Well no one country dominates the semiconductor sector anyways. So what's your point?
Does Intel fab it's own chips? Does TSMC make it's own EUV machine, does ASML make its own lenses?
Every country that owns semiconductor supply chain component is an American military vassal. EU, Japan, Korea, Taiwan. All have US military bases or heavily dependent on US military protection. If US makes an order, they will listen.
^^
More money doesn't matter at this point. More talent is needed and experience.
Personally, I don't think decoupling is the right solution. If China was actually willing to strike back against America for these semicon sanctions, then there would be no need for decoupling. China would have the dominant position the relationship, which obviously suits her well.
Instead, what is needed is an expansion of options to make retaliation more effective. Current options such as the rare earth card are not used for a reason.
In order to expand options, the battlefield, or various fronts on which the competition is being waged, should also be expanded. Ideally, China would become more involved in areas around America's weak spots, so as to better apply pressure. The Middle East is of course dear to America's heart. I think there are many possibilities there.
But doing this requires diplomatic clout and savvyness that is not evident in the PRCs current conduct. I would mark the development of covert soft power as a priority as a result.
No, this is not what I am getting at. China needs measures that are far less extreme and that can be applied to smaller issues like Huawei. You don't use nukes every time someone threatens war or intrudes on your border after all.
Money IS talent. In this globalized world, you can buy anything with money. Many American engineers and scientists will flock to China if China offers 1 million dollar per year for a post that pays 100K in the US. But obviously China is not in that kind of desperation mode right now. If China was really serious about developing Chip industry, they could take measures that will sacrifice their advantages in other ways in order to advance chip industry.
For example, if China mandates that any company that does not sell to Huawei will not be able to sell to any Chinese company or any other company that produces in China. So even Apple cannot buy chips to put in iphones if TSMC does not sell to Huawei.
Option 2, Any one that buys or sells anything from and to China cannot apply US sanctions on Chinese companies or individuals. Anyone that does, will be cutoff from buying and selling to China and Chinese companies.
Option 3, All Phones and laptops sold in China must have chips and OS made in China. So, even Apple will have to develop a Chinese OS and buy Chinese made chips if they want to sell.
If China seriously puts a line in the sand, that will halt the entire chip supply chain at risk, then obviously US will back down. But this will create serious doubt about the reliability of China itself as a manufacturing hub. Thus, China will not take such action to force US sell to Huawei again.
But ofcourse they did a cost benefit analysis and decided not to pursue such strategies.
China can retaliate in many ways. But retaliation is not in China's interest right now. Their main goal is to get rich as fast as possible. The richer they are, the more powerful they will be and more capable to deal with US threats. So, if they take measures that will cause a loss in business sentiment and investor confidence, then that will cause their economic growth to slow down.
China doesn't want to retaliate even one bit because Trump admin will love it. Retaliation means more decoupling, which is what they prefer. They would love to completely cutoff China similar to Iran or North Korea. But they can't. But if China plays tango, then they will get more chances to decouple further.
China will have to swallow its pride and keep getting slaps in order to make money. The more money they make, the more money they will have to spend on military and civilian tech. The more money they make, the bigger their consumer market will be. The more money they make, the more educated their population will be.
China will have to be absolutely shameless in order to make money. Stealing, Cheating and begging. China will have to do it all in order to tackle European-Euro-Settled hegemony that has been ongoing for 300 years. The advantage built up over 300 years cannot be over come if you don't swallow your pride.