Samsung Elec signs $16.5 billion deal to make chips for global firm

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SEOUL : Samsung Electronics said on Monday it has signed a $16.5 billion deal to supply chips for an unidentified major global company, sending its shares up 3.5 per cent.

The South Korean tech giant said the deal signed on Saturday was for contract chip manufacturing and details of the agreement including the counterpart and terms would not be disclosed until the contract is completed at the end of 2033.

The deal comes as Samsung is struggling to compete in the race to make artificial intelligence chips, which has hit its profits and share price.

Samsung has customers like Tesla and Qualcomm for its foundry business, while bigger rival TSMC has customers like Apple and Nvidia.

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The deal comes as South Korea is seeking U.S. partnerships in chips and shipbuilding as it is making last-ditch efforts to reach a trade deal to eliminate or cut potential 25 per cent U.S. tariffs.

It is not clear how the order would affect Samsung's plan to start production at its new factory in Texas, which has been delayed as it had struggled to win major customers.

Samsung is grappling to boost production yields of its latest 2-nanometer technology, and the order is unlikely to involve the cutting-edge tech, Lee Min-hee, an analyst at BNK Investment & Securities, said.

Samsung has been losing market share to TSMC in contract manufacturing, underscoring technological challenges the firm faces in mastering advanced chip manufacturing to lure the likes of Apple and Nvidia away from TSMC, analysts said.

($1 = 1,383.6800 won)

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