Microsoft Urges Trump Administration to Halt Expected Chinese Optical-Transceiver Ban

Microsoft leads industry push against proposed restrictions

Microsoft has been pressing the Trump administration to halt plans to restrict imports of Chinese optical transceivers used in U.S. data centers, according to three people familiar with the matter. The company and other industry participants argue that a ban could slow the rollout of facilities needed for cloud computing and artificial intelligence.

The restrictions remain under development and had not been finalized in the reporting reviewed as of November 10. The Federal Communications Commission is working on the proposal, while the White House and FCC did not immediately respond to requests for comment. Microsoft also declined to comment.

Supply concerns drive industry opposition

The reported proposal would target new models of Chinese optical transceivers, components that move data over fiber-optic connections within data centers. Officials have raised concerns that the products could be used by Beijing to steal data, install malware or disrupt service at U.S. facilities.

Microsoft was among a small group of companies that met in September with officials from the White House Office of Science and Technology Policy and the National Security Council to discuss the supply-chain challenges a restriction could create. Industry groups have made a similar case, saying insufficient supplies of the components could impede data-center construction and delay the use of already purchased AI chips.

Data-center expansion puts pressure on component availability

Microsoft has 35 data centers under construction in the United States and another 134 planned, according to Cleanview, a market intelligence company that tracks data-center development. The reporting did not identify how many of those facilities would use Chinese optical transceivers or whether Microsoft had already secured alternative supplies.

Some data centers require millions of optical transceivers to connect servers, routers and switches. John Miller, general counsel of the Information Technology Industry Council, said cloud companies that have already purchased AI chips could leave them unutilized if the transceivers needed to connect them are unavailable.

U.S. suppliers may lack the capacity to replace Chinese vendors

China accounts for two-thirds of the global optical-transceiver market, according to Counterpoint Research. Chinese manufacturers Eoptolink and Zhongji Innolight dominate global supply, while U.S.-based Coherent and Lumentum produce competing technology without enough scale to replace Chinese vendors, according to the Foundation for American Innovation.

The Information Technology Industry Council wrote to the FCC on August 13 asking it not to add optical transceivers to a trade blacklist. The group cited the potential effects of supply disruptions on data-center deployment and U.S. AI leadership.

Timing and scope of any restriction remain unsettled

Morgan Stanley said in an October client note that the administration was considering restrictions on Chinese optical transceivers capable of handling 3.2 terabits per second. The note said production of the relevant transceivers was not expected to ramp up until 2028, with widespread installation expected in 2029.

The reviewed reporting did not establish a final effective date, product list or decision on the proposed restrictions. The next verifiable milestone is an FCC decision or a public statement from the agency, the White House or Microsoft clarifying whether the ban will proceed and what products it would cover.