Most ARM CPUs are manufactured not by ARM itself but by Samsung, Qualcom, Texas Instruments and the like. These guys certainly do have all the requisite capacity as they provide the silicon for all of the world's mobile phones.
Granted, the Big Gorilla is faster to shrink the processes, because they have no problem dropping a few billions on a brand-new fab, but what good did that do? On both supposed benefits of the smaller process (cost and power drain / performance) ARM CPUs are still winning.
This whole situation is a replay of the Pentium 4 Megahurtz madness. Back then Intel was pushing raw performance disregarding power consumption, then they hit the heat dissipation wall, AMD snuck in from behind and punished them in a major way with Athlon-64. Intel regrouped with Core* series, won back the market share, pushed AMD back into oblivion, and relaxed about the whole thing. Now they are doing the same thing - prioritizing performance at the cost of power drain, and this time it will be ARM who will punish them. It's not clear how long it will take Intel to change their ways this time. The last time they still had Pentium 3 / Pentium M group of engineers to lean on, and that they did rather well. This time they are not so lucky - they have actually sold off their embedded CPU division a few years back, and now I doubt whether there is anyone left inside Intel to insist on a much needed pivot.
[EDITED for typos]