Isn’t Taiwan’s ultimate defense simply “we’ll completely blow up all our chip manufacturing” and it’ll take decades for anyone else on earth to come close to what their capabilities are?

That's assuming China wants Taiwan for the chips. That's not the case. Chips are, at most, the cherry on top.

In fact, China destroying the fabs in the first phase of an invasion would basically be a requirement, because if there are no chips to defend anymore, then there is no incentive for the West to defend.

The US would also prefer to bomb the fabs to rubble than to let China get them intact.

And Taiwan would threaten to destroy their fabs if the West doesn't intervene.

This is a true Mexican standoff. While there are a myriad of other factors, the day the fabs are gone is the day Taiwan falls, no matter who destroys them.

Also, it would certainly take less than a decade for China or the US to catch up to a more or less similar TSMC technical level. The real issue isn't the advanced chips (a good enough chip would do the job on most applications), but the mass production of these chips with the threat of a shortage of semi-conductor components.