The Federal Communications Commission is drafting a ban on U.S. imports of new Chinese optical transceivers used in AI data centers, four people familiar with the matter say. Shares of U.S. rivals Lumentum, Coherent, and Applied Optoelectronics rose on the news, while China's embassy in Washington warned of a response if the measure goes ahead.
The FCC is working on a measure to bar imports of new models of Chinese optical transceivers, the components that move data across fiber-optic cables at the speed of light within data centers, four people familiar with the matter told Reuters. Officials hope to publish the rule this year, when it would take effect. The FCC could still modify or shelve the restriction, the sources stressed, speaking on condition of anonymity.
Why regulators are targeting transceivers
The move aims to stop Chinese firms from stealing data, installing malware, or disrupting service at U.S. data centers that house the chips used to train and run AI models. According to Divyansh Kaushik, an AI policy expert at Beacon Global Strategies: "Transceivers definitely pose a risk." China hawks in the administration want to avoid a repeat of Huawei, whose telecom equipment became so embedded in U.S. infrastructure that removing it proved slow, expensive, and incomplete.
Transceiver makers rally, Innolight in the crosshairs
Shares of Lumentum, Coherent, and Applied Optoelectronics jumped 7%, 11%, and 18%, respectively, after the report. A ban would likely hit China's Zhongji Innolight, one of the biggest global sellers of transceivers. According to Counterpoint Research, Innolight holds a leading 27% share of the global data center transceiver market. The company was also added to the Pentagon's list of alleged Chinese military-backed companies in June. It could also raise costs for American cloud firms such as Amazon Web Services, which may need to shift to producers like Coherent and Lumentum.
Beijing warns of retaliation
The Chinese embassy in Washington said Beijing urges the United States to heed the rational voices of the business communities in both countries and stop threatening Chinese companies with sanctions, adding that China will take all necessary measures in response to any action that harms its interests. The White House and the FCC did not respond to requests for comment.
FCC curbs already cover Chinese drones, routers, robots, and inverters. Reuters reported in February that the Commerce Department had shelved a separate group of import restrictions on Chinese data center equipment following a trade war détente last October, leaving the FCC as the agency now driving the restrictions forward.
Source: Investing.com
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