The MacBook Air used to have an i3 in the $999 model which now has an M1. So in that sense the M1 is comparable to an i3. They both serve the same market.
There are also some high-end Windows laptops using i3s like the $999 Dell XPS 13.
Issue is that Intel will have an obvious problem on their hands:
Apple used the i3 in the Air because it was low cost and low power for good battery life. The M1 fits those needs but then blows the perfromance well beyond what we could call an i7 in this segment. (All in the comparable wattage i7 had 30% max less single-core perfromance and 1/3rd the multicore perfromance)
Intel sells chips like this on a sliding scale from i3 to i9.
If Intel made an i3 that compares favorably to the M1, it would be faster and cooler than any other CPU Intel makes, ruining i7 and i9 sales. It would pretty rapidly piss-off their vendors who seek to upsell expensive skus.
I could see a TSMC i3 core in a different name possibly, like Intel Evo Next or something like that and then them selling it as a premium chip for a high profit.
There are also some high-end Windows laptops using i3s like the $999 Dell XPS 13.