Microsoft wants Trump to reconsider ban on Chinese data-center technology
What's the story
Microsoft is lobbying the Donald Trump administration to reconsider its plans to ban the import of a critical component used in artificial intelligence (AI) data centers from China. The component in question is an optical transceiver, which enables data transmission over fiber-optic cables at lightning speed within data centers. The Trump administration has expressed concerns that these devices could be exploited by Beijing for malicious purposes such as data theft or service disruption at US data centers.
Project impact
Microsoft has 35 data centers under construction in the US
According to Cleanview, a market intelligence firm tracking data center development, Microsoft has 35 data centers under construction in the US and another 134 planned.
The company is part of a group of businesses and trade organizations warning the Trump administration, that such a ban could severely hurt America's AI competitiveness against China by further delaying the rollout of these vital infrastructure facilities.
Supply chain concerns
Cloud companies have already purchased AI chips needed for buildouts
Microsoft was one of the few companies that met with officials to highlight supply chain challenges posed by such a ban.
John Miller, Executive Vice President of Policy and General Counsel of tech lobbying group Information Technology Industry Council (ITI), warned that it could bring data center rollout to a standstill.
He noted many cloud companies have already purchased AI chips needed for their buildouts but without optical transceivers, they would remain unused until connectivity is established.
Regulatory action
China dominates majority of the global market for optical transceivers
The Federal Communications Commission (FCC), which regulates the US telecom industry, is working on the ban.
The move has raised alarms in an industry struggling to meet rising demand for cloud and AI services amid consumer backlash over soaring energy costs and water consumption.
China dominates two-thirds of the global market for optical transceivers, with companies like Eoptolink and Zhongji Innolight leading global supply chains.
Market competition
US-based Coherent and Lumentum produce competing technology
US-based firms Coherent and Lumentum produce competing technology but lack the scale to replace their Chinese counterparts, a report by the Foundation for American Innovation states.
The House Select Committee on China has expressed concerns over Pentagon-listed companies like Zhongji Innolight being involved in wiring America's data centers.
It has urged FCC to proceed with banning new China-linked optical transceivers from US networks.