What just happened? The US Senate has passed the CHIPS Act, giving the domestic semiconductor-production industry a $52 billion boost in the form of subsidies that will go toward the construction of new fabs. The long-term goal is to lessen reliance on Taiwan, especially in light of worsening relations with China, and mitigate against the worst effects of the current chip shortage—and any future ones.

The Senate yesterday voted 64 - 33 in favor of passing the $280 billion Chips and Science Act, $52 billion of which will go toward subsidies for chip makers. There will also be an investment tax credit for chip plants estimated to be worth $24 billion. The incentives do come with some restrictions for companies that have a presence in China or wish to operate there, or in other unfriendly countries, in the future.

The House of Representatives plans to vote on the bill later today. If passed, as expected, President Biden should sign it into law early next week.

The CHIPS Act, as it's known, came about through the chip crisis caused by the pandemic's lockdowns and massive increase in demand. Extreme weather, logistical problems, and Russia's invasion of Ukraine have exacerbated what was already an unprecedented situation.

"We are moving forward on the Senate CHIPS bill," Senate Majority Leader Chuck Schumer said in a statement. "It's going to take aim at the national semiconductor chip shortage, lower costs for American consumers, and boost scientific innovation and jobs."

Not every politician supports the bill. Vermont Senator Bernie Sanders said: "The five biggest semi-conductor companies that will likely receive the lion's share of this taxpayer handout, Intel, Texas Instruments, Micron Technology, Global Foundries, and Samsung, made $70 billion in profits last year. Does it sound like these companies really need corporate welfare?" Intel has been a vocal supporter of the act, and even postponed the groundbreaking ceremony of its Ohio fab because of the delays.

Another major factor behind the act is the US' reliance on Taiwan for its chips. Commerce Secretary Gina Raimondo previously said that if the US is cut off from the country's chip-manufacturing industry, the United States will face a deep and immediate recession.

Such a nightmare scenario could be possible. China has long said it would have no qualms about using military force against Taiwan, which it says is a breakaway province that must be "reunited" with the mainland. Reports that US House Speaker Nancy Pelosi plans to visit Taiwan have led to China threatening "firm and resolute measures" if the trip goes ahead.

As per Reuters, the Chinese Embassy in Washington said China "firmly opposed" the bill, which it said was "entrenched in the Cold-War and zero-sum game mentality and runs counter to the common aspiration of people from all sectors in China and the US to strengthen exchanges and cooperation."