It is still strategically important to be able to supply domestic civilian, industrial, and military computation needs with good enough chips. If you are not ahead, but still good enough, than you have sovereignty, and have a good chance to get back to the top eventually (in the sort/mid term).

China is not ahead. Still they are capable of mass-producing somewhat capable chips, with good enough yields for strategic projects.

Also they can mass produce now outdated designs, which are still good enough for "office use" to provide continuity of the government bureaucracy's operation.

China has less advanced nodes where it can produce for industrial applications.

They have the potential to eventually get ahead, but now a total embargo you only slow them down, but not cripple them. This situation is acceptable for any state as a temporary measure until reorganizing efforts.

Also Intel is still producing better stuff then the chineese can. It is still ahead. And as I detailed above, I think it would need to fall behind way more to loose its strategic nature.

Also capacities in Taiwan and in South-Korea are very fragile from a strategic perspective, even if they are/were more advanced than what Intel has.