U.S. Bipartisan Bill Targets Chinese Optical Modules; Eoptolink and Zhongji Innolight Named, AI Data Centers at Risk

U.S. bipartisan lawmakers recently introduced a bill to prohibit federal agencies from using Chinese-made optical modules (optical transceivers) in systems handling sensitive information, aiming to reduce potential risks to American artificial intelligence (AI) data centers and government systems.

The bill was introduced on September 25, co-sponsored by Republican Senators John Cornyn and Dave McCormick, and Democratic Senators John Fetterman and Ruben Gallego. The restrictions target optical modules produced by Chinese optical communication equipment makers Chengdu Eoptolink (300502-CN) and Zhongji Innolight (300308-CN).

Previously, the U.S. Department of Defense had already placed Zhongji Innolight on its "1260H list."

Optical modules primarily convert signals between fiber optics and electronic devices, enabling high-speed data transmission via fiber optics. They are critical components in AI data center infrastructure, with some large data centers requiring millions of such devices.

Supporters of the bill argue that Chinese-made products could affect U.S. access to AI tools and cloud services.

This legislation further increases U.S. pressure on Chinese optical module manufacturers. Chinese companies currently hold a significant share of the key component market for AI data centers.

However, U.S. technology companies have expressed concerns that restricting Chinese suppliers could slow down AI infrastructure construction in the U.S. and give China a first-mover advantage, as hyperscale data center operators are scrambling to find alternative supply sources.

The Information Technology Industry Council (ITIC), a tech lobbying group, sent a letter to the Federal Communications Commission (FCC) in August urging it not to place optical modules on a trade blacklist.

ITIC warned that supply disruptions could affect data center deployment speed and U.S. leadership in AI.

A report by the Information Technology and Innovation Foundation (ITIF) noted that U.S. companies Coherent (COHR-US) and Lumentum Holdings (LITE-US) can offer competitive optical module technology, but their current production capacity is insufficient to fully replace Chinese suppliers.

If the bill is ultimately passed, the U.S. government will have five years to fully implement the regulations. Additionally, the Secretary of Commerce and the Secretary of Defense will have the authority to add other companies to the restricted list.