Tesla deal could be ’a long-term growth catalyst’ for Samsung’s foundry business

Investing.com -- Samsung Electronics’ newly announced W22.8tn ($16.5bn) foundry contract with Tesla (NASDAQ:TSLA) could be “a long-term growth catalyst” for the company’s chipmaking business, according to Bank of America (BofA) analysts.

The agreement, covering the period from July 2025 through the end of 2033, is set to support production of Tesla’s next-generation AI6 chips at Samsung’s facility in Taylor, Texas.

The partnership marks a significant win for Samsung’s foundry unit, which has struggled with profitability and high-profile customer traction.

Samsung (KS:005930) shares closed 6.8% higher on Monday, while Tesla climbed 1.6% in U.S. premarket trading. 

While the scale of the deal is substantial, BofA noted that it is “too early to see a meaningful impact” on near-term earnings, citing challenges related to wafer fabrication, pricing, and return on investment capital (ROIC).

“We estimate just US$2-3bn extra foundry sales (annual) with 20% OP margin (good-case scenario for now) could have only low single-digit % impact on 2026-27E EPS,” the analysts led by Simon Woo said.

Samsung has been operating at a loss in its foundry division through the first half of 2025. Though margins are expected to improve in the second half and into 2026, analysts say the business is not yet positioned to generate meaningful profits.

Key headwinds include long manufacturing cycle times, rigorous customer quality controls, and cost competitiveness.

Tesla CEO Elon Musk said in a Monday post on X that the new fab “will be dedicated to making Tesla’s next-generation AI6 chip” and that Samsung has agreed to let Tesla help “maximize manufacturing efficiency.”

Samsung’s second-quarter earnings call on July 31 may offer additional clarity, though BofA expects investors to focus more broadly on the company’s long-term prospects with global clients.

BofA maintains a Buy rating on Samsung shares, pointing to a low valuation and earnings recovery potential. The bank’s price objective of W85,000 is based on 1.4x 2025–26E price-to-book, in line with its long-term historical average.

Samsung is already producing Tesla’s A14 chips, which power the company’s Full Self-Driving (FSD) system. The AI5 chips will be manufactured by Taiwan Semiconductor Manufacturing, initially in Taiwan and later at its Arizona facility, according to Musk.