1. The entire semiconductor manufacturing process is highly complex with innumerable components for input. However, it would appear China has a foothold on every single step in the process, although much of that equipment could be obsolete or crap. But, it is not like this is totally new. 2. What the Chinese can do is design chips, and produce the lower end chips. The top of the line chips need the top of the line equipment which China cannot do just yet. China does have a complete semiconductor industry that probably is American free, it is just not that advanced.
3. The reason probably just due to business reasons. R & D is expensive and everyone can just go buy the stuff from abroad. Now that seems to be all changed. Point here is that it was not the top priority before, now it is. Now they will throw money at it, and hire people from abroad to speed up the learning curve.
4. The dire predictions from Western sources are a little overblown, drama queen style. Huawei could run out of top of the line chips for their cell phones, but they have been there before. What is important for China is the 5G, and that they beat everyone with installation of stand alone 5G networks, which may not require the best chips. Look at it this way. China's space program. Where did they get their chips? Probably domestic, or could be easily found anywhere.
5. Let's wait and see what China is able to manufacture by the end of the year. There are rumours that SMIC can do a 7nm chip soon.
