Microsoft pushes Trump to halt Chinese data center component ban: Reuters

 Microsoft has been lobbying the Trump administration to abandon plans to bar imports of Chinese optical transceivers, a key component in AI data centers, Reuters reported on Tuesday, citing three people familiar with the matter.

The Federal Communications Commission (FCC) is working on the ban, which the administration has been weighing since at least August, the report said. Optical transceivers let data travel over fiber-optic cables inside data centers, and officials worry Beijing could use them to steal data, install malware or disrupt service. 

Reuters reported that Microsoft is one of several companies and trade groups arguing that a ban could damage the U.S. edge over China in AI by further slowing data center construction. Microsoft has 35 data centers under construction in the U.S. and 134 planned, the report said, citing Cleanview data.

The company was among a handful of firms that met with White House science and national security officials in September to flag supply-chain risks, two sources told Reuters.

John Miller, general counsel of the Information Technology Industry Council, a tech lobbying group, told Reuters a ban "really threatens to arguably grind (the data center rollout) to a halt." He said many cloud companies have already bought the AI chips for their buildouts, and without transceivers to connect them, the chips "could just sit there waiting around unutilized."

Some data centers need millions of the devices to connect servers, routers and switches, Reuters said.

U.S. alternatives are limited. China holds two-thirds of the global market, according to Counterpoint Research, with Eoptolink and Zhongji Innolight, which is on the Pentagon’s list of Chinese military-backed companies, dominating supply.

U.S. companies Coherent and Lumentum make competing technology but lack the scale to replace Chinese vendors, Reuters said, citing a report by the Foundation for American Innovation.

The report also said two of its sources confirmed the FCC is considering a threshold of 3.2 terabits per second. Such transceivers aren’t expected to ramp up until 2028, with widespread installation in 2029, which would give U.S. makers time to expand while avoiding friction with U.S. companies and Beijing.