Research Publication – Reality Bytes – Clash of the Titans Vol. VIII – DeepSeek

4th March 2025: RFM and Alavan Independent update their long running coverage of the USA-China technology war with the publication of Reality Bytes – Clash of the Titans Vol. VIII – DeepSeek.  RFM subscribers will receive their copy by email. 

Uncertainty is escalating. From the White House to the claims made by AI company DeepSeek, predicting the future has never been more difficult. We see potential for unintended side-effects of US policy creating opportunities for China to increase its global influence; but, at the same time, how the US conducts itself over Ukraine will impact events both in Korea and Taiwan. None of this is helped by the huge boost to China’s reputation as an AI powerhouse provided by DeepSeek. However, on closer examination, we find that Beijing’s claims are substantially overstated. Against this backdrop, we see further restrictions related to AI exports and an acceleration of the bifurcation of the technology industry into 2 separate camps as China pushes harder for technology independence. Those in the middle will be forced to choose.

• Chaos and opportunity: Trump’s deliberately chaotic approach to governance has thrown up proposals in a range of policy areas which run counter to maintaining a tech lead over China.
• Tariffs & withdrawals: The imposition of tariffs on allies as well as policies like the watering down of anti-trust enforcement may help China secure an advantage over the US.
• Russia, Ukraine & Taiwan: The Trump administration’s stance on Russia/Ukraine will have an impact on events in both the Korean peninsula and the Taiwan Strait. Furthermore, changes to the US factsheet on Taiwan could indicate Washington’s preparedness to use it as a bargaining chip in a bigger game with China.
• DeepSeek: shocked the world in being able to match the performance of Western competitors but is not novel in terms of performance or intelligence.
• DeepSeek efficiencies are where the real surprises lie. DeepSeek’s claims seem to suggest that it is many orders of magnitude cheaper to both train and run inference than Western peers.
• The reality: RFM’s analysis suggests that DeepSeek’s claims are misleading and that the reality is that DeepSeek has something more like a 2x-4x advantage in training (rather than 100x) and a 0x – 10x advantage in inference depending on the task being inferenced.
• DeepSeek’s IP: is in its methods not the models it has placed in open source. This is how we think DeepSeek was able to obtain an export license for R1 from the Chinese state.
• China’s motivations: DeepSeek is operating with state approval leading to the question of China’s motivations. RFM sees three possibilities with PR and propaganda being the most likely where we think China has succeeded way beyond its own expectations.
• Build the wall 2.0. The now unfolding ideologically-driven bifurcation of the Internet will accelerate the ongoing shift from global standards to one for China, and one for the West with everyone else being forced to pick a side. Long-term growth will suffer as a consequence.