Not sure I follow. The 99.8% is just an example number. If one machine messed up really bad and had just 50% yield, all other machines would need to do far better in terms of overall quality to achieve 36% yield. Of course every single machine isn't at the same quality level.
At the same time, when wafers get scrapped, they do justify why they were scrapped. There are metrology processes and tests performed as you go to ensure you don't run ruined wafers through additional manufacturing steps.
Yes it is. The 99.8% hypothetical number is on a per operation basis. Depending on the layers and complexity of the chip, the ballpark number of operations might be 300-1500 (lots of hand waiving here).
The gist of that part is meant to show how important and impressive the entire process is. In "normal" manufacturing, 99.8% good parts is a pretty darn good process. Many of the easy wins are already implemented. Most normal things are manufactured in far fewer steps, so even if you're only making 95% good parts, it doesn't absolutely kill your total recovery (start to finish).
It's a familiar concept from organic chemistry.
Edit: If yield per step averages 99.8%, and there are 500 steps, overall yield is 36.8%.