The Federal Communications Commission is considering limits on imports of new Chinese-made transceiver models over concerns that the devices could expose American infrastructure to espionage, malicious software or service disruption. No final restriction has been announced, and its precise scope remains under consideration.
Microsoft has raised its objections with officials at the White House Office of Science and Technology Policy and the National Security Council. Other technology companies and industry representatives have also challenged the proposal, arguing that domestic manufacturers cannot immediately replace the volume supplied by Chinese producers.
The dispute comes as American technology groups accelerate investment in facilities designed to train and operate advanced AI systems. Optical transceivers convert electrical signals into light and back again, enabling rapid communication between servers, networking switches and other equipment through fibre-optic cables. Large installations can require millions of these components.
Market intelligence company Cleanview identifies 35 Microsoft data centres under construction across the United States and another 134 in planning. Delays in obtaining networking components could complicate the commissioning of facilities even where processors, buildings and power connections are available.
China accounts for roughly two-thirds of the worldwide optical transceiver market, according to Counterpoint Research. Suppliers including Eoptolink and Zhongji Innolight hold substantial positions in the sector. Zhongji Innolight has also been placed on a Pentagon list identifying companies alleged to have links with China’s military.
American manufacturers Coherent and Lumentum offer competing optical technology, but the Foundation for American Innovation has identified insufficient production capacity to replace Chinese supply at short notice. That imbalance has become central to industry objections to an immediate, broad import prohibition.
The Information Technology Industry Council, whose members include major technology businesses, urged the FCC in an August letter to refrain from adding optical transceivers to its list of equipment presenting unacceptable national security risks. It warned that supply interruptions could affect data centre deployment and America’s position in artificial intelligence.
John Miller, the council’s executive vice-president for policy and general counsel, has warned that restrictions could severely impede the construction programme. Industry representatives are particularly concerned that AI accelerators purchased at substantial cost could remain unused if operators cannot obtain the optical connections needed to deploy them.
National security concerns nevertheless have support in Congress. Lawmakers from both major parties introduced legislation in September seeking to prevent Chinese-made optical transceivers from being procured for sensitive federal systems. The proposal addresses government security requirements rather than imposing a comprehensive prohibition on commercial data centre imports.
The Senate bill, introduced by Republican Senator Dave McCormick alongside Democratic Senator Ruben Gallego and other lawmakers, would also require an assessment of domestic and allied production capacity and the security risks associated with these components. It has been referred to the Senate Committee on Homeland Security and Governmental Affairs.
A narrower regulatory approach is among the possibilities under discussion. Morgan Stanley indicated in an October assessment that officials were considering restrictions covering Chinese transceivers capable of transmitting 3.2 terabits per second. Such devices are not expected to enter large-scale production until 2028, with wider deployment anticipated in 2029.
Targeting that generation of equipment could provide manufacturers outside China additional time to expand capacity while limiting disruption to current data centre projects. The approach has not been adopted as a final FCC policy, however, and there is no assurance that any eventual restriction will follow that threshold.
The security argument rests on the possibility that vulnerable or compromised networking equipment could create access points within critical computing infrastructure. Industry opposition focuses instead on whether a countrywide restriction would address those risks proportionately without imposing shortages on operators building domestic computing capacity.
Microsoft has not publicly detailed its discussions with administration officials. The FCC has likewise not published a final decision on the proposed import limits, leaving businesses without a confirmed implementation timetable or definitive list of affected products.
The separate congressional proposal includes provisions for evaluating risks in federal contractors’ supply chains, extending scrutiny beyond equipment installed directly in government facilities. Its text also calls for coordination among the departments of Commerce, Defence, Homeland Security and Energy and the intelligence community.
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