From a revenue/ profit standpoint, I can understand why. But considering that US have not even lifted most restrictions on Huawei, I don't think this will change anytime. Killing them from 7nm and better fab will put a big dent in whatever advance technology, i.e. 5G, they are looking to introduce. While they can move to SMIC, but I don't expect the same level of quality as compared to the likes of TSMC.
How I see is: Huawei launches new models reusing old branding, eg P30, and avoids ban. Not to mention its own software.
What American ban has proven till now is that China is becoming stronger, invest much more into tech and soon will be completely US independent. Also, COVID19 shown how whole world was (is) on knees because there was no products from China. If China shuts down its export whole world will collapse. Not to mention US debt under Chinese ownership.
While Huawei's chips can't be manufactured using US semi equipment, it means that there will be more demand for Dutch firm's ASML and Japanese made semi equipment. TSMC already has a 7nm fab line which does not have any US technology and Huawei have talks with Samsung for a similar fab line. US' stranglehold on Huawei means more R&D for foreign and Chinese semi equipment makers.