Tesla Expands Chip Partnership with Samsung for AI5 Production, Reducing TSMC Reliance

Tesla CEO Elon Musk announced that Samsung Electronics Co. will take on a significant role in manufacturing the company’s next-generation artificial intelligence chip, the AI5, challenging the dominance of Taiwan Semiconductor Manufacturing Co. (TSMC) in the made-to-order semiconductor market. The revelation, made during Tesla’s third-quarter conference call on October 22, 2025, marks a strategic pivot for the electric vehicle giant as it ramps up its AI-driven ambitions.

Musk clarified earlier statements, noting, “We’re actually going to focus both TSMC and Samsung initially on AI5,” correcting his prior indication that TSMC would exclusively handle the chip’s production. The AI5, designed to power Tesla’s self-driving features and emerging robotics projects, deviates from traditional graphics processing units by omitting image signal processing to optimize space and efficiency. This chip is critical for Tesla’s autonomous driving systems, which complement hardware from Nvidia Corp., the leading AI processor manufacturer.

The expanded partnership with Samsung builds on a $16.5 billion deal signed in July 2025, which tasked the South Korean tech giant with producing Tesla’s next-generation AI6 chip. That agreement, a major coup for Samsung’s foundry business, followed its role in manufacturing Tesla’s earlier AI4 chip. Musk’s decision to split AI5 production between Samsung and TSMC signals confidence in Samsung’s capabilities, despite its position as a distant second to TSMC in the global foundry market. Samsung is bolstering its presence with heavy investments in a production hub near Austin, Texas, where Tesla’s headquarters is located, positioning itself as a key player in the U.S. semiconductor landscape.

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This move comes as Tesla navigates a complex landscape of record electric vehicle sales tempered by rising costs, which have dented profits. The AI5 and future AI6 chips are central to Tesla’s vision of fully autonomous vehicles and its nascent Optimus robot line, aimed at revolutionizing industries from transportation to logistics. By diversifying its chip manufacturing partners, Tesla reduces reliance on TSMC, which has long dominated the contract chipmaking sector, while leveraging Samsung’s growing expertise and proximity to its Texas operations.

Industry analysts see Samsung’s expanded role as a strategic win, potentially reshaping the foundry market’s competitive dynamics. Samsung’s Austin hub, part of a broader $17 billion investment in U.S. semiconductor production, aligns with Tesla’s push for localized supply chains amid global chip shortages and geopolitical tensions. However, TSMC remains the industry leader, and Samsung’s ability to match its rival’s precision and scale will be closely watched.

Musk’s announcement, echoed in a post on X, underscores Tesla’s aggressive AI strategy as it seeks to outpace competitors in autonomous technology. The decision also reflects Musk’s broader vision of integrating AI across Tesla’s ecosystem, from vehicles to humanoid robots, while navigating a semiconductor market fraught with challenges. As Samsung steps up, the partnership could accelerate Tesla’s innovation timeline, but it also raises questions about execution and cost in a fiercely competitive sector.

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