🚨 Samsung Electronics Semiconductor Turnaround

Today Korean Economic News for Beginners | 2025.07.29

0️⃣ Tesla AI Chip 22 Trillion Won Contract Proves Foundry Technology

📌 Samsung's Largest Semiconductor Contract Ever, Global Market Trust Recovery with 2-Nano Technology

💬 Samsung Electronics has signed a major contract to produce Tesla's next-generation AI chip 'AI6'. The contract is worth about 22.7 trillion won until 2033, making it the largest foundry contract in Samsung semiconductor history. Samsung will mass-produce AI6 chips using 2-nanometer process technology at its Texas Taylor factory in the United States. This contract has helped Samsung recover its technology reputation and opened up possibilities for attracting more customers. Samsung's foundry business, which had struggled with yield issues, has finally gained technology recognition and entered a full turnaround phase.

1️⃣ Easy to Understand

Tesla has decided to let Samsung Electronics make its 6th generation AI chips for self-driving cars and robots. This is not just a simple business deal - it's a historic event showing that Samsung's technology is now recognized globally.

A 'foundry' is a business that makes semiconductors designed by other companies. It's like designing clothes but having a specialized factory actually make them. Samsung Electronics not only makes its own semiconductors but also runs a foundry business, manufacturing semiconductors for other companies.

The AI6 chip that Tesla ordered will be made using 2-nanometer process technology. Nanometer refers to the width of semiconductor circuits - the smaller the number, the more advanced and sophisticated technology is needed. 2-nanometer process is currently one of the most advanced semiconductor manufacturing technologies in the world.

Samsung had been struggling with its foundry business for some time. The biggest problem was 'yield rate'. Yield rate means the percentage of products that work properly out of all products made. Samsung's yield rate was lower than its competitor TSMC. Because of this, many customers chose TSMC instead of Samsung.

But this Tesla contract shows that things have changed. When a demanding company like Tesla trusts Samsung to make cutting-edge AI chips, it means Samsung's technology has reached TSMC's level.

The contract size is also huge. 22.7 trillion won equals about 30% of Samsung Electronics' annual revenue. With this much stable business secured, Samsung's foundry business profitability is expected to improve significantly.

In the end, this contract signals that Samsung Electronics has emerged as a strong competitor to TSMC in the semiconductor foundry market.

2️⃣ Economic Terms

📕 Foundry

A foundry is a specialized company that manufactures semiconductors designed by other companies.

• Semiconductor design companies prefer to outsource production to foundries rather than building their own manufacturing facilities.
• Samsung and TSMC form the two major players in the global foundry market.
• The foundry business requires massive investment and cutting-edge technology, making it a high-value-added business.

📕 Nanometer (nm) Process

Nanometer process refers to the unit measuring semiconductor circuit width - smaller numbers mean more advanced technology.

• 2-nanometer is currently the most advanced process technology for mass production.
• The finer the process, the more transistors can be packed into the same area, improving performance.
• Fine processes also reduce power consumption, making them essential for mobile devices and AI chips.

📕 Yield Rate

Yield rate means the percentage of products that work properly out of total production.

• In semiconductor manufacturing, yield rate is a key indicator determining competitiveness.
• Higher yield rates lower production costs and allow companies to offer better prices to customers.
• Advanced processes make yield rate harder to achieve, making technology capability crucial.

📕 AI Chip

AI chips are semiconductors specialized for artificial intelligence calculations, capable of quickly processing complex deep learning tasks.

• They are used as core components in self-driving cars, robots, and data centers.
• They have better parallel processing capabilities than regular CPUs, making them efficient for AI learning and inference.
• Demand is rapidly increasing due to AI market expansion, making this a promising field.

3️⃣ Principles and Economic Outlook

✅ Samsung Foundry's Technology Recovery and Competitive Edge

• Let's analyze how Samsung Electronics proved its technology through the Tesla contract.

  • First, Samsung solved 2-nanometer process yield issues and recovered technical trust. Samsung foundry's biggest weakness had been low yield rates. No matter how advanced process technology you have, low yields increase production costs and cause delivery delays. Samsung had the painful experience of losing several customers due to yield problems with 3-nanometer processes. But this Tesla contract means Samsung achieved significant yield improvements in 2-nanometer processes. When a quality-demanding company like Tesla places large orders, it proves Samsung's technology has reached industry-leading levels.

  • Second, local US production solved geopolitical risks. This production will take place at Samsung's Texas Taylor factory. With the US government pushing 'reshoring' policies to bring semiconductor supply chains back to America, local production becomes a major advantage. Especially companies like Tesla prioritize supply chain stability and prefer production within the US. Samsung's $17 billion investment in building the Taylor factory met these strategic needs. This is expected to positively impact future contracts with other US companies.

  • Third, Samsung secured AI-specialized chip design capabilities and captured future markets. Tesla's AI6 chip is an AI-dedicated chip specialized for self-driving and robotics. Such chips require completely different design and manufacturing technologies from regular CPUs or memory. Samsung winning this contract means it has all the technology needed for AI chip manufacturing. With the AI market growing explosively, this experience and technology will be a major weapon in future contract competitions with AI chip design companies like Nvidia, AMD, and Qualcomm.

