The Trump administration is preparing a new restriction through the US Federal Communications Commission that would ban imports of newly made optical transceivers from China, according to Reuters. The stated aim is to reduce information security risks and protect US artificial intelligence infrastructure.
The proposal targets a segment where Chinese manufacturers hold a strong position in the global data-center optical module market. Once the report surfaced, shares of US optical communications companies moved sharply higher, while investors started looking at how cloud procurement could shift if the rule advances.
FCC weighs adding optical transceivers to Covered List
Reuters, citing multiple people familiar with the matter, said the FCC is considering placing new optical transceivers on its Covered List. The concern described in the report centers on national security risks, including possible malware insertion, data theft, and network disruption linked to Chinese equipment.
The move would extend US scrutiny from drones, inverters, and humanoid robots to hardware used in AI data centers. Reuters said the effort is aimed directly at major Chinese suppliers including Zhongji Innolight and Eoptolink. Zhongji Innolight was identified in the report as holding about 27% of the global market.
China’s embassy in the US responded by urging Washington to stop what it called baseless accusations. It also warned that necessary countermeasures would follow if Chinese rights and interests were damaged.
Lumentum, Coherent and AAOI rally on the report
US-listed optical communications and networking stocks rose broadly in Tuesday trading after the news. The market view described in the report is that major US cloud service providers may be forced to shift toward non-Chinese domestic suppliers or other non-China sources. The companies named were Amazon AWS, Microsoft, Google, and Meta.
Among the stocks seen as potential beneficiaries, Lumentum climbed nearly 9%, Coherent rose 12%, and Applied Optoelectronics gained more than 19%.
Taiwan manufacturers seen as possible alternatives
The report said large US cloud operators may speed up reviews of their purchasing partners to meet future regulatory requirements and lower supply-chain concentration risk. In optical module assembly and contract manufacturing, Taiwan companies are drawing attention because of established overseas production capacity and existing ties with international chip and network vendors.
Enablence Technologies, listed as Zenda-KY (3234) in the report, was described as having a long-standing relationship with Broadcom, with production in Taiwan and Thailand that could connect directly to redirected US demand. LuxNet (4979) was cited for its work with Marvell and its focus on 400G and 800G high-speed optical modules, making it one of the names watched as US customers look for replacement capacity.
If US customers move faster to build a non-China supply chain, the report said orders could shift in a more structural way, putting Taiwan’s upstream epitaxy makers and midstream optical module manufacturers in focus.