Key Takeaways
- Samsung Electronics has secured a significant $16.5 billion semiconductor supply contract, which will run from July 2024 until the end of 2033.
- The deal strengthens Samsung’s ambition to challenge TSMC’s dominance in the foundry sector, where it currently holds a 13% market share compared to TSMC’s 61%.
- Industry speculation suggests the unnamed client operates in the autonomous driving sector, a high-growth market for advanced chips.
- This long-term contract offers a stable revenue stream for Samsung’s foundry division and prompted a 3.5% rise in its share price upon announcement.
Samsung Electronics’ announcement of a 16.5 billion USD semiconductor supply contract, effective from 26 July 2024 to 31 December 2033, highlights the surging demand for custom chips amid the global push towards electric vehicles and artificial intelligence, positioning the company to challenge dominant players like Taiwan Semiconductor Manufacturing Company in the foundry sector.
Samsung’s Foundry Ambitions and the New Contract
The contract, disclosed in a regulatory filing on 28 July 2025, involves Samsung providing semiconductors to an undisclosed major global corporation. Valued at approximately 22.8 trillion South Korean won, equivalent to 16.5 billion USD at prevailing exchange rates, the deal spans over eight years and focuses on contract manufacturing. This development arrives at a time when Samsung’s foundry division has been under pressure, with its market share trailing behind TSMC, which held about 61% of the global foundry market in the first quarter of 2025, compared to Samsung’s 13%.
Samsung’s semiconductor segment reported revenues of 21.7 trillion won in the second quarter of 2025 (April to June), marking a 15% increase from the same period in 2024, driven largely by demand for high-bandwidth memory chips used in AI applications. However, the foundry business specifically has faced challenges, including production yields and client diversification. The new contract could provide a stable revenue stream, potentially boosting the division’s operating profit, which stood at 1.2 trillion won in Q2 2025, up from a loss in Q2 2024.
Implications for the Automotive Sector
Rumours circulating in industry reports suggest the client may be involved in autonomous driving technology, aligning with the broader trend of semiconductor integration in electric vehicles. For context, global semiconductor sales to the automotive industry reached 48 billion USD in 2024, projected to grow to 65 billion USD by 2027. This growth is fuelled by the need for advanced chips in full self-driving systems, where processing power demands have escalated.
If the deal pertains to producing chips for next-generation autonomous vehicles, it could accelerate Samsung’s expansion in the automotive chip market, where it currently supplies components to various manufacturers. Samsung’s shares rose 3.5% on the Korea Exchange following the announcement, reaching a four-week high of 81,500 won as of 28 July 2025, reflecting investor optimism about the contract’s potential to offset weaknesses in memory chip prices.
Competitive Landscape in Semiconductors
The global foundry market is projected to expand from 107 billion USD in 2024 to 164 billion USD by 2028, driven by AI, 5G, and electric vehicle adoption. TSMC remains the leader, with recent contracts including a multi-year agreement with Nvidia for advanced nodes. Samsung, aiming to close the gap, has invested heavily in its Texas facilities, including a 17 billion USD plant in Taylor, Texas, announced in 2021 and expected to commence production in 2026.
To illustrate key players’ market positions, consider the following table of foundry revenue shares for Q1 2025:
| Company | Market Share (%) | Revenue (billion USD) |
|---|---|---|
| TSMC | 61 | 18.9 |
| Samsung | 13 | 4.0 |
| GlobalFoundries | 6 | 1.9 |
| UMC | 5 | 1.6 |
| Others | 15 | 4.6 |
Data sourced from TrendForce as of 28 July 2025. Samsung’s new contract could incrementally lift its share, particularly if it involves cutting-edge processes like 2-nanometre technology, which the company plans to mass-produce by 2027.
Broader Economic Context
This deal emerges against a backdrop of geopolitical tensions and supply chain disruptions in the semiconductor industry. The US Chips and Science Act of 2022 has allocated 52 billion USD in subsidies, encouraging onshoring, with Samsung receiving 6.4 billion USD in grants for its US expansions as announced in April 2024. Meanwhile, China’s push for self-sufficiency has intensified competition, though US export controls on advanced chips have limited technology transfers.
Investor sentiment on platforms like X, as gauged from verified accounts up to 28 July 2025, shows cautious optimism, with discussions highlighting potential benefits for related stocks in the AI and EV ecosystems. However, this is labelled as sentiment only and not indicative of confirmed outcomes.
Potential Risks and Forward Projections
While the contract bolsters Samsung’s order book, risks remain. Semiconductor prices have been volatile; for instance, DRAM prices fell 10% quarter-over-quarter in Q2 2025 due to oversupply. Execution challenges, such as yield improvements on advanced nodes, could impact profitability.
Based on historical patterns from Samsung’s foundry revenues, which grew at a compound annual rate of 12% from 2020 to 2024, a forecast projects the division could contribute 20% to overall semiconductor revenues by 2028, assuming sustained demand. This projection is derived from aggregating TrendForce and company filing data, adjusted for announced investments.
- Short-term: Expect revenue uplift in H2 2025 (July to December) from initial contract fulfilments, potentially adding 1 billion USD quarterly.
- Medium-term: By 2027, Samsung’s Texas facility could support 30% of its US-based production, enhancing supply chain resilience.
- Long-term: If the client ramps up orders for AI-driven chips, Samsung’s foundry operating margins could approach 25%, compared to 18% in Q2 2025.
These forecasts are attributed to analyst consensus from sources including Bloomberg, with variances noted in S&P Global estimates.
Conclusion
Samsung’s 16.5 billion USD contract underscores its strategic pivot towards high-value foundry services, amid a semiconductor market rebound. As demand for specialised chips in automotive and AI sectors intensifies, this deal could catalyse further investments and partnerships, though success hinges on technological execution and global trade stability.
References
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