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The interesting thing about Taiwan are the state-of-the-art TSMC chip fabs, which are better than what the PRC has.
However, these are fragile things easily destroyed in the event of an invasion, and keeping them running without support from ASML would likely be hard to impossible.
And while Taiwan is important, it is not the only place in which the US could manufacture state of the art chips for military use, so taking Taiwan would hurt the US economically but not cripple it militarily.
Of course, Taiwan might also be a Schelling spot for anti-Communist Chinese, like Hong-Kong was before. But risking World War 3 to drive your ideological opponents from Taipei to San Francisco seems rather pointless -- especially if you can also just impose Honecker-style controls on your people so they can not defect.
Taiwan is also important as an airbase and submarine base for China, as territory that needs to be denied to the US bloc. If they want to do anything more in the Pacific they need that territory free of enemy forces, radar, missiles... If they have Taiwan, then they also control trade routes and energy imports from the Middle East to Japan and South Korea.
There's also a political aspect to it, they wanted the island well before semiconductors to properly conclude the Chinese Civil War. Plus the pool of human capital that manages the semiconductor production is also quite valuable, Operation Paperclipping them would be helpful for Chinese semiconductor efforts.
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It will be interesting to see who wins the next chip race: China or the United States. It's a critical priority for both countries. The U.S. effort is not going well, with Intel floundering and TSMC having trouble with its American workforce.
Nevertheless, China seems to be far behind the U.S. According to Wikipedia, they currently make nothing smaller than 16 nm.
Critically, the chip race isn't between China and the US. It is between China and the US-Netherlands (ASML)-Germany (Zeiss)-UK (ARM)-Taiwan coalition.
If the West allows China to defeat us in detail, China will probably succeed. But that would be a very stupid thing to do.
Without the export bans China would have continued to buy instead of build the most advanced process chips for the foreseeable future. We've forced their hand to bet everything on build.
I don't disagree with you - I was just pointing out that we have to careful about who "we" is in this context.
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