The FCC is drafting rules to ban imports of Chinese optical transceivers in US data centers, citing national security concerns. Chinese manufacturer Zhongji Innolight controls approximately 27% of the global market for these components, with 62% of its revenue coming from US clients in Q1 2026. The Pentagon classified Innolight as a military-backed company in June 2026. Counterpoint Research estimates a ban would create a supply gap of 12 to 24 months, as Western suppliers cannot quickly replace this volume. AWS, Microsoft, Meta, and Google, which have made massive capital commitments to AI infrastructure, would face higher costs, increased pricing, or slower buildout timelines.
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