U.S. automaker Tesla signed a $16.5 billion contract to buy what it says is the latest version of semiconductor chips from Samsung Electronics' plant under construction in Central Texas in a deal that could grow over time.
Tesla CEO Elon Musk said in a post on X that the initial investment is "just the bare minimum" with "actual output likely to be several times higher."
Musk noted in announcing the deal that the plant is located near Tesla's operations and Musk's residence in Texas.
Tesla reportedly plans to use the chips called AI6 for its robotaxi, the Optimus robotic human robot as well as in artificial intelligence data centers as it restructures its business from mainly selling electric vehicles amid declining sales and expiring tax credits.
"Samsung’s giant new Texas fab will be dedicated to making Tesla’s next-generation AI6 chip," Musk said on X. "The strategic importance of this is hard to overstate."
Samsung submitted a regulatory filing with the Korean stock exchange about the contract that started July 24 and runs through Dec. 31, 2033.
Samsung and Tesla did not respond to emailed interview requests by CoStar News seeking additional comment.
Production expected for next year
Samsung's new Central Texas plant in Taylor, Texas, is expected to be ready for mass production by the end of 2026. The site is about an hour's drive northeast from Tesla's Austin headquarters and manufacturing facilities.
Samsung broke ground on the Taylor plant in 2022 with plans for an initial minimum investment of $17 billion, the company said on its website, and expects to create 1,800 jobs in its first decade of operation.
Musk said, in another X post, that Samsung has also agreed to allow Tesla to assist in maximizing its manufacturing efficiency.
"This is a critical point, as I will walk the line personally to accelerate the pace of progress," Musk added. "And the fab is conveniently located not far from my house."
In last week's earnings call, Tesla told investors the company is experiencing "headwinds from tariffs and supply chain challenges."
It was not immediately clear how the Samsung contract fits into ongoing trade talks between the United States and South Korea. South Korea has been actively pitching the U.S. on partnerships to avoid a 25% tariff rate.