Microsoft Is Lobbying Against a Ban on Chinese Optical Parts That Wire AI Data Centers Together, Reuters Reports
Microsoft has been pressing the Trump administration to halt a planned ban on imports of new Chinese optical transceivers, the components that carry data between servers inside AI data centers, Reuters reported on November 10, citing three people familiar with the situation. Industry groups argue the ban could leave purchased AI chips idle; Chinese firms hold about two-thirds of the market, per Counterpoint. The FCC is weighing a threshold that would spare current models. Microsoft declined to comment.
The AI chip export fight has a mirror image on the import side, and Microsoft is on the other side of it. Washington wants to keep Chinese hardware out of US data centers on security grounds; the hyperscalers say the part in question is one they cannot yet buy at scale anywhere else.
What Reuters reported#
Microsoft has been pressing the Trump administration to halt plans to bar imports of new Chinese optical transceivers, three people familiar with the situation told Reuters in a report published on November 10. Transceivers carry data over fibre-optic links between servers, routers and switches, and some data centers need millions of them. The concern behind the ban is that Beijing could use them to steal data, install malware or disrupt service, Reuters reported. The Federal Communications Commission is working on it.
Microsoft is one of a group of companies and trade groups arguing that a ban could damage the US lead over China in AI by slowing the data center rollout, the sources said. Two of them said Microsoft was among a handful of firms that met officials from the White House Office of Science and Technology Policy and the National Security Council in September to flag supply-chain problems. Microsoft declined to comment; the White House, the FCC and the Chinese embassy did not immediately respond, Reuters said.
Why the industry is worried#
"It really threatens to arguably grind (the data center rollout) to a halt," John Miller, general counsel of the Information Technology Industry Council, told Reuters. Many cloud companies have already bought the AI chips for their buildout, he said, and without transceivers those chips "could just sit there waiting around un-utilized."
China has about two-thirds of the global optical transceiver market, according to Counterpoint Research, cited by Reuters. Chinese suppliers such as Eoptolink and Zhongji Innolight count top US hyperscalers among their customers; Zhongji Innolight is on the Pentagon's list of Chinese military-backed companies. US makers Coherent and Lumentum lack the scale to replace them, according to a Foundation for American Innovation report.
Microsoft has 35 data centers under construction in the US and 134 more planned, according to market tracker Cleanview, Reuters reported. Its demand is not uniform: Bloomberg reported last week that it was winding down rented Oracle capacity built on older Nvidia chips.
A possible compromise#
Morgan Stanley said in an October client note that the administration was considering a ban only on Chinese transceivers capable of 3.2 terabits per second, a class not expected to ramp up until 2028, Reuters reported. Two of Reuters' sources said that threshold is under consideration. Reuters said such a threshold could avoid antagonising US companies and Beijing while giving US makers time to expand production. Separately, a bipartisan group of lawmakers introduced a bill in September to bar Chinese-made transceivers from sensitive federal systems.
Limits#
- Microsoft's lobbying is reported by Reuters from unnamed sources; Microsoft declined to comment. Other coverage we found rewrites the Reuters report and is not independent confirmation.
- The FCC has not addressed the transceiver issue publicly. No draft rule, threshold or timetable has been published.
- The market-share and data center counts come from Counterpoint and Cleanview via Reuters; we did not check them directly.