The South Korean company Samsung Electronics Co. has entered into a contract with Tesla Inc. worth $16.5 billion for the production of semiconductors aimed at artificial intelligence.

This was reported by Bloomberg.

The largest firm in South Korea announced on Monday that it has signed an agreement for chip production worth 22.8 trillion won, set to last until the end of 2033. According to Tesla's CEO Elon Musk, who confirmed Bloomberg's report, the upcoming factory in Taylor, Texas, will manufacture next-generation AI6 chips for Tesla.

Musk clarified that he will personally oversee the production line and has received authorization from Samsung to assist in optimizing the manufacturing process.

The contract comes at a time when Samsung is gradually losing ground in chip production. The company, which manufactures its own memory chips and semiconductors, is facing challenges in securing enough orders to fully utilize its production capacity. It has postponed the completion and launch of a new factory in Texas until 2026.

This stands in contrast to the leading chip maker Taiwan Semiconductor Manufacturing Co., which still cannot meet the entire demand. According to TrendForce from Taipei, in the first quarter of this year, TSMC held a dominant share of 67.6% of the global semiconductor manufacturing market. Samsung's share has decreased to 7.7% from 8.1% in the previous quarter.