Microsoft Lobbies White House to Shelve Ban
People familiar with the matter said Microsoft is pressuring the Trump administration to shelve a plan to ban imports of a key component for AI data centers made in China. Reuters reported in August that the Trump administration intended to bar U.S. companies from importing new Chinese-made fiber-optic transceivers, which allow data to move through fiber-optic cables inside data centers. There are concerns Beijing could use the equipment to steal data, install malware or disrupt services. According to market intelligence firm Cleanview, Microsoft currently has 35 data centers under construction in the United States, with another 134 in the planning stage. Sources said Microsoft is one of several companies and industry groups petitioning the government, arguing that if the ban slows buildouts, it could cause irreparable harm to the U.S. lead over China in the AI race.
September Meeting Warns of Supply-Chain Challenges
Two of the sources said Microsoft was one of the few companies to meet with officials from the White House Office of Science and Technology Policy and the National Security Council in September, warning of potential supply-chain challenges from the ban. The Federal Communications Commission, which regulates the U.S. telecom industry, is currently working on the ban. Despite consumer backlash over rising energy costs and water usage, companies are still aggressively expanding data centers to meet surging demand for cloud and AI services. Microsoft declined to comment, while the White House, the Federal Communications Commission and the Chinese Embassy in Washington did not immediately respond to requests for comment. The previously undisclosed lobbying effort highlights alarm in the industry over the FCC move.
Supply Cutoff Could Leave Chips Idle
Miller, general counsel of tech lobbying group the Information Technology Industry Council, said this could really bring data center construction to a standstill, and the association has publicly urged the government not to pursue the ban. He said many cloud companies have already purchased the AI chips needed to build data centers, and without fiber-optic transceivers, those chips would essentially sit idle until transceivers are secured to connect the equipment. Some data centers need millions of fiber-optic transceivers to connect servers, routers and switches. The association wrote to the Federal Communications Commission on August 13, urging it not to add fiber-optic transceivers to the trade blacklist, and stressing the impact supply disruptions could have on data center construction and U.S. AI leadership.
3.2T Threshold Emerges as Compromise Option
According to market research firm Counterpoint Research, Chinese companies account for about 23% of the global fiber-optic transceiver market, with Eoptolink and Zhongji Innolight, which has been placed by the Pentagon on its list of Chinese military-backed companies, among the Chinese firms dominating global supply, with customers including top U.S. hyperscale cloud providers. According to a report by the Information Technology and Innovation Foundation, U.S. firms Coherent and Lumentum produce competitive technology but lack sufficient scale to replace Chinese suppliers. An October Morgan Stanley report said the Trump administration is considering banning Chinese-made fiber-optic transceivers capable of processing 3.2 Terabits of data per second, products expected to expand to volume production in 2028 and be widely installed in 2029. Two sources said the 3.2 Terabits-per-second threshold is under consideration. In September, bipartisan U.S. lawmakers introduced a bill to bar the federal government from using Chinese-made fiber-optic transceivers in sensitive systems.