If the whole X-PHY® AI Embedded Cyber Secure SSD is encrypted, will this X-PHY® AI Embedded Cyber Secure SSD chip still work?

Yes, the X-PHY® AI Embedded Cyber Secure SSD will still continue to function as the AI One Core™ only encrypts the NAND flash storage data which is not  interconnected to other embedded modules residing on the X-PHY® AI Embedded Cyber Secure SSD.