Last Updated on: 30th July 2025, 11:26 pm
Korea Economic Daily reports that Tesla and LG Energy Solution have struck a deal worth $4.3 billion for LFP batteries produced at the LGES factories in Michigan, Ohio, and Tennessee. While LGES has not officially revealed who the buyer is, citing a confidentiality agreement — Tesla likes to wrap all its business dealings inside nondisclosure agreements — sources in South Korea claim it is Tesla who is the buyer.
Until now, CATL — the world’s largest battery manufacturer — has been been Tesla’s primary battery supplier, but recent tariff chaos from the failed US administration, coupled with a growing animus in the US toward Chinese companies, have shifted the financial calculus sufficiently to move LGES to the front of the line.
The deal has LG Energy Solution beginning to deliver the batteries starting in August 2027 and continuing through the end of July 2030. The new contract is equivalent to about 25 percent of LGES sales in 2024. “This deal includes provisions to extend the contract period up to seven years and to increase the supply volume accordingly,” LG Energy said in a regulatory filing. “As a result, the contract’s value and duration may be subject to change.”
LG Energy Solution is scaling up production in the US. Industry observers told KED that the batteries are likely to be used in Tesla grid-scale and residential energy storage devices, as LG Energy’s manufacturing plants in the US are dedicated to LFP batteries optimized for energy storage applications.
LG Energy is shifting toward LFP batteries, which are more affordable and suitable for mass-market EVs, amid a slower than expected market transition toward electric vehicles, many of which rely on batteries that include cobalt, nickel, and manganese in their chemistries. Those batteries have a higher energy density but are also more costly — a downside at a time when EV prices are set to rise in the US due to the end of the federal tax credit on September 30 of this year.
LG Energy Solution is also a partner in Ultium Cells, a joint venture with General Motors. Ultium Cells is converting its production lines for high-nickel-cobalt-manganese battery cell production in Tennessee to producing LFP battery cells for the energy storage market.
In March, LG Energy Solution signed a contract with global energy management firm Delta Electronics to supply 4 GWh worth of energy storage batteries for residential buildings in the US. Delta Electronics is based in Taiwan and counts Tesla and Apple among its major clients. During its second quarter conference call in July, LG Energy Solution said it expects meaningful profit growth in the second half, with ESS battery sales offsetting sluggish sales of EV batteries.
Samsung Signs Chip Deal With Tesla
Credit: Samsung Electronics
Also this week, Samsung Electronics, the world’s top memory chipmaker, announced it had signed a contract worth $16.5 billion, raising hopes of a turn around for its under-performing foundry business which has struggled with persistent losses in recent quarters. Samsung said only that it had signed the deal with a “large global company.” The contract became effective on July 24, 2025, and runs through the end of 2033.
Samsung didn’t identify the client, but Elon Musk let the cat out of the bag when he posted on his personal antisocial media channel that Samsung will produce next-generation A16 chips for the Tesla at its fabrication facility in Texas. “Samsung’s giant new Texas fab will be dedicated to making Tesla’s next-generation A16 chip. The strategic importance of this is hard to overstate,” Musk said on X.
Samsung currently manufactures the A14 chip, while TSMC will produce the A15 chip — a design that was just completed recently — initially in Taiwan and later at the TSMC fabrication facility in Arizona. The A16 chip will be produced at Samsung’s $37 billion foundry in Taylor, Texas, starting in 2026.
The new contract is equal to 7.6 percent of Samsung’s 2024 annual sales revenue, making it one of the largest foundry orders the company has ever received from a single client. Industry officials and some media reports have said that Samsung could be supplying its artificial intelligence semiconductors for Tesla’s full self-driving chips. Analysts said the deal could mark a long-awaited inflection point for Samsung’s foundry business, which competes directly with Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest foundry chip maker.
“This contract suggests that Samsung’s yield on its advanced nodes, particularly 2-nanometer technology, is finally reaching viable levels,” a semiconductor executive close to the matter told Korea Economic Daily. “It also signals renewed customer trust and a possible shift in market momentum.”
The latest foundry contract, analysts said, would generate about 2.5 trillion won a year until the end of 2033 — about 10% of Samsung’s estimated annual foundry revenue — and provide the scale needed to improve economies of production. The chips to be produced under the new contract are expected to leverage Samsung’s advanced 2 nm process.
If successful, the Taylor, Texas, facility could make it possible for Samsung to diversify production beyond its home base in Korea and further embed itself in the US semiconductor supply chain, which is a strategic priority as the US tries to increase its domestic chip making capacity. “This deal is more than just about revenue,” said an industry analyst. “It’s a bet on Samsung’s ability to deliver next-generation silicon and reposition itself in the AI era. If they get it right, this could be a watershed moment.”
Intel and TSMC are aggressively seeking major US customers, including Nvidia, Google, and Amazon, all of which are racing to secure leading-edge capacity amid the AI boom. Analysts told KED that Samsung’s success in clinching a multi-year, high value deal could open doors to additional orders and help it shake off years of skepticism surrounding its foundry ambitions.
The major news for Tesla is that it finds itself able to make such high-dollar commitments as its automotive business struggles in the US, Europe, and China. It is not entirely clear how many of the chips Samsung will produce are intended for Tesla automobiles and how many are intended for use by xAI. On the energy storage front, it is also unclear how the battery storage business will fare as the US pivots to more fossil fuels and less renewable energy. Interesting times ahead for Tesla. Stay tuned.
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