The U.S. government is preparing new restrictions on Chinese technology used inside data centers, bringing another part of the AI supply chain into the country’s widening technology crackdown on China.
The latest proposal, being developed by the Federal Communications Commission, would restrict imports of new Chinese optical transceivers.
These components move data between servers over fiber-optic cables and are essential to the high-speed networks connecting AI systems inside modern data centers. The agency hopes to publish the measure this year, although officials could still change or abandon it.
The development comes shortly after the FCC added connected power inverters and advanced robots to its restrictions on new foreign-made equipment. It is also important to note that the agency has also previously targeted Chinese drones and routers.
The AI Infrastructure Supply Chain Is Now in Focus
AI servers need high-speed networking equipment, large amounts of electricity, cooling systems and power infrastructure to keep thousands of processors running. As such, the U.S. government has already identified energy infrastructure, networking equipment, and data storage as key components supporting large AI data center projects.
And China is deeply involved in several of these supply chains.
Chinese manufacturers have become major suppliers of liquid cooling equipment as AI servers generate more heat and require increasingly sophisticated thermal management. Google, for example, held talks with Chinese cooling equipment manufacturers including Envicool earlier this year as it looked for supplies for its data centers.
Chinese companies also have a significant presence in power equipment. A report from Caixin found that Chinese manufacturers of transformers, turbines and related equipment have become increasingly involved in the global data center buildout, with exports of power equipment rising as demand from AI infrastructure grows.
The Cost of Replacing Chinese Suppliers
The immediate concern for U.S. data center operators is availability.
Reuters reported that Innolight, one of the world’s largest optical transceiver suppliers, holds about 27% of the global data center transceiver market. U.S. companies including Lumentum and Coherent produce competing products, but they do not currently have the same manufacturing scale.
Replacing Chinese suppliers could, therefore, increase costs for American cloud companies while forcing them to qualify alternative suppliers and adjust existing procurement networks.
This challenge comes as U.S. companies are already racing to build AI data centers and secure the electricity and equipment needed to operate them. The Federal Energy Regulatory Commission has separately moved to accelerate the connection of large data center loads to regional power grids, highlighting how quickly infrastructure demand is growing.
Washington Wants to Act Before the Supply Chain Becomes Harder to Change
The reasoning behind the latest restrictions is similar to the argument used for earlier Chinese technology bans.
U.S. officials are concerned that Chinese-made connected equipment could create opportunities for data theft, malware, or disruption of critical infrastructure. FCC Chair Brendan Carr has also said the restrictions are intended to encourage companies to develop more domestic production before potentially risky equipment becomes widely embedded in U.S. infrastructure.
And this has made the data center supply chain the next major front in the U.S.-China technology conflict.
