Trump administration drafting ban on Chinese data center devices, sources say

• The ban would likely impact China's Zhongji Innolight, which holds a 27% market share and was added to the Pentagon's list of alleged Chinese military-backed companies in June
• U.S. cloud providers like Amazon Web Services may face higher costs as they transition to alternative suppliers such as Coherent and Lumentum, which stand to benefit from the measure
• The move follows Trump administration efforts to avoid a Huawei-like situation where Chinese equipment becomes deeply embedded in critical U.S. infrastructure, making removal slow and expensive

Summary: Trump Administration Targets Chinese Data Center Equipment

The Trump administration is preparing to ban U.S. imports of new Chinese data center components, specifically optical transceivers used in fiber-optic data transmission, according to four sources familiar with the matter. The Federal Communications Commission (FCC) is drafting the measure, which officials hope to publish and implement this year.

Key Details

The ban targets optical transceivers, critical components that enable high-speed data transfer within data centers supporting AI infrastructure. The primary concern is preventing Chinese firms from stealing data, installing malware, or disrupting U.S. data center operations.

Main Company Impacted: China's Zhongji Innolight, holding a 27% market share in transceivers, would be significantly affected. The company was added to the Pentagon's list of alleged Chinese military-backed firms in June.

U.S. Beneficiaries: American suppliers Coherent and Lumentum stand to gain market share, though the restriction could raise costs for cloud providers like Amazon Web Services.

Market Context

The measure follows similar FCC bans on Chinese drones, routers, inverters, and robots, as well as restrictions on equipment from Huawei, ZTE, Hikvision, and Dahua. The administration aims to prevent Chinese technology from becoming entrenched in critical U.S. infrastructure before removal becomes costly and difficult—as occurred with Huawei telecom equipment.

Caveats

Sources emphasized the restriction could still be modified or shelved. China's embassy warned Beijing "will take all necessary measures" against actions harming its interests. The move represents a more aggressive FCC stance after the Commerce Department reportedly shelved similar restrictions following trade détente in October.