That's not what this is about. The US is sanctioning SMIC. It forced TSMC to release customer data of mainland Chinese customers, presumably with the goal of checking which more Chinese companies to sanction. The US's goal is to prevent China from building a self-sufficient semiconductor industry. Or conversely: to keep China dependent on the US so that the US can sanction China at any time.
Yes, SMIC looks like one aspect of a global reorganization of semiconductor manufacturing.
I’m not sure I buy your reasoning though. I don’t understand how effective blocking the use of US technology by SMIC will be given the propensity for IP theft, so I don’t see how it furthers the goal of preventing China from becoming self-sufficient. Nor would I really agree with the assumption that they are not already self-sufficient.
US rethoric says that they are concerned about IP theft, unfair economic practices, etc. But if you look at the sanctions then you see that they target pretty much only R&D-heavy sectors. That should be telling.
The semiconductor industry is extremely R&D heavy. You can't just steal your way into success. It is also heavily dependend on a global network of specialized suppliers and is one of the most complex supply chains on earth.
Even Chinese media says that they are not yet self sufficient. They predict that SMIC will become able to produce 28nm and above using only domestic inputs by the end of 2022, but that's just ability and doesn't factor in manufacturing scale to handle the corresponding demand.
Making 14nm fully domestic takes a bit longer -- maybe 2 years more. Chinese media and experts say that if they scale up 14nm and above, then that satisfies 70% of the demand.
To go further than about 7nm you need EUV lithography, which only has 1 supplier in the world, and the US is blocking that. How long it takes for China to independently develop EUV is unknown. Universities have made small breakthroughs in subfields here and there but they're still far away from the full solution.
There’s a difference between self-sufficiency and state of the art. China can be self-sufficient without having cutting edge technology.
For most military applications, 28nm process is comfortably sufficient - USAF 5th generation aircraft were designed and flying before 28nm.
I’m not convinced that there is any real need right now for <14nm process besides striving for market share. Market share which is itself reorganizing around new ISAs. EUV is a (amazingly clever) Rube-Goldberg machine.
