If there are US fabs, and China invades Taiwan then Taiwanese fabs are destroyed, and China loses access to advanced chips, but the US and the west do not. This puts China at a major disadvantage compared to the US, for at least a few decades in the future, if it decides to invade Taiwan.

It seems unlikely that US and west would get involved in a direct major military conflict with China, no matter what. The costs are too great. It is far more likely that they would only provide military equipment and intelligence (like Ukraine).

So this move of TSMC actually strengthens the shield a lot more than it weakens the spear.