Microsoft Urges Trump Administration To Curb Chinese Data Center Imports Amid Security Concerns

Microsoft has reportedly urged the Trump administration to restrict imports of Chinese-made components used in US AI data centres, citing potential national security risks, data theft and surveillance threats. However, industry groups warn that such restrictions could disrupt supply chains, slow data centre expansion and weaken America's ability to compete with China in artificial intelligence.

People familiar with the matter told Reuters that Microsoft has raised concerns about Chinese optical transceivers, which carry data through fibre-optic cables at extremely high speeds. These components could potentially be exploited by Beijing to conduct surveillance, steal sensitive information, install malware or disrupt critical US infrastructure.

The Trump administration was reportedly considering restrictions on new models of Chinese optical transceivers as early as August. Microsoft was among several companies that met officials from the White House Office of Science and Technology Policy and the National Security Council in September to discuss the potential supply chain challenges. The company has held multiple meetings with administration officials to highlight the risks of disrupting supplies.

Microsoft currently has 35 data centres under construction in the US, with nearly 134 more planned. Industry groups, including market intelligence firm Cleanview and trade unions, have warned that restrictions could seriously undermine America's competitive advantage in the global AI race.

The stakes are significant because China accounts for approximately two-thirds of the global optical transceiver market, according to Counterpoint Research. Chinese manufacturers Eoptolink and Zhongji Innolight dominate supply and count major American hyperscalers among their customers. Zhongji Innolight has also been added to the Pentagon's list of Chinese military companies.

US manufacturers Coherent and Lumentum produce competing components but lack the production scale of their Chinese rivals.

The Federal Communications Commission (FCC) is examining the proposed restrictions. A Morgan Stanley client note in October said the administration was considering banning Chinese optical transceivers capable of handling 3.2 terabits of data per second. Production is expected to increase by 2028, with widespread installation anticipated by 2029. Two sources said this performance threshold was under consideration, although the FCC has not publicly commented. US lawmakers have separately introduced legislation to prohibit Chinese-made transceivers in sensitive federal government systems.

AI policy expert Dubyansh Kaushik of Beacon Global Strategies previously warned that transceivers pose security risks as data centre infrastructure expands.

The administration also wants to avoid repeating the Huawei controversy, when Chinese equipment became deeply embedded in US infrastructure, making its removal slow, expensive and incomplete.