Samsung to make 2nm Tesla AI6 chips at a loss, considers the order a 'blessing in disguise'

Samsung Electronics has secured a $16.5 billion contract to make 2nm chips for Tesla, which will be made at Samsung's new semiconductor fab in Texas, and will be produced for Tesla at a loss.

The new order for Tesla has been analyzed as a "loss-making order" that prioritizes securing references over profitability, and that Samsung looks to be taking the $16.5 billion order as a reference point to make a "blessing in disguise" for its foundry business.

Furthermore, the completion of its new Taylor semiconductor fab, collaboration with Tesla is expected to strengthen, and that there's anticipation growing that the Tesla order will lead to increased transactions with big tech companies like Google and Qualcomm.

Samsung will be producing Tesla's next-generation AI6 chips at its Taylor semiconductor fab in Texas, USA, with Elon Musk personally involved with the project. An industry official explains: "The production cost per wafer for the 2nm process exceeds $20,000, and Samsung Electronics likely offered a lower price to Tesla to enhance competitiveness. Amidst this, the 2nm process yield remains sluggish at 20%, indicating that Samsung is focusing on publicizing the reference externally, even if it means incurring a loss".

Previously, Tesla's AI4 chips were made on Samsung's 5nm and 7nm process nodes, with the newer AI5 chips made at TSMC on its newer 2nm and 3nm process nodes. In recent reports, it's presumed the opportunity for Tesla's new AI6 chips which use 2-4nm processes, shifted to Samsung Electronics due to TSMC's lack of capacity.

Korean media outlet Dealsite reports from an industry official who said: "From TSMC's perspective, Tesla is not classified as a core customer, so the order opportunity seems to have passed to Samsung Electronics".

Samsung is expected to begin producing the next-gen AI6 chips for Tesla after 2027, with initial production volume expected to be around 10,000 wafers per month. Following the disclosure of the $16.5 billion order with Tesla, it's rumored that internally within Samsung Electronics' foundry division, there was an evaluation expressing "puzzlement as the current 2nm process yield is not at a level to handle such a large order".

However, the decision to move forward with the order despite anticipating a loss is because securing a large big tech customer for Samsung's new 2nm process alone carries significant implications for the industry.

This is because Samsung hasn't had any significant orders for its 2nm process node, even with rumors flying, as it had been focusing on developing its own in-house mobile processors like the Exynos 2600 to secure "captive" references. Recently, Samsung seized an opportunity to secure small volumes of orders for advanced processes below 3nm, taking advantage of the capacity shortages at TSMC.

The method was to entrust 95% of TSMC and the remaining 5% to Samsung Electronics, but it's being reported that even this 5% is being shifted back to TSMC due to yield issues. But, the recent Tesla AI6 chip order is being seen as an opportunity for Samsung Electronics to make its presence felt with TSMC customers, as foundry process yields improve with increase utilization, securing a reference (like Tesla) can contribute to enhancing external credibility (something Intel needs, badly).