• Samsung's achievement goes beyond simple contract wins to establishing technological superiority in the foundry market, making it highly significant.

✅ Impact on Global Semiconductor Market

• Let's examine how Samsung's Tesla contract will affect the entire semiconductor ecosystem.

  • First, cracks will appear in TSMC's dominance, reshaping the competitive landscape. The foundry market had been dominated by TSMC with over 60% market share. Major customers like Apple, Nvidia, and AMD all depended on TSMC. But Samsung securing a premium customer like Tesla is changing the situation. This sends a signal to other customers that 'Samsung is now trustworthy too'. Indeed, negotiations for 2-nanometer contracts with Qualcomm and Samsung's own Exynos chips are reportedly underway. Increased competition means customers can get chips made under better conditions.

  • Second, new supply chain diversification will begin in the AI chip market. The AI boom has caused explosive demand for related chips, but suppliers were concentrated at TSMC, creating bottlenecks. Even ordering Nvidia GPUs meant waiting months. Samsung proving its AI chip manufacturing capabilities has made supply diversification possible. This will contribute to AI chip price stabilization and supply stability. This is especially welcome news for industries requiring large quantities of AI chips like self-driving cars, robots, and data centers.

  • Third, the entire Korean semiconductor ecosystem's competitiveness will strengthen. Samsung's success positively impacts Korea's entire semiconductor ecosystem including SK Hynix, semiconductor equipment companies, and materials companies. Korean companies' technology and market positions in semiconductor equipment and materials are especially expected to improve. Also, Samsung's deeper penetration into the US market through its Texas factory will strengthen Korea-US semiconductor cooperation. This has the effect of securing advantageous positions in technology competition with China.

• Samsung's advance will change global semiconductor market competition and improve overall market stability through supply chain diversification.

✅ Future Outlook and Investment Opportunities

• Let's analyze the sustainability of Samsung foundry's success and points investors should watch.

  • First, additional large contracts are likely, leading to continued improvement in revenue and profitability. With Samsung's technology proven through Tesla contract success, other major customers are showing increased interest. Particularly, contracts for Qualcomm's next-generation mobile chips, Samsung's own Exynos chips, and other AI chip companies are being discussed. While Samsung's foundry business is currently operating at a loss, these large contracts becoming reality could enable profitability from 2026. The 22 trillion won Tesla contract alone can secure 2-3 trillion won in stable annual revenue.

  • Second, based on technological advantages, Samsung will lead in next-generation process development too. Building on 2-nanometer success, Samsung plans to continue process miniaturization to 1.4-nanometer and 1-nanometer. Samsung is particularly evaluated as ahead of TSMC in next-generation transistor structures like GAA (Gate-All-Around) technology. If this technological advantage continues, Samsung foundry's growth will accelerate over the next few years. Samsung can also seize opportunities in new fields like quantum computer chips and bio-chips beyond AI-dedicated chips.

  • Third, from an investor perspective, positive impact on Samsung Electronics stock price is expected to continue. Samsung Electronics had been highly dependent on memory semiconductors, with performance heavily influenced by memory price fluctuations. But with foundry business getting on track, revenue diversification will significantly improve performance stability. Foundries especially provide predictable revenue through long-term contracts, unlike memory. Securities firms value Samsung foundry at 30-50 trillion won, so business success could provide significant upward momentum for Samsung Electronics stock.

• Samsung's foundry success is evaluated as having high investment appeal, securing long-term growth engines beyond short-term performance improvements.

4️⃣ In Conclusion

Samsung Electronics' Tesla AI chip contract win is creating a new turning point for Korea's semiconductor industry beyond just a simple contract. With the 22 trillion won large-scale contract proving technology capabilities, it has completely dispelled previous yield controversies and technology doubts.

The most important achievement is securing TSMC-level technology in 2-nanometer processes. When a quality-demanding company like Tesla entrusts cutting-edge AI chip manufacturing to Samsung, it means Samsung's technology has reached global top levels. This will be a major weapon in future contract competitions with other major customers.

From a geopolitical perspective, this is also a very meaningful achievement. By producing at the US Texas factory, Samsung meets US government semiconductor reshoring policies and secures supply chain stability. This will open cooperation opportunities with more US companies in the future.

Most importantly, Samsung has secured new growth engines suitable for the AI era. The AI chip market is expected to grow explosively over the next few years, and Samsung has laid the foundation to establish itself as a key supplier in this market.

However, to sustain success, several challenges must be solved. Yield rates must continue improving, and Samsung must stay ahead in next-generation process development. Production capacity expansion to handle increasing orders is also necessary.

From an investor perspective, this represents very positive change. Samsung Electronics, previously subject to memory price fluctuations, will see significantly improved performance predictability by securing stable foundry revenue. Long-term corporate value revaluation is highly likely.

Ultimately, this Tesla contract will be an important milestone for Samsung Electronics' evolution from a 'memory semiconductor company' to a 'comprehensive semiconductor company'. Samsung has seized the opportunity to leap forward as a true global semiconductor powerhouse competing on technology.