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Samsung Electronics has secured a massive ₩23 trillion ($16 billion) foundry order from Tesla, signaling a major turnaround for its struggling system semiconductor business. The deal comes as Samsung faces mounting pressure from Taiwan’s TSMC, whose dominant market share has fueled skepticism about Samsung’s competitiveness.

Industry experts see the contract as a pivotal starting point for Samsung, with limited players capable of handling advanced nanometer processes for big tech firms. As a result, more orders are expected to follow.

According to industry sources on July 28, Samsung is currently producing Tesla’s AI4 chip, while TSMC is handling AI5. Tesla’s next-generation AI6 chip, crucial for its Full Self-Driving (FSD) technology, will utilize Samsung’s 2nm process, providing a critical platform to showcase its technological capabilities. Analysts say Tesla split production between Samsung and TSMC to diversify supply chain risks.

TrendForce data shows Samsung’s global foundry market share dropped to 7.7% in Q1 2024, down from 11% a year earlier. Meanwhile, TSMC surged to 67.6%, widening the gap, while China’s SMIC trailed closely behind Samsung at 6.0%.

Samsung’s non-memory semiconductor division has struggled, posting over ₩5 trillion in losses last year and another ₩2 trillion deficit in Q1 2025. The foundry business faced challenges from low yield rates, insufficient design assets, and customer trust issues.

However, Samsung’s recent technological advances have been pivotal in winning Tesla’s contract. The company significantly improved yields in its 3nm Gate-All-Around (GAA) process, which powers the Exynos 2500 chip in its new Galaxy Z Flip 7 foldable. Production of 2nm chips for the upcoming Exynos 2600 is set to ramp up later this year, with recent tests showing yields surpassing 30% and approaching 40%.

Samsung has also accelerated organizational restructuring. Last year, Jun Young-hyun was appointed head of the Device Solutions (DS) division and later confirmed as vice chairman and CEO. He is tasked with revitalizing both the memory and foundry sectors.

“Even TSMC has physical limits on output,” said Lee Jong-hwan, a professor of system semiconductors at Sangmyung University. “If Samsung stabilizes yields, its 2nm and 3nm processes can be world-class, making it fully competitive.”

Lee added that large-scale, long-term contracts with major clients mark “a critical signal of regained market trust” and could drive a virtuous cycle of further orders.

As the only company capable of producing both memory and foundry chips, Samsung’s integrated capabilities could create significant synergies. “Samsung needs to leverage its dual strength to secure sustained strategic contracts and restore double-digit foundry market share,” Lee said.