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No, it's this, they mostly want x86 for government use https://www.tomshardware.com/news/loongson-launches-3a6000-cpu-matches-14600k-ipc
An article that lists the CPU: https://www.tomshardware.com/pc-components/cpus/china-bans-intel-and-amd-cpus-for-government-offices-and-servers-plans-to-switch-to-domestic-made-alternatives
That Huawei CPU is mostly marketing as doing 5nm chips with duv machines is possible but yields much less because it needs more steps. It's also the same design of 4 years ago
Loongson makes sense for government use because it can act as a drop in replacement for x86, but it's pretty clear the chips SMIC is making for Huawei are what's going to the consumer market. These chips are only a generation behind the bleeding edge.
You're right that yields might be low currently, but all that means is that it's just less efficient to produce chips, and it's not like the problem is insurmountable. Meanwhile, silicon as a substrate is hitting limits now, there's nowhere to go past 2mn because you start having problems like quantum tunnelling effects. So, it's not like western chips can keep improving indefinitely without radically new designs.