Trump Administration Plans to Ban Chinese Optical Transceiver Imports! Lumentum and Coherent Surge, InnoLight Faces Impact

Four sources indicate the Trump administration is drafting a ban on U.S. imports of new data center components made in China to protect critical infrastructure underpinning the artificial intelligence (AI) boom.

According to a Reuters report, the Federal Communications Commission (FCC), which oversees the U.S. telecommunications industry, is developing measures to prohibit the import of Chinese-made optical transceivers. These components enable data to travel at near-light speed through fiber-optic cables within data centers. Officials aim to announce the measure this year, with formal implementation following the announcement.

This previously unreported initiative primarily aims to prevent Chinese firms from stealing data, implanting malicious software, or disrupting the operations of U.S. data centers housing chips that train and run AI models.

Sources emphasize that the FCC may still modify or shelve the proposal. However, the move is seen as the latest example of the Trump administration’s recent series of actions to block Chinese technological infiltration into U.S. advanced industries, aiming to act before such technologies become deeply embedded in supply chains.

Divyansh Kaushik, an AI policy expert at Washington advisory firm Beacon Global Strategies, analyzed: 'Optical transceivers do pose risks. As data center construction continues to expand, we must ensure the security of the data center supply chain from the outset.'

Markets believe this U.S. government measure will benefit domestic optical transceiver manufacturers. After the news broke, related stocks surged.

On Tuesday (April 4), Lumentum (LITE-US), Coherent (COHR-US), Applied Optoelectronics (AAOI-US), and Marvell Technology (MRVL-US) closed up 8.92%, 12.35%, 19.44%, and 12.81%, respectively.

Chinese Embassy: Will Take Countermeasures if Necessary

The White House and FCC have not responded. The Chinese Embassy in the U.S. stated that Beijing urges the U.S. to 'listen to the objective and rational voices of businesses in both countries' and 'stop smearing Chinese companies, stop threatening with sanctions.'

The embassy also emphasized: 'China will take all necessary measures in response to any actions that cause substantial harm to its interests.'

If the U.S. bans imports of new Chinese-made data center equipment, it is expected to impact InnoLight (300308-CN), one of the world’s largest optical transceiver suppliers.

The company was added in June this year to a U.S. Department of Defense list of firms suspected of ties to the Chinese military, a designation often seen as a precursor to harsher U.S. sanctions. InnoLight did not respond to requests for comment.

Analysts note the ban could also raise costs for U.S. cloud service providers, including Amazon (AMZN-US) Web Services (AWS), as they may be forced to switch procurement to U.S. suppliers such as Coherent and Lumentum.

Hardline officials within the Trump administration hope to avoid repeating the Huawei incident. Back then, despite severe U.S. sanctions, Huawei’s telecom equipment was already deeply deployed in U.S. infrastructure, making removal costly, time-consuming, and ultimately incomplete.

While the FCC has traditionally been viewed as an independent regulator, the U.S. Supreme Court in June supported President Trump’s removal of a Democratic FTC commissioner, further expanding presidential control over federal agencies, including some independent regulators.

According to Counterpoint Research, InnoLight currently holds about 27% of the global data center optical transceiver market, leading globally.

A report by the Foundation for American Innovation notes that while Coherent and Lumentum possess competitive technologies, their current production scale is insufficient to fully replace Chinese suppliers.

The report also states that about 90% of InnoLight’s revenue comes from markets outside China.

AWS, Coherent, and Lumentum did not respond to requests for comment.

Reuters previously reported that the FCC has already imposed similar restrictions on Chinese-made drones, routers, robots, and inverters.

Three sources say, following the same model, the FCC will ban all new Chinese-made optical transceivers while exempting most non-Chinese suppliers from the restrictions.

During his first term, Trump heavily criticized Chinese firms for allegedly stealing intellectual property and accused Huawei of aiding the Chinese government in espionage activities—accusations Huawei has repeatedly denied.

However, in his second term, Trump has taken a more restrained approach toward China, partly due to Beijing’s rare earth export controls last year, which increased the cost of U.S. pressure.

Reuters reported in February that the U.S. Department of Commerce had drafted a series of import restrictions on China, including data center equipment, but these measures were shelved after a temporary de-escalation in the U.S.-China trade war in October last year.

Now, the FCC has taken over pushing these restrictions, announcing bans on Chinese-made drones and routers in December last year and March this year via the 'Covered List' established through congressional authorization.

The list aims to block foreign equipment deemed a threat to U.S. national security from entering the U.S. market, with restrictions on Chinese-made inverters and robots rolled out last week.