Samsung Electronics Co. will produce semiconductors for Tesla Inc. in a new $16.5 billion pact that gives a boost for its underperforming foundry division.

South Korea’s largest company announced on Monday that it has secured a 22.8 trillion won chipmaking agreement with a global corporation that will run through the end of 2033. Tesla, which already does business with Samsung’s contract chipmaking division, is that customer, according to a person familiar with the matter who asked not to be named as the information isn’t public.

Samsung’s Seoul-traded shares rose as much as 3.5%, their biggest intraday gain in almost four weeks. A company spokesperson declined to comment regarding Tesla, and representatives for the US company did not immediately respond to requests for comment.

The contract win comes as Samsung has been steadily losing ground in chip manufacturing. The company, which makes its own memory chips and also fabricates semiconductors on behalf of clients, has had difficulty bringing in enough orders to fully utilize its foundry capacity.

That’s in contrast to leading chipmaker Taiwan Semiconductor Manufacturing Co., which still cannot meet all demand. TSMC held a dominant share of 67.6% of the global foundry market in the first quarter this year, according to Taipei-based TrendForce. Samsung’s share slipped to 7.7% from 8.1% in the previous quarter.

What Bloomberg Intelligence Says

Samsung Electronics’ contract to supply semiconductors to an unidentified large global corporation implies a recovery in its foundry business’ 2-nanometer generation chip production. The $16.5 billion contract spans 2025-33 and could boost Samsung’s foundry sales by 10% annually, we calculate. It could also lead to new contracts with other fabless chip companies.

— Masahiro Wakasugi and Takumi Okano

Samsung and TSMC are both on pace to deliver the next generation of semiconductor advancement — moving to 2-nanometer fabrication — and the new deal is seen as a signal of confidence for the company’s upcoming fabrication technology.