> The entire point of construction in space is to avoid launching from earth

This is true, but avoiding launching from earth could be done for one of two reasons:

(1) to increase the efficiency of what can be built

(2) to increase the possibility of what can be built

Your point is (1), and I agree with it. The point mentioned above is (2) — even if all the materials for the ISS were from earth, it still could not be constructed on earth and then launched as a whole, and so construction in space is viable.