US Plans to Ban Chinese Components in American Data Centers

The Federal Communications Commission (FCC) is developing a set of measures to ban the import of new Chinese optical transceivers for data centers (data centers), with the ban potentially taking effect this year. This step aims to prevent data theft, malware installation, or disruption of US data centers hosting chips for training and running AI models. The FCC may modify or postpone the restriction, but its development indicates another attempt by the US administration to counter the penetration of Chinese technologies into advanced US industries. Hawks on China seek to avoid a repeat of the situation where sanctioned Huawei's telecom equipment became so deeply integrated into US infrastructure that unprecedented efforts and costs were required to replace it. The ban is likely to hit Chinese company Zhongji Innolight, one of the world's largest transceiver suppliers, which was added to the Pentagon's sanctions list in June. It could increase costs for American cloud companies like Amazon Web Services, while boosting revenues for American equipment makers Coherent and Lumentum. According to Counterpoint Research, Innolight holds a leading 27% share of the global data center transceiver market and receives 90% of its revenue outside China. Coherent and Lumentum sell competitive technologies but are not yet able to fully replace Chinese suppliers. In February, the Commerce Department postponed several import sanctions on China, including a restriction against Chinese data center equipment. However, the FCC introduced similar restrictions on Chinese drones, routers, robots, and inverters, stating that these products pose a threat to national security. China's embassy in Washington said Beijing urges the US to "listen to the objective and rational voices of business circles in both countries" and "stop denigrating Chinese companies and threatening them with sanctions." A embassy spokesperson assured that China will take all necessary measures in response to any actions that cause substantial damage to its interests.