The US Federal Communications Commission (FCC) is considering or developing a measure to ban the import of new models of Chinese-made optical transceivers used in data centers. The agency aims to publish a ruling on these components before the end of this year.
The Trump administration is reportedly drafting a ban on US imports of new models of Chinese datacenter components. Under the proposed restrictions, the FCC could potentially ban the upgrading of existing 800G optical transceivers from Innolight to next-generation 1.6T models. However, the FCC could still modify or shelve the proposed restriction.
Market implications and security concerns
Zhongji Innolight, a major supplier of optical transceivers to NVIDIA and Google, currently controls 27% of the global optical transceiver market. More than 90 percent of the company's revenue comes from outside China. The company was added to the Pentagon's list of alleged Chinese military-backed companies in June.
27% Global market share
Zhongji Innolight's current share of the optical transceiver market.
Experts state that Chinese datacenter components could allow Chinese firms to steal data, install malware, or disrupt service in the US if embedded in US infrastructure. Divyansh Kaushik, an AI policy expert at the advisory firm Beacon Global Strategies, said, 'Transceivers definitely pose a risk.' Additionally, US Treasury Secretary Scott Bessent suggested that China could be sanctioned for the theft of US data and intellectual property.
Regulatory landscape and responses
The potential move follows previous regulatory actions, including the FCC's ban on China's advanced humanoid robots announced last month and an April ban on foreign-manufactured routers.
US-based manufacturers of optical transceivers include Coherent Corp. and Lumentum.
The Chinese embassy in Washington told Reuters that Beijing urges the US to 'heed the objective and rational voices of the business communities in both countries' and 'stop smearing Chinese companies and threatening them with sanctions.' The embassy also stated that 'China will take all necessary measures in response to any action that causes material harm to its interests.'
Updates
Following the news, the CSI 300 Telecommunications Services Index dropped by 6 percent, with Zhongji Innolight shares falling approximately 8 percent in Shanghai and Hong Kong. In contrast, Lumentum, Coherent, and Applied Optoelectronics saw stock increases of 7, 11, and 18 percent, respectively. While the US government has officially expressed concerns regarding costly dependency on Chinese hardware, the timeline for the FCC to implement the regulation by the end of 2026 remains disputed.
Following the news, the CSI 300 Telecommunications Services Index dropped by 6 percent, with Zhongji Innolight's shares falling approximately 8 percent in Shanghai and Hong Kong. In contrast, Lumentum, Coherent, and Applied Optoelectronics saw share increases of 7, 11, and 18 percent, respectively. While the US government has expressed concerns over costly dependencies, reports suggest the FCC's move could be a gambit to force China to export more Indium Phosphide (InP), though the timeline for implementing the regulation by the end of 2026 remains disputed.
Following the news, the CSI 300 Telecommunications Services Index fell by 6 percent, with Zhongji Innolight shares dropping approximately 8 percent in both Shanghai and Hong Kong markets alongside declines for Eoptolink Technology and Suzhou TFC Optical Communications. While Lumentum, Coherent, and Applied Optoelectronics saw stock increases of 7, 11, and 18 percent respectively, the potential ban is expected to apply only to new Chinese models, leaving existing systems unaffected. Furthermore, the Chinese embassy in Washington warned that China may respond to actions harming its interests through measures targeting critical minerals, AI components, or U.S. tech companies' operations in the
Following the news, the CSI 300 Telecommunications Services Index dropped 6 percent in early trading, while Zhongji Innolight's shares fell approximately 8 percent in both Shanghai and Hong Kong. In contrast, Lumentum shares rose by 7 percent, Coherent by 11 percent, and Applied Optoelectronics by 18 percent. Additionally, the potential ban is reportedly limited to new Chinese models, leaving existing systems unaffected.
Following the news of the potential ban, the CSI 300 Telecommunications Services Index fell by 6 percent, while Zhongji Innolight's shares dropped approximately 8 percent in Shanghai and Hong Kong. In contrast, shares for Lumentum, Coherent, and Applied Optoelectronics rose by 7, 11, and 18 percent, respectively. Additionally, the potential ban is reported to apply only to new Chinese models, leaving existing systems unaffected.
