Trump Targets A New Piece Of China’s AI Supply Chain. Data Center Equipment Faces Fresh U.S. Curbs
The Trump administration is preparing new restrictions on Chinese technology used inside American data centers, according to a new report.
Reuters detailed that officials are drafting a proposal that would block imports of new models of Chinese-made optical transceivers, components that help move massive amounts of data between servers supporting artificial intelligence workloads.
The proposed measure, which is still under development, is designed to prevent Chinese-made networking equipment from becoming embedded in the infrastructure powering the U.S. AI industry. The Federal Communications Commission (FCC) is working on the proposal and hopes to publish it before the end of the year, Reuters reported, citing four people familiar with the matter.
Optical transceivers are essential components in modern data centers, converting electrical signals into optical signals that travel through fiber-optic cables at extremely high speeds. As AI models require ever-larger clusters of chips connected through high-bandwidth networks, demand for these components has surged across hyperscale cloud providers.
According to Reuters, the proposal would prohibit imports of new Chinese transceiver models while allowing exemptions for many non-Chinese manufacturers. The measure has not been finalized and could still be modified or shelved before implementation.
The effort reflects a broader U.S. strategy to strengthen supply chain security around AI infrastructure. Officials are concerned that networking equipment sourced from Chinese companies could present cybersecurity risks, including unauthorized data access, malware installation, or service disruption if deployed inside critical facilities.
The proposed restrictions could significantly affect Chinese manufacturer Zhongji Innolight, one of the world’s largest suppliers of optical transceivers. According to Counterpoint Research, the company controls roughly 27% of the global data center transceiver market and generates most of its revenue outside China.
The Pentagon added Zhongji Innolight to its list of companies allegedly linked to China’s military in June, although inclusion on the list does not itself trigger sanctions. The company did not respond to Reuters’ request for comment.
The proposal could also create new challenges for U.S. cloud providers including Amazon Web Services, which may need to source more equipment from American manufacturers such as Lumentum Holdings and Coherent Corp. if the restrictions take effect.
The latest move builds on a series of FCC actions targeting Chinese technology across multiple sectors. In recent months, the agency has expanded restrictions covering Chinese-made drones, routers, robots and power inverters, citing national security concerns. The agency’s “Covered List,” established by Congress, bars future sales of communications equipment deemed to pose unacceptable risks to U.S. infrastructure.
The proposal also reflects lessons Washington says it learned from Huawei Technologies, whose telecommunications equipment became deeply integrated into U.S. networks before sweeping restrictions were introduced. Federal officials have argued that removing Huawei equipment proved costly and time-consuming after deployment.
The Chinese Embassy in Washington criticized the proposed action, urging the United States to stop targeting Chinese companies and warning that Beijing would respond if its interests were harmed, according to Reuters.
The proposed import ban would add another layer to the ongoing technology competition between the United States and China, which has increasingly centered on AI hardware, semiconductor manufacturing, advanced networking equipment and the supply chains supporting next-generation computing infrastructure.
