Tesla(US:TSLA) Hua Er Jie Jian Wen·2025-07-31 06:25Core Viewpoint - Samsung Electronics is at a critical turning point in its chip business, with a $16.5 billion contract with Tesla for AI6 chip manufacturing seen as a potential lifeline for its struggling foundry operations [1][4]. Group 1: Business Challenges - Samsung's foundry business market share has plummeted from a leading position to just 7.7% in Q1 2023, significantly trailing TSMC's 67.6% [1]. - The company's second-quarter earnings report revealed a 55% year-on-year drop in operating profit to 4.7 trillion KRW, the lowest in six quarters, with the chip division's profit falling to 400 billion KRW from 6.5 trillion KRW a year earlier [2]. - Samsung's challenges stem from a lack of major clients, leading to delays in production at its flagship factory in Texas, contrasting sharply with TSMC's success in securing large clients like Apple and Nvidia for its Arizona facility [2][3]. Group 2: Opportunities from Tesla Contract - The eight-year contract with Tesla is viewed as a significant opportunity for Samsung's foundry business revival, as it will involve producing AI6 chips for Tesla's AI model training projects [4]. - Analysts believe that this contract could enhance confidence among other large tech companies in Samsung's technology, potentially attracting more AI clients [4]. - However, there are concerns regarding the long contract duration, as it provides Tesla with opportunities to exit if Samsung fails to execute effectively, raising questions about the contract's profitability for Samsung [4].