Samsung Electronics partners with Tesla on AI chips, signaling a rebound in wafer foundry demand

Samsung Electronics’ semiconductor business is leveraging the strong momentum of its memory division to boost overall performance, but some observations suggest that it will take more time to return its foundry operations to profitability. However, as collaboration with Tesla on AI chips expands from current production to next-generation products, this has become a key variable for judging when the foundry business rebound will take off.

According to industry news on the 26th, Tesla CEO Elon Musk publicly disclosed on the 22nd at an earnings briefing its upgrade plan for its AI chip “AI4,” called “AI4.” He expects mass production to begin around mid-2027, and said Samsung Electronics is making design changes for the chip; whether it can ultimately transition to a mass-production system is crucial. Industry interpretations say Tesla has effectively indicated that production of the improved AI4 variant will be handled by Samsung’s foundry. The product is a higher-capacity and higher-computing-performance model than the AI4 that began mass production in 2023, and it may be referred to as “AI4+” or “AI4.1.”

The companies’ cooperation has expanded to next-generation chips. Samsung Electronics has decided to participate in production of Tesla’s “AI5” and “AI6.” The AI6 order, officially confirmed in July last year, is reportedly on the order of about 23 trillion won. This is the largest contract by single-customer scale within Samsung’s semiconductor division. Currently, existing AI4 is produced on Samsung’s foundry lines in Pyeongtaek, Gyeonggi Province, South Korea, using a 7-nanometer process, and this upgraded product is also highly likely to be produced in Pyeongtaek. Meanwhile, AI5 and AI6 are planned to be manufactured using a 2-nanometer process at the Taylor factory in Texas, USA. It is understood that AI5 will share output with TSMC, while AI6 will be produced exclusively by Samsung Electronics. These chips are Tesla’s in-house developed AI semiconductors for autonomous driving, used to enable full autonomous driving functionality for vehicles.

The background behind Samsung’s foundry being able to secure consecutive Tesla orders is believed to be the trust accumulated during the current AI4 production process, as well as the gradually stabilizing yield and performance of fine-process technology. Yield refers to the proportion of semiconductors etched on a wafer that actually function properly; if the figure is too low, even if the factory runs, it is difficult to generate profits. Musk, CEO, also recently posted on his X account news that AI5 has completed tape-out and expressed thanks to Samsung Electronics and TSMC. Tape-out is the first step into the trial-production stage after the semiconductor design is completed. In line with this, the Taylor factory held an equipment in-facility ceremony on the 24th, and initial operations are expected to begin at the earliest by the end of this year, with formal production of Tesla-related orders starting next year.

The issue is the timing gap. Samsung Electronics’ preliminary operating profit for the first quarter of 2026 announced earlier this month was 57.2 trillion won, but market estimates suggest that about 95%—roughly 54 trillion won—came from the memory division. The non-memory division, including the foundry, is observed to have losses of around 1 trillion won. Securities circles believe that the annual loss for the non-memory division this year will reach about 3 trillion to 4 trillion won. Therefore, the “Tesla effect” is more likely to be reflected not in the contract signing itself, but in the timing when actual shipments begin and revenue is recognized. Based on this, industry opinion holds that the turning point for performance improvement will be after 2027, when production at the Taylor factory and customer order shipments are combined. Samsung Electronics will release detailed first-quarter performance for each division on the 30th, and at that time questions about the Taylor factory’s specific operating schedule and the current state of customer cooperation are expected to be concentrated. This trend could become the litmus test for whether Samsung’s foundry can move beyond simply cutting losses—using major customers as a springboard to regain competitiveness in leading-edge process technology.