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Published by RAND in May 2025, this commentary by Lennart Heim provides a strategic framing for the U.S.-China AI competition centered on compute infrastructure rather than model benchmarks, with detailed analysis of export control failures.
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Importance: 62/100opinion piececommentary
Summary
RAND analyst Lennart Heim argues that while China is rapidly closing the gap on AI model capabilities, the U.S. retains a decisive advantage in total compute capacity and advanced chip infrastructure. The commentary highlights critical failures in U.S. export control enforcement—including TSMC producing chips for Huawei via a proxy—and warns that U.S. policymakers risk squandering the compute advantage by fixating on benchmark comparisons rather than strategic infrastructure leverage.
Key Points
- •China is expected to match U.S. AI model benchmark performance in 2025, but the U.S. holds a larger lead in total compute capacity and advanced chip access.
- •TSMC violated export restrictions by producing ~3 million advanced chip dies for Huawei via a Chinese proxy, equivalent to ~1 million Nvidia H100s in compute power.
- •U.S. export controls have repeatedly failed: specification loopholes enabled Nvidia's A800/H800 chips, entity-listed firms circumvented rules via bridge facilities, and stockpiling occurred.
- •The real U.S. strategic advantage is compute infrastructure, not model capability; overreacting to model parity risks misallocating policy attention.
- •Policymakers should focus on closing enforcement gaps in chip export controls rather than treating model benchmark parity as the primary threat indicator.
Cited by 1 page
| Page | Type | Quality |
|---|---|---|
| AI Safety Multi-Actor Strategic Landscape | Analysis | 79.0 |
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China's AI Models Are Closing the Gap—but America's Real Advantage Lies Elsewhere | RAND
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China's AI Models Are Closing the Gap—but America's Real Advantage Lies Elsewhere
Commentary
May 2, 2025
Photo by William_Potter/Getty Images
By Lennart Heim
This commentary was originally published by ChinaTalk on April 29, 2025.
China will likely match U.S. AI model capabilities this year, triggering inevitable concerns about America's technological edge. However, this snapshot comparison misses the bigger picture. While Chinese models close the gap on benchmarks, the United States maintains an advantage in total compute capacity—owning far more, and more advanced, AI chips. This compute advantage, if leveraged strategically, will play an extraordinary role in driving economic transformation, securing technological leadership, and shaping the global AI ecosystem. U.S. policymakers risk squandering this edge by focusing on the wrong metrics and overreacting to predictable Chinese advancements.
TSMC's Secret Pipeline to China
Central to the U.S.-China AI competition are U.S. export controls that restrict China from importing advanced AI chips, acquiring semiconductor manufacturing equipment to build indigenous advanced AI chips, and using leading chip manufacturers such as Taiwan Semiconductor Manufacturing Company (TSMC). Despite these measures, a massive failure occurred in September 2024: TSMC, lacking basic due diligence, breached export restrictions by producing advanced AI chips for Huawei through a Chinese proxy company. This violation allowed Huawei to secure approximately 3 million chip dies using TSMC's 7nm process, enabling the production of China's best AI chips, the Huawei Ascend 910B and the upcoming 910C . This dwarfs even the highest estimates of smuggled chips , which typically involved tens of thousands of units, not millions. Although these chips trail the U.S. state of the art by about four years, they collectively provide China with computing power equivalent to approximately 1 million export-controlled Nvidia H100s (Nvidia's previous-generation chip from 2023)—substantial AI compute capacity that compensates for China's lack of indigenous production capabilities.
A Pattern of Failures, Not an Exception
The U.S. government responded to TSMC's illicit production issue with a harsher rule in January 2025 and a likely investigation , but this incident is just one of many failures.
The 2022 chip controls contained specification errors that allowed Nvidia to slightly modify existing chips, creating the A800 and H800, which enabled DeepSeek's rise. Entity-listed Chinese companies built literal bridges to access advanced chipmaking equipment in unlisted facilities. Chinese firms stockpiled enough high-bandwidt
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