Susana SchwartzWould Chinese fiber optics ban help or hurt U.S. hyperscalers?
If Reuters reporting last week is correct, the Trump administration and FCC are considering a ban on Chinese-manufactured fiber-optic cables used in U.S. data centers. If that happens, what would be the impact on U.S. hyperscalers?
Last week, a Counterpoint research note spoke of possible collateral damage that would come by way of a supply bottleneck, with analyst Neil Shah stating ““The belief that the optical transceiver market can be neatly divided geographically misinterprets how the hardware ecosystem operates,” with Shah emphasizing that a “Chinese transceiver” is not “purely Chinese,” with integrated chips from Broadcom and Marvell, as well as lasers and optical chips from companies like Lumentum and Mitsubishi Electric.
On the opposite side of the argument is the belief that long term, cutting out Chinese optics suppliers would benefit U.S. hyperscalers and the domestic economy by mitigating the potential to steal data or to plant malware, in addition to accelerating domestic supply chain reshoring. At this moment, it seems most domestic manufacturers have not been shoring up their supply chain or at least off-shoring it from China. Currently, about seven of the top-ten positions in optical modules worldwide are held by Chinese companies, with Innolight and Eoptolink responsible for more than 60% of the global market in 800G and above.
In response to the news about the Trump administration and FCC mulling restrictions, China’s Ministry of Commerce announced last Wednesday a set of countermeasures on drones exports to the U.S., now threatening a case-by-case review, effective immediately.
For all stakeholders, higher levels of government scrutiny and oversight of supply chains will make procurement a much bigger strategic consideration going forward.
Susana Schwartz
Technology Editor
RCRTech
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