If you place a major scientifically literate economy under interdiction over critical tech that you previously gave them access to, you shouldn't be surprised if they invest energy and budget in achieving a degree of self reliance.

Surely the point here is that we might see some useful competition between VLSI sources?

Aside from military uses, this tech is capable of making China a lot of money. Had negotiations not fixated on a belief only zero sum winner-loser negotiations exist, we might be talking about this differently.

China famously also invested in the ability to precisely manufacture balls for ballpoint pens, despite there being no restrictions on importing them. So you can skip the international politics: a major manufacturing economy will tend to invest into expanding their manufacturing.

A different approach to negotiations would have changed little, since Chinese industrial policy isn't just a reactive mirror of the policies of other countries. As usual, everyone just did what they were mostly going to do anyway.

> Had negotiations not fixated on a belief only zero sum winner-loser negotiations exist

This is also belief of Putin, which I suppose is not surprising given the orange man is admiring him.