Microsoft Lobbies Trump Administration to Drop Planned Ban on Chinese Optical Transceivers for AI Data Centers

MSFT is urging the Trump administration to drop a planned ban on Chinese optical transceivers, the components that move data between servers in AI data centers, according to a Reuters exclusive carried by TipRanks. In September, Microsoft and a few other companies met with staff at the White House Office of Science and Technology Policy and the National Security Council about supply problems the ban could create. The lobbying was reported by Reuters rather than announced by the company, and the coverage carries no direct Microsoft statement. The rule, which the FCC is drafting over data theft, malware and service-disruption concerns, would target imports of new Chinese models and has not been finalized.

The stakes are supply. China makes two-thirds of the world's optical transceivers, according to Counterpoint Research, and Innolight alone holds 27% of the global data center transceiver market, while U.S. rivals such as COHR and LITE are said to lack the capacity to fill the gap. Microsoft is building 35 data centers in the United States with another 134 planned, per Cleanview data cited in the report. The trade group ITI asked the FCC in August to keep transceivers off its blacklist, with its general counsel warning a ban could "grind" the data center rollout "to a halt".

The policy may end up narrower than a blanket ban. A Morgan Stanley note from October suggested the administration might block only faster 3.2-terabit parts, which hardware makers are not expected to ramp until 2028. Security pressure is building in parallel: senators introduced a bill in September barring federal agencies from using Chinese parts in sensitive systems, and the Pentagon added Innolight to its Chinese military company list in June. The final scope of the FCC rule is the key variable for hyperscaler buildout costs and for U.S. transceiver suppliers.