Samsung foundry rebounds with big orders from Tesla, Apple, Nintendo

Seoul [South Korea], October 24 (ANI): In addition to a previous contract manufacturing deal with Tesla to produce the next-generation AI6 chip, Samsung Electronics' foundry business has won orders for the electric vehicle maker's AI5 chip, set for mass production in 2026, as per a report by the Korean Herald.

During Tesla's third-quarter earnings call on Wednesday, Tesla CEO Elon Musk revealed that the forthcoming AI5 chip will be manufactured by Samsung in Texas and TSMC in Arizona. The chips had previously been expected to be produced solely by TSMC.

"Our explicit goal is to have an oversupply of AI5 chips," the report quoted Musk, noting that the surplus chips will be used not only in cars and robots, but also in Tesla's data centers.

The report stated that in July, Musk announced on his social media platform X that Samsung will be producing Tesla's AI6 chip under a deal worth USD 16.5 billion, equivalent to 7.6 per cent of Samsung's 2024 sales, making it the chip division's largest single-client contract.

Production of the AI6 chips is planned for 2027-2028 and will run through the end of 2033.

"As foundry orders have been heavily concentrated in TSMC, client firms are now compelled to diversify their supply chains to reduce risks," the report quoted an industry official. "Since Samsung Electronics is the only company besides TSMC capable of producing advanced chips at the 2-nanometer level, more business opportunities are likely to follow."

The latest orders from Tesla, along with new deals with Apple and Nintendo, are breathing fresh life into Samsung's contract chipmaking business, which had long struggled with a shortage of clients.

The foundry division's quarterly losses, which hovered around 2 trillion won in the first half, are estimated to have narrowed to the low 1-trillion-won range in the third quarter.

The report projects that the deficit could fall below 1 trillion won once Samsung begins supplying both mobile chips for next year's Galaxy S26 smartphones and Tesla's AI5 chips. The foundry business is expected to return to profitability around late 2027, when the chipmaker begins production of Tesla's AI6 chips.

Samsung has recently begun joint development of next-generation image sensors with Apple at its plant in Austin, Texas, where it plans to supply chips optimized for the power efficiency and performance of Apple products, including iPhones.

The chipmaker is also manufacturing the main chips designed by Nvidia for the popular Nintendo Switch 2 gaming console, which launched in June. (ANI)

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