The Trump administration is preparing a new round of restrictions aimed at China's role in the artificial intelligence supply chain, with federal officials drafting a proposal that would limit imports of Chinese-made optical transceivers used in U.S. data centers, according to Reuters. The planned measure would expand Washington's technology competition with Beijing beyond semiconductors to include networking hardware critical for AI computing infrastructure.
The proposal, which is reportedly being developed by the Federal Communications Commission (FCC), would target new models of Chinese optical transceivers-devices that transmit data between servers through fiber-optic networks. Reuters reported, citing four people familiar with the matter, that officials hope to publish the proposal before the end of the year, though the plan remains under review and could still change before any formal action is taken.
The initiative reflects a broader U.S. effort to secure the infrastructure supporting artificial intelligence as hyperscale cloud providers continue investing billions of dollars in next-generation data centers.
Optical transceivers have become increasingly important as AI models require thousands of interconnected graphics processors capable of exchanging enormous volumes of information at high speeds. The devices convert electrical signals into optical signals, enabling data to travel rapidly through fiber-optic cables across massive computing clusters.
Industry analysts say demand for these components has accelerated alongside the rapid expansion of generative AI services, making the technology an increasingly strategic part of global supply chains.
According to Reuters, the proposal would block imports of new Chinese transceiver models while allowing exemptions for many suppliers headquartered outside China. The measure is intended to reduce the presence of Chinese networking equipment inside facilities considered critical to the United States' AI ecosystem.
Federal officials have expressed concern that communications hardware manufactured by Chinese companies could present cybersecurity risks if deployed within sensitive infrastructure. Those concerns include the possibility of unauthorized data access, malware insertion or disruptions to essential services.
One company that could be significantly affected is Zhongji Innolight, a leading producer of optical transceivers. According to Counterpoint Research, the company accounts for approximately 27% of the global data-center transceiver market, with much of its business generated outside China.
Potential market implications include:
- Targeted company: Zhongji Innolight
- Estimated global market share: Approximately 27%
- Potential beneficiaries: U.S. manufacturers including Lumentum Holdings and Coherent Corp.
- Affected customers: Large cloud providers such as Amazon Web Services and other hyperscale operators
The Pentagon added Zhongji Innolight to its list of companies it alleges have links to China's military earlier this year. Inclusion on that list does not automatically trigger sanctions, but it often increases regulatory scrutiny. Reuters reported that the company did not respond to requests for comment regarding the proposed restrictions.
In recent months, the agency has expanded restrictions affecting Chinese-made drones, communications equipment, routers, robots and power inverters, arguing that such products may pose unacceptable national security risks.
Washington has increasingly pointed to its experience with Huawei Technologies as a cautionary example. U.S. officials have argued that allowing Huawei equipment to become deeply integrated into American telecommunications networks ultimately forced a costly and lengthy removal effort after security concerns emerged.
China has criticized the reported proposal. According to Reuters, the Chinese Embassy in Washington urged the United States to stop targeting Chinese companies and warned that Beijing would respond if its commercial interests were harmed.
