Microsoft, tech groups urge Trump to drop ban on Chinese data centre parts

Microsoft and other technology companies and trade groups have urged the Trump administration to halt plans to bar US imports of Chinese optical transceivers, the components that carry data at light speed between servers inside AI data centres, three people familiar with the situation said. The companies argue a ban could slow data centre construction and damage the US edge over China in the AI race.

Microsoft was among a handful of firms that met White House Office of Science and Technology Policy and National Security Council officials weeks after the plan surfaced, two of the sources said, to flag the supply chain problems a ban would create. Microsoft has 35 data centres under construction in the US and another 134 planned, according to Cleanview, which tracks data centre development. Microsoft declined to comment; the White House and the Federal Communications Commission did not respond to requests for comment.

The FCC, which oversees US telecoms, is working on the ban over fears Beijing could use the components to steal data, install malware or disrupt service. John Miller, executive vice president of policy and general counsel at the Information Technology Industry Council, said the move “really threatens to arguably grind (the data centre rollout) to a halt.” He said many cloud companies have already bought the AI chips for the buildout, and “those chips, without optical transceivers literally could just sit there waiting around un-utilised.” ITI wrote to the FCC on August 13 urging it to “refrain from adding optical transceivers” to a trade blacklist.

China holds two-thirds of the global optical transceiver market, according to Counterpoint Research, with firms such as Eoptolink and Zhongji Innolight dominating supply. US-based Coherent and Lumentum compete but lack the scale to replace Chinese vendors, according to a report by the Foundation for American Innovation. The House Select Committee on China, led by Republican John Moolenaar, said the FCC should “move forward and keep new (China)-linked optical transceivers out of our networks.” Zhongji Innolight did not immediately respond to a request for comment.

Morgan Stanley said in an October client note that the administration was considering barring Chinese transceivers capable of handling 3.2 terabits per second, whose production is not expected to ramp up until 2028. Two sources said that threshold is under consideration. In September, a bipartisan group of US lawmakers introduced legislation to bar the federal government from equipping sensitive systems with Chinese-made optical transceivers. Beijing “firmly opposes the US overstretching the concept of national security and abusing state power to unjustifiably suppress Chinese companies,” the Chinese embassy in Washington said.