Sir, chip making is a heavily automated process and driven by only one word, scale! A chip has to cost cheap and that comes from the number of units we produce in a single day. Chine kills the world on that scale. Chipe, steel, heavy manufacturing... They just do it faster and bigger....
On the question of labor arbitrage, that is really not that big a difference as vlsi designers will cost a bomb everywhere and the workers are not your normal factory workers. There is a reason why even infy and wipros are looking to recruit locals in these countries, because indian wage inflation is one of the highest in the world. When chinese sakaries grow at 3 %, our grew at higher than 12%. If you do the math, we will catch up on salary levels in almost a decade. Hardly any leverage for a long term investment, when the factories/facilities will take 3 years to get permits and 2 years to build