Microsoft, tech firms urge Trump to drop ban on Chinese data centre tech
Microsoft and other tech groups have asked the Trump administration to halt plans to ban Chinese optical transceivers used in AI data centres, warning the move could slow US data centre rollouts and harm the AI race. China dominates the global market for the component, and US competitors lack the sc
Microsoft and other companies and trade groups have pressed the Trump administration to halt plans to bar imports from China of a key component used in artificial-intelligence data centres, three people familiar with the situation said.
Reuters reported in August that the Trump administration wants to ban US imports of new models of Chinese optical transceivers, which allow data to travel over fibre-optic cables at the speed of light within data centres. The concern is that they could be used by Beijing to steal data, install malware or disrupt service at US data centres.
Microsoft has 35 data centres under construction in the US and another 134 planned, according to Cleanview, a market intelligence company. It is one of a group of companies and trade groups making the case to the administration that such a ban could irreparably damage the US edge over China in the AI race by further slowing the data centre rollout, the sources said.
John Miller, Executive Vice President of Policy and General Counsel of the Information Technology Industry Council, a tech lobbying group that has publicly urged the administration not to move forward with a ban, said: “It really threatens to arguably grind [the data centre rollout] to a halt.” He said many cloud companies have already purchased AI chips needed for the buildout, and that “those chips, without optical transceivers, could just sit there waiting around un-utilised until you actually have the transceivers to essentially connect them together.” Some data centres need millions of optical transceivers to connect servers, routers and switches.
The Federal Communications Commission, which oversees the US telecom industry, is working on the ban. The efforts by Microsoft and other firms, which have not been previously reported, show how the agency’s deliberations have set off alarms in an industry scrambling to meet surging demand for cloud and AI services despite a growing backlash by consumers over rising energy costs and water use.
China boasts two-thirds of the global market for optical transceivers, according to Counterpoint Research. US-based Coherent and Lumentum produce technology that competes with them 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 in a social media post that “a Pentagon-listed Chinese military company, including Zhongji Innolight, should not be wiring America’s data centres,” and that the FCC should “move forward and keep new [China]-linked optical transceivers out of our networks.”
Morgan Stanley said in an October client note that the Trump administration was considering barring Chinese optical transceivers capable of handling 3.2 terabits of data per second, whose production is not expected to ramp up until 2028, with widespread installation expected in 2029. The FCC has not addressed the issue publicly, but two sources said the 3.2 terabit per second threshold is under consideration. In September, a bipartisan group of US lawmakers introduced legislation to bar the federal government from equipping sensitive government systems with Chinese-made optical transceivers.