Xiaomi may manufacture their chips in Taiwan (by tsmc) but Xiaomi is still a Chinese hardware company, similar to how Apple or Qualcomm are US American hardware companies.

No. The problem is that TSMCs new capacity is already hogged by AI peddlers for years to come (in fact, AI BS is the reason why these new non-Taiwanese fabs got the massive US and EU subsidies), and so everyone else not flush with cash from the AI hypetrain has no alternative than to go to China - and deliver all their secrets to the CCP.

And eventually, just like the Western solar, battery, pharma and car companies all have learned, the CCP will use that knowledge to surpass and undercut everyone else.