Samsung Electronics Co. will manufacture semiconductors for Tesla Inc. under a new $16.5 billion (22.8 trillion won) agreement. This gives a major boost to its struggling foundry division. The deal, which runs through the end of 2033, was confirmed by Samsung on Monday. Tesla was identified as the client by a person familiar with the matter. However, the information hasn’t been officially made public.

Tesla already works with Samsung’s chipmaking unit, and this expanded pact strengthens their relationship. Following the announcement, Samsung’s Seoul-listed shares climbed as much as 3.5%, marking their biggest intraday gain in nearly four weeks. Samsung declined to comment on Tesla specifically, and Tesla representatives have yet to respond.

The contract arrives at a critical time for Samsung’s foundry business, which has been struggling to secure sufficient orders to utilise its capacity fully. This has left it trailing Taiwan Semiconductor Manufacturing Co. (TSMC), the industry leader. TSMC held a 67.6% share of the global foundry market in Q1, while Samsung’s share slipped to 7.7% from 8.1%. Unlike Samsung, TSMC continues to face demand that exceeds its production capabilities.

Bloomberg Intelligence noted that this deal signals a recovery in Samsung’s 2-nanometer chip production. The contract could potentially boost its foundry sales by 10% annually from 2025 to 2033. Analysts also suggested it could pave the way for further agreements with other fabless chipmakers.

Both Samsung and TSMC are advancing toward the next generation of semiconductor technology — 2-nanometer fabrication. Therefore, this agreement is seen as a vote of confidence in Samsung’s upcoming manufacturing capabilities.

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