Rebuilding the AI Supply Chain Wall! US Plans to Ban New Chinese Optical Modules

Reuters reported on Tuesday (4th), citing four sources, that the US Federal Communications Commission (FCC) is drafting measures to ban imports of new Chinese optical transceiver modules (optical modules), targeting high-speed fiber transmission equipment within data centers, especially 800G and 1.6T specifications that support AI training and inference. The rule is expected to be announced and take effect within 2026.

The US justification remains 'national security,' alleging that Chinese equipment could steal data, implant malware, or disrupt data center operations. The aim is to prevent Chinese products from becoming deeply embedded in North American AI infrastructure, avoiding a repeat of the costly and slow Huawei telecom equipment phaseout.

China's embassy in the US responded on Tuesday, urging Washington to listen to rational voices from the business community and stop smearing and threatening sanctions. It warned that any move seriously damaging China's interests would trigger necessary countermeasures. China's Foreign Ministry has previously opposed the broadening of national security concerns and discriminatory blacklists targeting Chinese firms.

The biggest impact would fall on InnoLight. According to Counterpoint Research data, the company holds about 27% of the global data center optical module market, ranking first worldwide. After being added to the US Department of Defense's so-called 'military-civil fusion' list in June, the company denied the allegations, emphasizing it is neither a military nor a military-civil fusion firm, and pledged to defend its rights through communication and legal means.

If the ban takes effect, North American cloud providers like Amazon Web Services (AWS) may be forced to shift sourcing to Coherent and Lumentum. However, a report by the American Innovation Foundation notes that while these domestic suppliers are technologically comparable, their production capacity still cannot fill the Chinese supply gap in the short term.

Previously, the FCC has imposed similar restrictions on Chinese drones, routers, robots, and inverters. This proposed ban would target 'new models' and exempt most non-Chinese suppliers, though the draft details remain unsettled. Sources indicate the draft could still be modified or shelved.

Institutions like CICC and CITIC Securities argue that optical modules only perform photoelectric conversion and do not store business data, making the security rationale weak. Moreover, major Chinese firms have already established production capacity in Thailand and the US, meaning the policy may change shipping origins but not who can best deliver products. As a result, the likelihood of the move being 'all bark and no bite' remains high.