Samsung Electronics (005930.KS) made small gains on Tuesday following its $16.5 billion AI chip deal with Tesla. Despite the sharp rise from the previous day, which caused stocks to outperform the overall market’s 0.7% increase, analysts note that Samsung is still struggling to acquire large customers.
Analysts say this deal could revitalize the company’s unprofitable contract manufacturing business, but Samsung is struggling to find more customers in the logic chip and memory chip market against competitors like TSMC and SK Hynix.
“This deal could be a significant milestone for Samsung, but the memory business also needs to make significant progress,” says Ben, Global Technology Analyst at Quilter Cheviot. Barringer.
New Opportunities on a Difficult Road
Although Samsung is the world’s largest memory chip manufacturer, delays in supplying high-bandwidth HBM chips to Nvidia negatively impacted its profits and lowered its share value. At the same time, it lags behind TSMC in the “foundry” or contract manufacturing business.
Analysts emphasize that whether the Tesla deal will bring new major customers to Samsung depends on the company’s manufacturing success.
Samsung shares recovered losses from earlier in the day, closing 0.3% higher on Tuesday. Stocks rose 7% on Monday following the Tesla deal.
Business Trip to Washington
Meanwhile, Samsung Electronics Chairman Jay Y. Lee went to Washington on Tuesday. According to Yonhap News Agency, he reportedly went to support the South Korea-US trade talks. However, company officials stated that this trip was a “business trip.”
Tesla Agreement and Texas Factory
Tesla CEO Elon Musk stated that the next-generation AI6 chips that Samsung will develop at its new chip factory in Texas will be used in self-driving cars, humanoid robots, and data centers. However, no information was given about the production schedule. This agreement could create a great opportunity for Samsung’s Texas factory, as the company was struggling to attract large customers due to low production efficiencies at its factory.
Samsung’s Tough Test
Samsung’s successful long-term agreement may be related to its efforts to prove its chip manufacturing capabilities. AJ Bell Investment Director Russ Mould stated that the deal could mitigate risks such as supply chain disruptions and tax barriers.
What Samsung needs to do now is prove that it can produce the right quantity and high quality for a demanding customer.
Analysts say the deal aims to secure the long-term future, but that it will take at least one or two years before these chips are used in vehicles.
