US import threat jolts Chinese optical shares

Chinese optical-component shares fell sharply on Wednesday after reports that Washington is preparing restrictions on data-centre equipment from China, raising fresh concerns over access to the world’s largest artificial intelligence infrastructure market.

Zhongji Innolight dropped about 10% in both Shanghai and Hong Kong, while Eoptolink Technology also lost 10%. Suzhou TFC Optical Communication declined roughly 6%. The CSI 300 Telecommunication Services Index fell as much as 9% during early trading before trimming some losses.

The sell-off followed disclosures that the administration of US President Donald Trump is drafting a measure that would bar imports of new Chinese optical transceiver models on national security grounds. The Federal Communications Commission is working on the proposed restrictions and is seeking to publish them before the end of the year.

No final decision has been announced, and the proposed rules could be altered, delayed or abandoned. Neither the White House nor the FCC has publicly detailed the measure.

Optical transceivers are essential components in modern data centres. They convert electrical signals into light and allow vast volumes of information to move at high speed through fibre-optic cables connecting servers, switches and computing clusters.

Demand for the devices has surged as technology groups build larger facilities for training and operating artificial intelligence models. These systems require thousands of advanced processors to communicate rapidly, making optical networking a critical part of the AI supply chain.

Chinese manufacturers have secured a substantial position in the global market by combining high-volume production with competitive pricing. Zhongji Innolight holds an estimated 27% share of the global data-centre transceiver market and is among the leading suppliers of high-speed products used in AI computing systems.

The company derived 62% of its revenue from the United States during the first quarter of 2026. It has previously warned that an escalation in trade tensions could produce a steep decline in earnings or lead to losses.

Eoptolink is similarly exposed, generating about 96% of its sales from overseas markets. TFC Optical also depends heavily on foreign customers, leaving all three companies vulnerable to any restriction affecting shipments to US cloud-computing operators.

The proposed action would mark a further expansion of Washington’s technology controls. Earlier measures concentrated mainly on preventing China from acquiring advanced semiconductors, chipmaking equipment and other technologies with potential military applications.

US policy is now extending towards limiting Chinese companies’ access to the domestic market. The FCC has already imposed or prepared restrictions covering telecommunications equipment, drones, routers, connected power inverters and advanced robots.

Under the plan being considered, the agency could initially prohibit imports of all new optical transceiver models and then grant exemptions to suppliers outside China. Existing devices may remain unaffected, although the scope of any final regulation has yet to be established.

US officials are concerned that foreign-made components embedded in data centres could enable data theft, malware installation or service disruption. Supporters of tighter controls argue that Washington should act before Chinese equipment becomes deeply integrated into critical AI infrastructure.

The approach reflects lessons drawn from Huawei, whose telecommunications equipment became widely installed before security restrictions were introduced. Removing or replacing those systems proved costly and complicated for network operators.

A ban would also create challenges for US cloud-computing companies. Amazon Web Services and other operators may have to shift orders to suppliers such as Coherent and Lumentum, potentially increasing procurement costs and slowing the expansion of data-centre capacity.

Shares of US optical-networking companies rose after details of the proposal emerged. Lumentum gained about 7%, Coherent climbed 11% and Applied Optoelectronics advanced 18%, as investors anticipated greater demand for non-Chinese products.

Industry specialists have cautioned that US suppliers may lack the manufacturing scale required to replace Chinese vendors quickly. Any abrupt change could tighten global supplies of high-speed transceivers at a time when technology groups are spending heavily on AI infrastructure.

Some market analysts also viewed Wednesday’s declines as excessive. They said the proposal could serve as a negotiating tool before an expected visit by Chinese President Xi Jinping to the United States in September.

Trade relations remain shaped by mutual dependence. Washington relies on China for rare-earth minerals used in electronics and optical systems, while Chinese technology companies depend on US customers, processors and specialised equipment.