Fabs are multi-year projects, and take quite a while to run a profit (since you first have to invest 10s of billions into building one). So "will be able to sell whatever" right now could still mean that the overall thing ends not very profitable once the competition recovers from their outages and finishes their expansion plans. And similarly, the supply chains for the equipment you need to actually build a fab don't magically scale, and are wary of doing so - because again, just because everyone wants their high-end fab equipment now doesn't mean they will in a few years, and they've been bitten by market contractions in the past, so they have little motivation to scale extremely and then struggle because they've satisfied demand. Their order books are basically full already, so you can't just go and equip your shiny new fab quickly. Even if they now wanted to expand more than they expected, them tooling up for faster production would take a while.
In the end, making chips just isn't that high on the overall list of things to be able to opt.out of normal market forces. If it looks like customers will pay enough to make rapid expansion and the changes necessary to enable such rapid expansion worth it, it'll happen.
But demand is not actually that much higher than normal, and thus the investment has limits. You can be sure that everyone is working to finish their expansions as fast as possible (hundreds of billions of investment over the next few years) and get their broken-down fabs back online ASAP, but its not like they suddenly can spend massively more resources on it. Compared to big challenges like fighting COVID its overall a minor concern, and as you point out even that did not go as all-out as it could have.
In the end, making chips just isn't that high on the overall list of things to be able to opt.out of normal market forces. If it looks like customers will pay enough to make rapid expansion and the changes necessary to enable such rapid expansion worth it, it'll happen.
But demand is not actually that much higher than normal, and thus the investment has limits. You can be sure that everyone is working to finish their expansions as fast as possible (hundreds of billions of investment over the next few years) and get their broken-down fabs back online ASAP, but its not like they suddenly can spend massively more resources on it. Compared to big challenges like fighting COVID its overall a minor concern, and as you point out even that did not go as all-out as it could have.