Why does a hardware router perform better than a Linux router with better specs (RAM & CPU)?

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ASICs.

Instead of using a general purpose CPU and task-specific software, you can skip the software and just make the silicon handle the task directly.

High performance networking hardware uses ASICs instead of software for the computationally heavy (but relatively logically simple) tasks of something like comparing an IP address to an enormous internet routing table, checking a CAM table for a switching decision, or checking a packet against an ACL. This makes an enormous difference in the speed of those time-sensitive operations, providing a significant advantage over a general-purpose CPU.

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