Is having one really fast and big chip that much better than having 10x 5 year old chips? (I have no idea how many chips they can produce, just wondering if being second really is that bad.)
The West pretends that Taiwan is another country with another totally alien set of people who hate the mainland. However, that is not really the case. I imagine it's fairly easy to poach TSMC personnel, who well now realize that Taiwanese semi-conductor industry is going to be ruined by American meddling in the coming decade (much like they did of Japan's).
They already did that. They offered some TSMC engineers much better payment and they built 5nm and 7nm fab processes for SMIC using DUV instead of EUV. :)
To add insult to the injury, Huawei released their Kirin 9000s CPU during US secretary of commerce visit in China.
Right now SMIC can produce 5 nm and 7 nm chips. That means about 5 years difference. I guess they can catch up in a decade if they invest enough resources, and will.
Having a domestic chip industry will be a huge win for China. Not only the chips will be much cheaper for them but they can export a ton while undercutting the competition. They will try to eat TSM, Samsung, Intel, AMD pies.