Elon Musk, Chief Executive Officer (CEO) of Tesla, is rapidly emerging as a savior for South Korean companies with his recent string of substantial investments.
Tesla has poured 16.5 billion USD into Samsung Electronics and an additional 4.3 billion USD into LG Energy Solution (LGES).
Tesla’s significant investment in LGES appears to be a strategic move to circumvent the high tariffs imposed on Chinese imports.
Initially, Tesla relied on importing batteries from China’s CATL, the world’s largest electric vehicle (EV) battery manufacturer, due to limitations in domestic production.
However, with President Donald Trump’s administration imposing high tariffs on Chinese imports, LGES’s existing battery factory in the U.S. has become an attractive alternative.
This arrangement allows Tesla to sidestep tariffs not only on products from China but also those imposed on South Korea.
The substantial investment in Samsung Electronics likely stems from production backlogs faced by Taiwan’s TSMC, the world’s largest foundry, due to high demand from clients like Nvidia.
By securing a contract with Samsung Electronics under these circumstances, Tesla can exercise exclusive rights. Musk stated that it will directly operate the chip manufacturing line and has received authority from Samsung Electronics to support production optimization.
These factors seem to be driving Tesla’s all-in investments in South Korean companies such as Samsung Electronics and LGES.
Reuters reported on Wednesday that Tesla plans to switch its EV battery supplier from CATL to LGES, investing 4.3 billion USD.
The contract will run for three years starting August 2027, with an option to extend for up to seven years.
Tesla has struggled to expand its domestic battery production capacity. Chief Financial Officer (CFO) Vaibhav Taneja acknowledged a lack of in-house battery production capability during an April earnings call.
Given this context, LGES’s existing U.S. battery factory makes it an ideal partner for Tesla, allowing the automaker to avoid tariffs on Chinese products.
Tesla’s 16.5 billion USD investment in Samsung Electronics, announced Monday, involves a contract to produce next-generation artificial intelligence (AI) chips.
The agreement, lasting until the end of 2033, will see Samsung Electronics produce AI6 semiconductors at a new Texas facility.
Musk emphasized on X (formerly Twitter) that the strategic importance of this cannot be overstated.
He added that the 16.5 billion USD is just a baseline figure, with actual production volumes likely to be several times higher.
The AI6 chips will power Tesla’s upcoming robotaxis, the humanoid robot Optimus, and AI data centers in the coming years.
Industry experts believe this contract could bolster Tesla’s ambitions for its soon-to-be-released robotaxi service.
They unanimously agree that these long-term supply agreements will significantly alleviate Tesla’s chip shortages and stabilize production.
