Samsung Foundry has finalized a contract with Elon Musk’s xAI to produce custom AI chips at its Taylor, Texas fabrication facility, according to sources familiar with the matter. This agreement follows a $16.5 billion chip-manufacturing deal with Tesla announced in July.
The deal with xAI is a significant development for Samsung Foundry, which has been working to ramp up production at its Taylor facility. To support this effort, Samsung ordered three advanced extreme ultraviolet (EUV) lithography machines from Dutch supplier ASML for the Taylor plant. Each machine costs about $200 million and is designed to support the production of AI chips using Samsung’s 2-nanometer process technology. The order is a clear indication of Samsung’s plans to increase output at the facility, which has faced challenges in attracting customers.
The $17 billion Taylor fab had “virtually no customers” as of July, according to NH Investment & Securities analyst Ryu Young-ho. Samsung had previously delayed the delivery of ASML equipment in 2024 due to weak demand. However, with the xAI deal in place, operations at the facility are now set to begin in early 2026, with full production ramping up by 2027.
xAI is the second Musk-led company to partner with Samsung Foundry, after Tesla. The startup is focused on developing the Grok chatbot and has been hiring custom silicon engineers to work on application-specific integrated circuits (ASICs) for large-scale AI tasks. While Samsung did not reveal the value of the xAI contract, Korean media outlet SamMobile reported in September that talks involved a potential $1 billion deal.
The partnership with xAI is expected to bolster Samsung’s standing in the AI chip market, where it has lagged behind Taiwan Semiconductor Manufacturing Company (TSMC). The location of the Taylor site near Tesla’s Austin headquarters and xAI operations is also seen as a strategic advantage, allowing for tighter coordination between designers and manufacturers.
