Tesla has recently made a strategic shift in its autonomous driving technology, confirming that it will transition the production of its Full Self-Driving (FSD) chip from Samsung Electronics to Taiwan’s TSMC (Taiwan Semiconductor Manufacturing Company). This decision is seen as a key move by Tesla to strengthen its competitiveness, particularly in the Chinese market, while expanding its global market share and advancing its autonomous driving capabilities.
The Shift to TSMC and Its Implications
Tesla and Samsung Electronics have previously collaborated on autonomous driving chips. Starting in 2019, Samsung’s 14-nanometer process was used to produce the HW 3.0 chips installed in Tesla’s Model S, X, and 3 vehicles. In 2021, the partnership was furthered, with Samsung receiving orders for next-generation chips based on the 7-nanometer process. However, Tesla has moved its FSD chip production to TSMC, utilizing its advanced 5-nanometer and 4-nanometer processes.
This shift is attributed to TSMC’s superior manufacturing capabilities, especially its stable yields and cutting-edge microprocess technology. With an approximately 54% market share, TSMC is the dominant player in the global foundry market and has established itself as a leader in producing sophisticated chips under 5 nanometers. On the other hand, Samsung Electronics has faced challenges with yield issues and difficulty attracting clients for processes smaller than 7 nanometers, leading to its competitiveness decline in the advanced semiconductor space.
Tesla’s Strategy for the Chinese Market
Another factor influencing Tesla’s decision is its strategy to enhance its presence in the Chinese market. Recently, Tesla has been updating its FSD function in China to stay competitive against local electric vehicle manufacturers such as BYD and Xiaomi. Given that TSMC is a Taiwan-based company, it may have a stronger position in China due to geopolitical considerations and the stability of the Chinese supply chain. This is particularly significant as TSMC-invested Kaiyu (采鈺), which handles sensor packaging, is aiding Tesla’s China-specific strategy.
While Samsung Electronics will continue to supply Tesla with some memory components and current FSD chips, its decline in advanced process chip manufacturing has raised concerns about its future competitiveness in the foundry market.
The Growing Role of Tesla’s Chip Manufacturing Partner
The shift to TSMC highlights the increasing importance of Tesla’s chip manufacturing partner, mainly as Tesla’s autonomous driving technology relies heavily on AI computing capabilities. As competition between TSMC and Samsung Electronics intensifies, the effects of Tesla’s decision on the semiconductor sector are expected to continue drawing significant attention. This move also emphasizes the strategic importance of securing reliable, advanced semiconductor technology to support the development of autonomous driving systems.
