FCC drafts ban on Chinese optical transceivers for US data centers
The Federal Communications Commission is drafting a measure to block imports of new Chinese optical transceivers, aiming to secure the AI infrastructure supply chain, four sources told Reuters.
The draft ban
The FCC is drafting a ban on imports of new models of Chinese optical transceivers, four people familiar with the matter told Reuters. Officials hope to publish the measure this year, at which point it would take effect. The restriction could still be modified or shelved, the sources cautioned. The FCC has historically been independent, but in June the Supreme Court backed President Trump's firing of a Democratic FTC member, expanding his powers over regulatory agencies. The move targets components that allow data to travel over fiber-optic cables at the speed of light inside data centers, which house the chips that train and run AI models.
Security rationale
The administration wants to prevent Chinese firms from stealing data, installing malware, or disrupting service at U.S. data centers. Divyansh Kaushik, an AI policy expert at Beacon Global Strategies, said transceivers pose a risk as the data center buildout scales up.
Transceivers definitely pose a risk. As the data center buildout scales up, you want to make sure the data center supply chain is secure from the get-go.
China hawks in the administration are keen to avoid a repeat of the Huawei situation, where telecom equipment was so deeply embedded that removal was slow and expensive. The draft ban would cover new models, but enforcement is expected to be difficult because of resellers, relabelled parts, and subsidiaries that could circumvent the restriction.
Market impact
China's Zhongji Innolight would likely be hit hardest. The company holds 27% of the global optical transceiver market, according to Counterpoint. U.S. tech companies rely on these components for high-speed connections between GPUs that run AI workloads. American operators still depend on Chinese components in some areas, and few non-Chinese equivalents exist at the price and volume the AI buildout demands. The gear most likely in the frame includes networking switches, servers, storage, and management chips.
Broader tech conflict
The draft extends a fast-widening campaign. Last month, the FCC banned advanced Chinese humanoid robots and power inverters, citing risks to critical infrastructure. The administration is also mulling restrictions on Chinese open-source AI models. Treasury Secretary Scott Bessent has suggested China could be sanctioned for theft of U.S. data and intellectual property. Washington has been nudging allies to follow, which would widen the market Chinese vendors lose. U.S. tech companies have committed trillions to build out AI infrastructure, but plans are falling behind schedule while China attempts to catch up with its own massive data center development.
- FCC bans advanced Chinese humanoid robots and power inverters
- FCC drafts ban on Chinese optical transceivers
China's response
The Chinese embassy in Washington urged the U.S. to "heed the objective and rational voices of the business communities in both countries" and stop "smearing Chinese companies and threatening them with sanctions."
China will take all necessary measures in response to any action that causes material harm to its interests.
Beijing has already threatened retaliation over the robot ban, including leverage over rare-earth minerals that Western manufacturers cannot easily source elsewhere. The two sides are now trading restrictions in a familiar rhythm, unpicking a technology supply chain that took decades to knit together.
