Samsung Foundry Secures Major Order from Tesla for AI5 Chip
Samsung Electronics’ foundry division has recently secured a significant order for Tesla’s AI autonomous driving chip, the ‘AI5’. This follows a previous $16.5 billion contract in July to produce Tesla’s next-generation AI6 chip. The new order for the AI5, which is set to be installed in Tesla vehicles from late next year, has sparked discussions about Samsung Foundry’s potential resurgence after years of financial struggles.
Elon Musk, CEO of Tesla, confirmed during the company’s Q3 earnings call that both TSMC and Samsung Electronics would manufacture the AI5 chip. This revelation has shifted industry expectations, as it was previously thought that Tesla might assign AI5 to TSMC and AI6 back to Samsung. Musk’s statement indicates that Samsung will now have an additional order, reinforcing its position in the semiconductor manufacturing landscape.
Three Key Implications of the Additional Order
The decision by Tesla to entrust part of the AI5 chip production to Samsung Foundry carries three major implications. First, it signals a recovery in Samsung’s foundry technology, which had faced challenges due to low yield rates and performance issues. Samsung introduced its 3-nanometer foundry using GAA (Gate-All-Around) process technology in 2022, but this transition led to delays and lower-than-expected yields. Even the Exynos2500, originally planned for the Galaxy S25, was replaced with Qualcomm chips due to supply issues. Industry experts noted that Samsung struggled with managing deadlines and client relationships in the foundry sector.
In response to these challenges, Samsung shifted its focus to improving its technology rather than rushing production. It delayed the mass production of its 1.4-nanometer process to 2029 and concentrated on enhancing the yield rates for its 2-nanometer process. According to industry reports, Samsung’s 2-nanometer yield rate has now reached 55–60%, with plans to push this to 70% by year-end.
Second, Tesla is securing Samsung Foundry amid intense competition for advanced semiconductors. Musk emphasized that splitting AI5 production between Samsung and TSMC aims to ensure an oversupply of AI5 chips. With only TSMC, Samsung, and Intel capable of producing sub-3-nanometer chips, Tesla is strategically leveraging Samsung’s underutilized capacity. While TSMC is overwhelmed with orders, Samsung’s lines remain relatively empty, making it an attractive option for Tesla.
Third, the recent price hikes by TSMC could benefit Samsung. TSMC is reportedly increasing the price of its 2-nanometer wafer production by approximately 50%. Companies like Qualcomm and MediaTek, burdened by these increases, are considering Samsung Foundry as an alternative. Industry sources suggest that Qualcomm is testing samples with Samsung, while Samsung is actively pursuing clients by lowering prices to stage a comeback.
Samsung Foundry’s Revival Takes Flight
This situation presents a significant opportunity for Samsung Foundry to overcome its slump and reestablish itself in the market. According to TrendForce, TSMC held a 70.2% global foundry market share in Q2, while Samsung had 7.3%. Although Samsung once narrowed the gap, it has since fallen behind by a tenfold margin. However, recent successes in securing major clients like Tesla are helping to close this gap.
British semiconductor design firm Arm recently unveiled its next-generation server chip, Neoverse V3, built on Samsung’s 2-nanometer process. Apple also announced in August that it is developing an innovative new chip manufacturing technology at Samsung’s foundry in Austin, Texas—the first of its kind globally. Industry speculation suggests this could be an image sensor for future iPhones. Samsung has also received 2-nanometer chip orders from domestic AI fabless firms DeepX, autonomous driving semiconductor company Ambella, and Japanese AI firm Preferred Networks (PFN).
Positive developments include the performance of Samsung’s new mobile AP, the Exynos2600, which is reportedly outperforming competitors. Song Jai-hyuk, Samsung’s Chief Technology Officer (CTO), recently expressed confidence during a meeting hosted by the presidential office, highlighting smooth progress in the 2-nanometer process.
A semiconductor industry source stated, “Samsung Foundry’s yield rates are gradually improving, and given that its 2-nanometer process is cheaper than TSMC’s, a rebound after a long slump is possible.” This ongoing improvement and strategic partnerships signal a promising future for Samsung Foundry as it continues to regain its footing in the competitive semiconductor market.