I am not sure it would make an ounce of difference. The huge gap between the top (Ferrari/Mercedes/Red Bull) and the mid-field has almost nothing to do with those teams being supplied inferior engines to the works teams (if that happens at all). The difference is pretty much all determined by the aerodynamics/chassis. Put differently, the mid-field are already massively losing the battle in construction skills. This is mostly a matter of budget.It’s a real shame that there is no independent, good, engine manufacturer. Sold to a majority of teams. Then a team like Haas could prove themselves with their construction skills, or not.
There will always be teams that are the complete package, i.e Ferrari, or Mercedes, but I don’t think that supplying other teams adds to the racing potential of that other team. The works team will always be better than the teams it supplies. I’d go as far as saying I don’t think it should happen.