Microsoft is asking the Trump administration to withdraw a proposal that would restrict the use of Chinese-made components in AI data centers. Three people familiar with the matter told Reuters the company fears the move could slow US data center expansion and weaken its competitive position in the global AI market.
The plan targets optical transceivers, which send data through fiber cables inside data centers and connect servers, routers and switches. US officials worry that Chinese-made versions could be used to steal data, plant malware, or disrupt operations.
Microsoft is not alone. Several tech firms and industry groups oppose the plan. Microsoft joined a group that met with the White House Office of Science and Technology Policy and the National Security Council in September to talk about supply problems.
Market research firm Cleanview says Microsoft has 35 data centers under construction in the US and 134 more planned. Industry groups say a ban could hold these projects back. Many cloud firms have already bought AI chips, but those chips cannot work well without transceivers.
John Miller, general counsel at the Information Technology Industry Council, said a ban could significantly delay data center construction. He added that some sites need millions of transceivers. The council wrote to the Federal Communications Commission on August 13, asking it to keep these parts off its trade blacklist.
Counterpoint Research says China makes about two-thirds of the world's optical transceivers. Eoptolink and Zhongji Innolight are among the top suppliers. US firms Coherent and Lumentum make similar components, but they may not be able to expand production quickly enough to replace Chinese suppliers.
The FCC is reportedly looking at a narrower rule. It would cover only Chinese transceivers that handle 3.2 terabits of data per second. The output of these is not expected to rise much before 2028, with wider use in 2029. That could give US makers time to grow.
Separately, a group of US lawmakers from both parties has put forward a bill. It would stop Chinese-made transceivers from being used in sensitive federal systems.
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