Following the news, the CSI 300 Telecommunications Services Index dropped by 6 percent, while Zhongji Innolight shares fell approximately 8 percent in the Shanghai and Hong Kong markets alongside sharp declines for Eoptolink Technology and Suzhou TFC Optical Communications. Conversely, Lumentum, Coherent, and Applied Optoelectronics saw their shares rise by 7, 11, and 18 percent, respectively. While the potential ban would only apply to new Chinese models, the Chinese embassy warned of retaliatory measures targeting critical minerals, AI components, or U.S. tech operations. Additionally, the FCC's move follows previous bans on foreign-manufactured routers in April and drones in December 2025
Following the news of a potential ban, the CSI 300 Telecommunications Services Index fell by 6 percent in early trading, while Zhongji Innolight's shares saw sharp declines of approximately 8 percent in both Shanghai and Hong Kong. Conversely, Lumentum, Coherent, and Applied Optoelectronics stocks saw increases of 7, 11, and 18 percent respectively. While the regulation could increase hardware costs for data centers, the potential ban would only apply to new Chinese models, leaving existing systems unaffected.
Following the news, the CSI 300 Telecommunications Services Index fell by 6 percent in early trading, while Zhongji Innolight shares dropped approximately 8 percent in both Shanghai and Hong Kong. In contrast, Lumentum, Coherent, and Applied Optoelectronics saw stock increases of 7, 11, and 18 percent, respectively. The potential ban is reportedly expected to apply only to new Chinese models, leaving existing systems unaffected.
Following the news, the CSI 300 Telecommunications Services Index dropped by 6 percent, while Zhongji Innolight's shares fluctuated with an 8 percent decline in early trading before closing down 7.3 percent in Shenzhen and 6.7 percent in Hong Kong. In contrast, Lumentum and Coherent saw stock increases of 8.9 percent and 12.4 percent respectively. Amidst these market shifts, the US FCC is reportedly considering whether to restrict Chinese open-source AI models, and while some dispute the timeline, there are claims the regulation could be implemented by the end of 2026.
Following the news, the CSI 300 Telecommunications Services Index fell by 6 percent, while Zhongji Innolight’s shares dropped approximately 8 percent in both Shanghai and Hong Kong markets. In contrast, shares for non-Chinese suppliers rose, with Lumentum, Coherent, and Applied Optoelectronics seeing increases of 7 percent, 11 percent, and 18 percent, respectively. Additionally, the potential ban is expected to increase hardware costs for individual data centers and may only apply to new Chinese models, leaving existing systems unaffected.
Following the announcement, Zhongji Innolight's shares fell 8% in both Shanghai and Hong Kong markets, closing at 7.3% and 6.7% declines respectively, while Eoptolink dropped 5.3% in Shenzhen — contrasting with Suzhou TFC’s 2.3% gain, and U.S. competitors Lumentum, Coherent, and Applied Optoelectronics rising 6–18% as investors shifted toward non-Chinese suppliers; Applied Optoelectronics also raised its Q2 2026 revenue guidance to $180–198 million from Q1’s $151 million, with management projecting full-year revenue potentially exceeding $1 billion.
Following the report, Zhongji Innolight’s shares fell 8% in Shanghai and Hong Kong, closing down 7.3% in Shenzhen and 6.7% in Hong Kong, while Eoptolink dropped 5.3% in Shenzhen and Suzhou TFC gained 2.3%—contrary to earlier reports of uniform declines; U.S. competitors Lumentum, Coherent, and Applied Optoelectronics rose 6–18% on Tuesday, with Applied Optoelectronics’ Q1 revenue at $151 million and guidance for Q2 at $180–198 million, signaling potential market realignment as the FCC’s proposed ban, though not yet finalized, intensifies pressure on Chinese suppliers amid concerns over supply chain gaps and retaliatory Chinese export controls on critical tech components.
