The issue arises when you look at it from a geopolitics point of view. The US (aka the West) loosing manufacturing and design dominance in the semiconductor space means that there is less bargaining power to force others to do what the US wants. In the case of China, US export embargos for cutting edge semiconductor technology was meant to cripple China's technological progress, especially in the semiconductor design/production and AI model space. (Think of whatever shenanigans US companies have been doing with AI models, and what China has already demonstrated on Western hardware.)

Semiconductors are integral to modern weapon systems. If you've been keeping up with the news, you'll remember that even Russian missiles have been found to contain western-made electronics. AKA Russia has been buying US technology and adding it into their own weapon systems, rather than designing, producing and using their own. That makes Russia reliant on having a stable source of US components, be it imported legally or in spite of sanctions. The same goes for China. The fear is that China will eventually be able to manufacture weapon electronics comparable to US designs. Stealing the designs from US sources isn't particularly difficult, its always been the manufacture of said components that caused issues for China. Seemingly, that gap has been closing.

In short it's basically the issue of the West having made China the factory of the world, them having learned/being able to steal designs, and them now having the ability to produce almost anything. That makes them a strategic threat to US interests.

Anything that makes someone less reliant on you is a net negative if you wish to remain 'in charge'.