Tesla and Samsung Partner on $16.5B AI Chip Deal

Tesla Secures $16.5 Billion Chip Supply Agreement with Samsung

A significant agreement has been reached between Tesla and Samsung, valued at $16.5 billion, for the provision of next-generation chips. This partnership will be instrumental in advancing Tesla’s technological capabilities.

Musk Announces the Deal

Elon Musk announced on X (formerly Twitter) late Sunday that Samsung’s new, expansive fabrication facility in Texas will be dedicated to the production of Tesla’s AI6 chip. He emphasized the considerable strategic importance of this collaboration.

AI6: A Versatile Chip Design

Tesla’s AI6 chip, also known as Hardware 6, represents the company’s investment in an integrated chip design. This design is intended to be scalable, powering a range of applications.

These applications include Tesla’s Full Self-Driving (Supervised) driver assistance system, the Optimus humanoid robots, and high-performance AI training within data centers.

Current and Future Chip Production

Currently, Tesla is collaborating with TSMC for the manufacturing of AI5 chips, with the design phase recently completed.

The AI5 generation, primarily focused on Full Self-Driving capabilities, will initially be produced at TSMC’s facility in Taiwan and subsequently at its Arizona plant. Samsung is already involved in the production of the AI4 chip, as stated by Musk.

Benefits for Samsung

This deal provides a substantial boost for Samsung, which has faced challenges in establishing its chip-making project and attracting key clients. Musk indicated that Tesla’s expenditure with Samsung could exceed the initial $16.5 billion.

He projected that the actual output value is “likely to be several times higher.”

Collaboration on Manufacturing Efficiency

Samsung has agreed to allow Tesla to actively participate in optimizing manufacturing efficiency. Musk stated his personal involvement will be crucial in accelerating progress.

He also noted the convenient proximity of the Samsung fab to his residence.

Transition from Nvidia

Tesla transitioned away from Nvidia’s Drive platform to its own custom chip design in 2019. This chip, the FSD Computer (FSDC) or Hardware 3, was integrated into all of Tesla’s electric vehicles that year.

The FSDC, manufactured by Samsung, features a redundant design with two identical systems on a single board, a critical feature for automated driving systems.

Expanding Ambitions in AI and Robotics

Since the introduction of the FSDC, Tesla’s focus on custom chips has broadened in line with its evolving ambitions. AI chips are now central to Tesla’s transformation from an automotive manufacturer to an AI and robotics company.

This strategic shift underscores Tesla’s commitment to innovation and its vision for the future of technology.