FCC Announces New Rules! Chinese Optical Module Makers Like InnoLight Excluded from Sanctions List – Will US AI Data Centers Be 'Choked'?

The US Federal Communications Commission (FCC) finalized its new rules on Thursday (11th), excluding Chinese optical communication firms including InnoLight, Eoptolink, Dongshan Precision, and TFC from direct restrictions.

The newly added restrictions are narrowly scoped: equipment using 'logic hardware components' from companies on the FCC's 'Covered List' may be denied authorization. The FCC did not adopt the more aggressive proposal to ban all components from 'foreign adversaries'.

This outcome differs from market concerns over a month ago. Reuters reported last month that the Trump administration was drafting new restrictions targeting Chinese data center equipment, specifically naming InnoLight and raising fears that new models could be blocked from the US market.

However, if the strictest version had been implemented, the biggest loser would likely have been the US AI data center industry itself. According to research firm Counterpoint, InnoLight accounts for approximately 27% of global data center optical module revenue, with Chinese firms collectively supplying nearly two-thirds of shipments and about 60% of data communications optical module revenue. Their advantage is even greater in high-speed products like 800G and 1.6T. Reuters also reported in July that around 62% of InnoLight's revenue in Q1 2024 came from the US, with customers including Meta and NVIDIA.

Counterpoint notes that while US firms like Coherent and Lumentum possess advanced photonic technologies, they lack the cleanroom production capacity, automated packaging, and yield scale to replace InnoLight and Eoptolink within 12 to 24 months.

Additionally, Fierce Network reported on Tuesday (8th) that two major networking equipment vendors warned that cutting off Chinese optical modules would severely delay US AI data center construction. Rebuilding the manufacturing ecosystem could take two to three years, and rebuilding the entire supply chain might take five to ten years.

Without tens of thousands of high-speed optical modules, hyperscale AI clusters cannot operate. Rather than signaling a softening stance toward China, the FCC's decision suggests that the pace of US AI infrastructure expansion currently outstrips the speed of supply chain 'de-China-fication'.

China's Guancha.cn argues this is more of a 'delay' than a disappearance of risk. The optical module-specific restrictions reported by Reuters last month are distinct from this component-level rule. InnoLight remains on the US Department of Defense's 1260H list, and Washington retains multiple tools to exert pressure. The reality is clear: if the US cuts off Chinese optical modules, it may first sever its own AI computing expansion.