But that’s not the point either. Even if they made their own 5nm chips, and they are not, they would still rely on foreign machines. SMEE, their domestic lithography machine maker, may finally deliver a 28nm capable machine this year, though afaik they haven’t yet. That’s literally a decade old at this point. Even if they massively sped up their development, it would take years for them to catch up with Western manufacturers. Even with them poaching Western engineers to steal intellectual property.

But your statement is still not really truthful. Because what you are saying, expensive 5nm are better than cheap foreign 5 or 3nm chips because they control the production, that only works for small numbers. For their military, maybe some government computers. But it doesn’t scale. They are not able to sell it abroad if they can only afford making it with massive subsidies that will ban them from any other market. But then, spending all that money on foreign tools so they can make a horrible 5nm chip doesn’t make sense when they cannot sell it.

The nodes do not matter. Even if their 7nm node was technically identical to TSMCs, there are more aspects you have to compare. Like costs, the wafer throughput, the yields… and there, China simply cannot compete. It works a bit because SMIC is aggressively subsidised, so that the CCP can claim being on par with other countries. But they rely on foreign machines that they don’t get anymore, are cut off from EUV without real perspectives of getting their own, and can only compete because the Chinese government burns billions of dollars on them.