We then let our government get bribed by Wall Street to allow outsourcing everything for a few decades of short term profit. Now China has the manufacturing ecosystem that allows them to innovate more efficiently
In a good way or a bad way? I can think of a few success stories that are dependant on China’s manufacturing prowess. I’m typing this on an iPhone.
From what I've seen, businesses will often hire someone with specific experience dealing with Chinese manufacturers in their specific vertical, for example PCBs/electronics, tooling like injection molds, or textiles.
Example: You mention NVidia as a success—and they are—but reliable middle-tier builders like EVGa simply could not remain in business in the graphics card business.
Eventually only NVidia will be supplying their own GPUs and cards.
This in turn significantly drives-up the cost of hiring good local talent if the need ever arises; as TSMC discovered when setting up shop in the US.
The fastest international delivery isn’t comparable to driving 30 minutes to shop for the parts needed for some wild idea (etc.), but that market no longer exists in the US.
In addition to delays, that makes R&D more specialized and therefore more expensive; not to mention the local loss of expertise by the sellers of the components.
Just trying to build some Arduino ideas: I’m looking at $$, planning, and days of shipping. No opportunity to try something out on the spur of the moment.
It's also predicated on people that are intimately familiar with the underlying manufacturing. Lose the manufacturing, and in a generation you're left only with people who know the current designs but lack the knowledge and experience essential to continue innovating.
Exactly as you say: when you no longer have 30-minute access to experimental parts and in-depth advice, your ability to innovate suffers.