ANALYSIS
PARTNERSHIP HAS UPS, DOWNS
Musk announcement raises some eyebrows
The recently announced $16.5 billion pact between Tesla Corp. and Samsung Austin Semiconductor – both of which have a massive presence in Central Texas – would yield a major windfall for the latter by providing next-generation A16 chips for the maker of electric cars.
But what will the multibillion- dollar deal do for Tesla?
And — beyond the blaring headlines breathlessly touting the deal — how likely is the deal to eventually materialize?
Tesla CEO Elon Musk’s sudden announcement in late July detailing the Samsung contract raised some eyebrows given the company’s past allegations of market manipulation in making similar corporate pronouncements.
To be sure, the deal sounds promising for both sides.
“For Samsung, it’s a huge anchor client that could lift foundry sales by around 10 percent annually through 2033, and help stabilize a division that’s been under pressure,” Tobias Robinson, an analyst for DayTrading.com, told the Press in a recent interview. “For Tesla, it locks in a stray domestic supply of A16 chips. In turn, it reduces supplychain risks and provides support for its long-term autonomous driving roadmap.”
The two facilities are located relatively close to each other.
Samsung Austin Semiconductor’s fabrication foundry — or “fab” — in Taylor is expected to be fully operational in 2026. The plant – initially a $17 billion project – is considered central to the chipmaker’s efforts to expand its U.S. presence while bolstering the global semiconductor supply chain.
The Tesla Gigafactory complex just off Texas 130 is in far east Austin and on the outskirts of Bastrop, about 30 miles away from the Taylor site. Tesla also loads its cybertrucks in a Taylorbased rail yard near Samsung.
Announcing the agreement via social media, Musk noted the proximity between the two corporate behemoths would streamline
operations. “Samsung’s agreed to allow Tesla to assist in maximizing manufacturing efficiency,” Musk wrote on X, the former social-media platform once known as Twitter that Musk now owns. “This is a critical point, as I will walk the line personally to accelerate the pace of progress. And the fab is conveniently located not far from my house.”
Musk’s surprise announcement helps recoup losses
As expected, the announced deal between the tech giants boosted their market value.
“Tesla’s shares climbed about 4 percent on the news, as investors seemed encouraged by the security of new chip supply,” Robinson said.
“Samsung’s stock popped even more (about 6.8 percent) thanks to the boost to its foundry business,” he added, referring to Samsung’s role in producing the automotive components for Tesla.
The timing of the announcement was a boon for Musk, coming on the heels of losing billions in net worth after alerting shareholders to brace for “a few rough quarters ahead” for the carmaker.
“We’re in this weird transition period where we’ll lose a lot of incentives in the U.S.,” Musk said during a recent earnings call. “Once you get to autonomy at scale in the second half of next year, certainly by the end of next year,I would be surprised if Tesla’s economics are not very compelling.”
As detailed in a recent Tesla press release, federal tax credits for consumers are set to expire in September. The incentives called for a $7,500 credit off the purchase of eligible new vehicles, applicable to both cash and financing purchases.
According to multiple media reports, the credits were withdrawn following Musk’s falling out with President Donald Trump.
The grim earnings outlook on July 23 had a corrosive effect on both Tesla’s market value and Musk’s net worth.
“At the time, the warning knocked Tesla’s share price down roughly 9 percent to 10 percent in a single day,” Robinson said of Musk’s July 24 earnings outlook. “For Musk personally, that translated into about a $12.6 billion paper loss from his net worth plus another $6 billion hit to his bonuslinked equity. So around $17.6 billion estimated in total.”
The unexpected announcement on a Tesla-Samsung pact helped buoy those losses.
Musk’s fortunes rose exponentially further in early August when the Tesla board awarded him 96 million shares of stock valued at $44 billion – the same amount he paid to buy Twitter in late 2022 – as outlined in a regulatory filing.
Deal announced on X but not filed with regulators The Press reached out to the Securities and Exchange Commission to check if regulators have vetted the veracity of Musk’s latest claims of a partnership with Samsung, but a spokesman declined comment.
The inquiry from the Press was prompted given the lack of a formal SEC filing from Tesla alerting to the Samsung pact.
Typically, public companies file an SEC Form 8-K report in disclosing major, unscheduled events deemed important for investors.
Robinson confirmed no such filing was entered.
Samsung’s parent company is Samsung Electronics Co. Ltd., part of the Samsung Group headquartered in South Korea.
“Samsung filed the deal as a material contract in South Korea, but it didn’t name Tesla outright,” Robinson wrote, noting that Musk later confirmed the deal on X.
He added, “It’s not immediately known why Tesla didn’t file a matching U.S. filing (i.e., SEC 8K) on this deal. It could be because U.S. and Korean materiality thresholds differ; its legal team may view the contract as ordinary-course business; the agreement may not be final from Tesla’s perspective; and/ or the company may be withholding information for a planned strategic announcement. Or some other rationale.”
Musk has gotten into hot water with regulators in the past for making claims that never materialized but spiked share value.
In 2018, Musk tweeted he had “funding secured” to take Tesla private, causing the stock to soar in value.
As widely reported, the SEC that year charged Musk with securities fraud.
Regulators found the tweet messaging to be misleading as the deal was uncertain and Musk had not discussed terms of the plan with financing partners, according to reports at the time.
In addition, Musk faced a class-action lawsuit over the “funding secured” tweet that alleged fraudulent misrepresentation.
Time will tell if measurable gains in business activity will be seen in Taylor as a result of the Tesla-Samsung plant. But were the multibillion- dollar contract never to materialize, accountability would be elusive.
“Even in cases of executives making exaggerated or overly optimistic claims that look like financial/stock promotion, those rarely get prosecuted as proving intent and direct harm is a high bar, ” Robinson said. “Even when they do, warnings, fines and settlements are the most common outcomes.”
