That hurts the US access to chips, short term. But then who is going to fill the demand and where will the talent migrate, and who else is going to build the capacity ($$$)?
Have people suddenly forgotten that markets and enterprises exist, and are quite good at making products. Chips are not minerals. The state department isn't a tool for this job.
In any case, TSMC is currently within the US sphere. Nvidia makes most of the capital gains. US government gets to deny China. US companies get good chips. Where's the upside in blowing all this up?
Perhaps pulling the security guarantee and greenlighting reunification under PRC is the destination, and onshoaring Taiwan's critical industries is deemed prudent in advance of this.