President Joe Biden next Tuesday will sign a bill to subsidise the US semiconductor industry and boost efforts to make the United States more competitive with China, the White House said on Wednesday.
The legislation aims to alleviate a persistent shortage that has affected everything from cars, weapons, washing machines and video games.
Thousands of cars and trucks remain parked in southeast Michigan awaiting chips as the shortage continues to impact automakers.
A rare major foray into US industrial policy, the bill provides about US$52 billion (S$72 billion) in government subsidies for research and US production of semiconductors.
It also includes an investment tax credit for chip plants estimated to be worth US$24 billion.
"The bill will supercharge our efforts to make semiconductors here in America," Biden said Tuesday.
The legislation authorises US$200 billion over 10 years to boost US scientific research to better compete with China.
Congress would still need to pass separate appropriations legislation to fund those investments.
China had lobbied against the semiconductor bill.
The Chinese Embassy in Washington said China "firmly opposed" it, calling it reminiscent of a "Cold War mentality."
Many US lawmakers had said they normally would not support hefty subsidies for private businesses but noted that China and the European Union have been awarding billions in incentives to their chip companies.
They also cited national security risks and huge global supply chain problems that have hampered global manufacturing.
Some progressive lawmakers had raised concerns about the size of government grants to profitable chip companies.
The Commerce Department said Friday it will limit the size of government subsidies for semiconductor manufacturing and will not let firms use the funding to "pad their bottom line."
Congressional Progressive Caucus chair Pramila Jayapal said the group backed the legislation after lengthy negotiations with Commerce Secretary Gina Raimondo after the group expressed concerns chips companies would use the funding for stock buybacks or pay dividends.