniently located not far from my house,” Musk said in a post on X on Monday.

“The $16.5B number is just the bare minimum. Actual output is likely to be several times higher,” he said in another post.

According to a senior analyst at NH Investment & Securities, Ryu Young-ho, Samsung’s Taylor fab “so far had virtually no customers, so this order is quite meaningful”.

In October, Reuters reported that Samsung had postponed taking deliveries of ASML chipmaking equipment for its Texas factory as it had not yet won any major customers for the project. It has already delayed the plant’s operational start to 2026.

POTENTIAL PRODUCTION TIMELINE

While no timeline was provided for AI6 chip production, Musk has previously said that next-generation A15 chips will be produced at the end of 2026, suggesting A16 would follow.

Lee Dong-ju, an analyst at SK Securities, expects production in 2027 or 2028, but Tesla has a history of missing its targets.

Samsung currently makes Tesla’s A14 chips, which power its Full Self-Driving driver assistant system, while TSMC is slated to make the AI5, initially in Taiwan and then Arizona, Musk has said.

Samsung, the world’s top memory chip maker, also produces logic chips designed by customers through its foundry business. The Texas project is central to Samsung Chairman Jay Y. Lee’s strategy to expand beyond its bread-and-butter memory chips into contract chip manufacturing.

Samsung currently holds just 8% of the global foundry market, far behind industry leader TSMC, which has a 67% share, data from market researcher Trendforce show.

Samsung had earlier announced the $16.5 billion chip supply deal without naming the client, saying the customer had requested confidentiality about the details of the deal, which will run through the end of 2033.