Tesla Bets $16.5 Billion on AI Chips  ## Metadata - Author: [[Hard Fork AI]] - Full Title: Tesla Bets $16.5 Billion on AI Chips - Category: #podcasts - URL: https://share.snipd.com/episode/dadff435-e727-4670-937e-42d3b86b6aee ## Document Notes ## Highlights - **Tesla's Dual-Supply Strategy** - Tesla is strategically splitting chip production between Samsung and TSMC to foster competition and cost savings. - Elon Musk's approach contrasts with Apple's centralized supply chain to optimize manufacturing efficiency and pricing. Transcript: Jaeden Schafer Musk recently made. He said, 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. Samsung currently makes AI4. So basically, this is the chip that goes inside the Tesla to help it self-driving. Samsung was making their AI4 chip, but for their AI5 chip, they actually went to Taiwan Semiconductor Company. And then for their AI6 chip, they went back to Samsung. Now, what's going on here? This is a good strategy. I guess one other thing that I'll bring up here is I think Elon's trying to do like the, you know, tariffs and other reasons trying to get a lot of stuff made inside of America. So that could be an element to this. But basically, he said, TSMC will make the AI5, which just finished design initiated in Taiwan, and then in Arizona. So TSMC is building a ton of fabs in Arizona, I used to live kind of in that area. And honestly, it's a it's pretty insane what they're doing down there. And so basically what it feels like, though, is that Elon is kind of bidding out his suppliers against each other. Right. So he's not just picking TSMC to do everything. He's not just picking Samsung to do everything for like different models of chips, which will go in different cars and different generations of cars. He's going back and forth between two different companies. So I think some people would like basically say this is a bad idea because, you know, you're not going to get, you know, super, you're not going to get super sustainable or like very similar Results. There's going to be issues from one company to another. Like I think a great example of someone that doesn't do this is Apple, right? I'm sure some people that know more about Apple supply chain than me will complain and say like, yes, they do. They use a whole bunch of companies. But like basically for iPhones, Apple is deeply embedded with Foxconn in China. And they're not bidding this out to, OK, now there's some company building something in America. We're going to just like ship all of our iPhones to get built in America this year. And then in the next season, we're going to go over to Vietnam where there's a new, right? Like Apple doesn't want to do that. Their supply chain is so massive. This is so massive. They don't just bop around. And of course the demand for an AI four chip, ([Time 0:01:48](https://share.snipd.com/snip/7acb9926-3794-4020-80e9-e3fe1734169a)) - **Tesla Helps Samsung Fab Efficiency** - Tesla assisting Samsung to maximize fab manufacturing efficiency benefits both parties by boosting yield and quality. - This collaboration may elevate Samsung's competitiveness with TSMC, improving chip production overall. Transcript: Jaeden Schafer Not a brand new person. They're capable of doing it. But like, how good are they? Are they as efficient as TSMC? All right, I'm going to get to that in a second because Elon followed up on this tweet by saying, Samsung agreed to allow Tesla to assist in maximizing manufacturing efficiency. 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. Okay, it's in Texas. So yes, that sounds like it would be more that'd be easier for Elon to be able to get over there and walk the lines like he does the Tesla line. But I think more importantly, the bigger story here is the fact that they agree to let Tesla maximize their manufacturing efficiency. So basically Tesla probably has some concept of what's going on at Taiwan Semiconductor and Taiwan Semiconductor Manufacturing and also they have their own manufacturing for their Car so like they're manufacturing they're you know they're all about manufacturing efficiencies this is a big thing they do and they're literally going there to help now is this just Because Elon's look, we just want the chips better and faster. We'll make sure the quality control probably an element of it. But Samsung really should be happy about this as well. Because if there's another company that has mastered, you know, some sort of manufacturing efficiency thing, and they're willing to come bring it to your fab, why would you say no, Right? If they leave ([Time 0:04:48](https://share.snipd.com/snip/6047e75b-6e33-4a88-8073-b046f2245daa)) - **AI Chips as Geopolitical Assets** - The AI chips Tesla is developing represent not just hardware but strategic geopolitical assets. - Localizing AI chip manufacturing in the U.S. aligns with broader tech sovereignty goals. Transcript: Jaeden Schafer AI infrastructure in the U S AI six won't just be a chip. It's a geopolitical asset. Okay. I mean, other than the fact that sounds like it was probably written by chat GPT, the though, it won't just be a chip. It's a geopolitical asset. Yeah, that's probably written by chat GP, but the concept is good. So I think this is pretty interesting and definitely going to be a ([Time 0:06:40](https://share.snipd.com/snip/89d0da0d-0bd5-4500-8d79-544a67862d4d)) - **Tesla's Early AI Chip Efforts** - Tesla began its own AI chip design in 2019, moving away from Nvidia's platform with its in-house FSD computer. - That initial chip, made by Samsung, featured dual redundant systems to ensure self-driving reliability. Transcript: Jaeden Schafer Interesting. Now, what's interesting to note is that Tesla actually switched from NVIDIA's drive platform to their own custom chip back in 2019. So it's not like a brand new thing they're doing. They've been working on, you know, their own chips for like six years, almost. And that new chip that they built kind of their own in-house thing is called FSD computer, um, or hardware three. And it's in 2019, it was in all of their EVs. So that was actually made by Samsung. But what's interesting about it was it was actually two duplicate systems right next to each other on the same board. Basically, it's this redundancy where one of your chips like fries or brakes or short circuits or has some sort of issue. There's two right next to two systems right next to each other. And so there's built in redundancy. If you're self driving, you don't want ([Time 0:07:17](https://share.snipd.com/snip/b386d7e4-d5a7-4bfd-a5ce-fe261b2579c9))