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Tesla's $16.5 billion deal with chip manufacturer Samsung is unlikely to harm Taiwan's TSMC, believes investment bank Morgan Stanley. Samsung's struggling chip manufacturing business was injected with life last month after Tesla inked a deal with it to manufacture next-generation artificial intelligence chips for use in electric vehicles and humanoid robots. Through the deal, Samsung will manufacture Tesla's chips at its factory in Austin, Texas, with Tesla CEO Elon Musk outlining that he will oversee the chip production.
TSMC & Tesla Will Continue To Enjoy Close Partnership Despite Samsung Deal, Says Morgan Stanley
While Samsung is the only contract chip manufacturer after TSMC to offer leading-edge chip manufacturing technologies, its market share is a distant second due to TSMC's consistent output and manufacturing efficiencies. Consequently, Tesla's deal with Samsung was well-received by investors, as the latter's shares soared by 6% on the Korean stock market.
After the deal was announced, Morgan Stanley opined in a note that the Tesla partnership could add as much as $50 billion to Samsung's market value. The bank's analysts based some of their estimates on improved longer-term utilization rates for Samsung's Texas plant, which has suffered from construction delays.
Under the deal, Samsung will manufacture Tesla's next-generation AI6 chips with the 2-nanometer chip manufacturing technology. TSMC currently manufactures the A15 chips using the 3-nanometer process. While both firms have targeted 2025 for 2-nanometer mass production, they wait for new technologies to mature before relying on them for higher-powered chips such as the Tesla processors.
Samsung will manufacture the A16 chips in 2027, with the TSMC-made A15 chips expected to launch in January 2026. While the Korean firm did win over Tesla's orders for the next-generation chips, Morgan Stanley believes that the revenue impact of the deal on TSMC in terms of lost market share will be minimal. According to the bank's estimates, the Samsung deal will lead to a mere 1% revenue loss for TSMC as it believes that the Taiwanese firm will continue to supply chips to Tesla and Musk's AI company, xAI.
Soon after news of the deal broke, Musk took to social media to share key details. The Tesla executive revealed that the $16.5 billion figure was just the start and accounted for the bare minimum output. Musk added that the AI5 chips had just finished the design phase, and a key factor behind the deal being offered to Samsung was the manufacturer allowing Tesla to assist it with chip production. Samsung's leading-edge manufacturing processes are known to suffer from low yields, which has led to TSMC gaining the lion's share of the market.
Tesla's AI6 processors are believed to play a key role not only for the firm's Full Self Driving (FSD) assisted driving platform but also for its humanoid robots. It will become the first chip to serve as a unifying platform for the two and play a key role in Musk's ambition of transforming his car company into a robotics powerhouse.
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