Your analysis is out of date I think. This has already happened. Poor NXP just got their asses handed to them by the PRC. The fab they have in Italy looks nice but PRC has many of those.

Also Texas Instruments, STMicro, Onsemi, Microchip Tech, i.e. what PRC is doing after going big in mature nodes last few years they likely will also do in leading edge. IMO there's argument that since leading edge will definitely be strategically bifurcated PRC and western semi can pseudo collude to maintain higher margins, especially if PRC wants to claw back investment. But if western semi continues to drive economy/growth there's also incentive to weaponize margins.