Such an advantage is not the end, though. Look at where Intel is, with all the R&D spending, fab, and anti-competition moves from a couple of years ago. Engineers move around, and it is difficult to keep a top team for decades. You always end up making mistakes that can be used by your competition.
They won't keep the fab advantage. The money TSMC gets from Apple will contribute to improving production, which will also benefit other TSMC customers. Just like Apple buying most of the world's supply of NAND chips a couple of years back did not kill the market.
ARM Macs may be different in the future, but I don't think the performance advantage in phones is that important. People chose mostly on features and ecosystem. Even Android geeks do not care that much that last generation's iPhone outperforms their current flagship. Android still sells. Now, more performance does give more room for some features, but this is a second-order effect. For now, you can find almost any iPhone feature in some Android phones, often with bigger batteries or other things like a headphone jack or a SD port. OnePlus' phones are slower, but it's not the end of the world.
A vertically integrated Apple will suffocate the others if they become dominant enough to utterly dominate their market, which I don't see happening as long as they focus on the high end.
But they aren't just focusing on the higher end. They have products at competitive prices now like iPhone SE or Watch SE/ older gen watch.
And unquestionably TSMC now has much more 7nm capacity for sale than they would have if Apple were vertically integrated and owned their own fabs.
While true for the world for now, they already own half of the phones sold in US. In revenue/profit terms, it is even higher. They have already beaten everyone with a fabulous phone processor design. Imagine that coupled with fab advantage. While others can differentiate on other things but at some point, some differences will become hard to overlook.
They are at a dangerous position where they can suffocate others like this easily because no one else has comparable cash to outbid them for cutting edge stuff.