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

This was reported by Bloomberg.

The largest company in South Korea announced on Monday that it has entered into a chip manufacturing agreement valued at 22.8 trillion won, set to last until the end of 2033. According to Tesla CEO Elon Musk, who confirmed Bloomberg's report, the upcoming factory in Taylor, Texas, will produce next-generation AI6 chips for Tesla.

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

The signing of this 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 struggling to attract enough orders to fully utilize its production capacity. The completion and launch of a new factory in Texas have been postponed until 2026.

This stands in contrast to leading chipmaker Taiwan Semiconductor Manufacturing Co., which is still unable to meet the entire demand. According to TrendForce from Taipei, TSMC held a dominant share of 67.6% of the global foundry market in the first quarter of this year. Samsung's share has dropped to 7.7% from 8.1% in the previous quarter.