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

The Trump administration is drafting a ban on U.S. imports of new models of Chinese data center components, four people familiar with the matter told Reuters, as it seeks to protect the infrastructure that undergirds the AI boom.

The Federal Communications Commission, which oversees the U.S. telecom industry, is working on the measure to bar imports ​of new Chinese optical transceivers, which allow data to travel over fiber-optic cables at the speed of light within data centers. Officials hope to publish it this year, when it would take effect.

The move, not previously reported, aims to prevent Chinese firms from stealing data, installing malware or disrupting service at U.S. data centers, which house the chips to train and run AI ‌models.


The FCC could still ⁠modify or ⁠shelve the restriction, the sources stressed, speaking on condition of anonymity to discuss sensitive matters. But it is the latest example of the Trump administration trying to limit Chinese technological incursions into cutting-edge U.S. industries ​before they become embedded in the supply chain.

"Transceivers definitely pose a risk," said Divyansh Kaushik, an AI policy expert at Washington, D.C., advisory firm Beacon Global Strategies. "As the data ​center buildout scales up, you want to make sure the data center supply chain is secure from the get-go," he added.

CHINA WILL RESPOND IF NECESSARY: EMBASSY

The White House and the FCC did not respond to requests for comment. The Chinese embassy in Washington said Beijing urges the United States to "heed the objective and rational voices ​of the business communities in both countries" and "stop smearing Chinese companies and threatening them with sanctions."

"China will take ⁠all necessary ‌measures in response to any action that causes material harm to its interests," it added.

China hawks in the administration are keen to ​avoid another situation like ​Huawei, where telecom equipment made by the heavily sanctioned Chinese firm was so deeply embedded in U.S. infrastructure that efforts to remove ⁠it were slow, expensive and incomplete.

The FCC has historically been independent, but in June the ​U.S. Supreme Court backed President Donald Trump's firing of a Democratic Federal Trade Commission member, expanding his powers over ​the government, including certain regulatory agencies.

A U.S. ban on new models of Chinese data center devices would likely hit China's Zhongji Innolight, one of the biggest global sellers of transceivers, which was added to the Pentagon's list of alleged Chinese military-backed companies in June. The list can be a harbinger of tougher action. Innolight did not respond to requests for comment.

A ban could also raise costs for American cloud firms such as Amazon Web Services, as it may force them to transition to other producers such as U.S.-based Coherent and Lumentum, which stand to benefit from the measure.

Innolight has a leading 27% share of the global data center transceiver ‌market, according to Counterpoint Research. Coherent and Lumentum sell competitive technology but lack the scale to replace Chinese vendors, according to a report by the Foundation for American Innovation. Innolight generates 90% of its revenue outside China, the report added.

AWS, Coherent and Lumentum did ​not respond to requests ​for comment.

The FCC has imposed similar curbs on ⁠Chinese drones, routers, robots and inverters, as first reported by Reuters.

In line with those restrictions, the agency would ban all imports of new transceiver models and then exempt many non-Chinese suppliers from the restrictions, three of the sources said.

Trump drew attention during his first term to alleged intellectual property theft by Chinese firms ​and state-sponsored spying by Huawei, which the company denies.

But Trump has taken a less aggressive approach during his second term after Beijing's use of export controls on rare earth minerals last year.

Reuters reported in February that the Commerce Department, which has tools to police the tech supply chain for perceived threats from China, shelved a group of import restrictions on China - including one targeting Chinese data center equipment - following a trade war detente last October.

But the FCC has stepped in, announcing the drone and router bans in December and March, respectively, via its so-called Covered List, created by Congress to bar future equipment sales by foreign companies whose products pose national security risks. Moves against Chinese inverters and robots followed last week.