US lawmakers target Chinese optical modules used in AI data centres

Four US senators have introduced a bill to bar federal agencies from buying optical modules made by China’s Zhongji Innolight and Eoptolink for the government’s most sensitive networks.
Optical modules, also called optical transceivers, are small plug-in devices that convert electrical signals into light and back. As AI clusters scale to tens of thousands of GPUs, these optical links have become a critical part of the infrastructure that moves data between servers and switches. Some AI data centres use them by the million.
The bill, S.5548, was introduced on 24 September by Republicans Dave McCormick and John Cornyn and Democrats John Fetterman and Ruben Gallego. It would bar federal agencies from buying the two companies’ transceivers for national security systems, a legal category that covers military, intelligence and classified networks. The sponsors argue that the firmware in advanced transceivers can be reprogrammed, creating potential security risks inside those networks.
A summary from McCormick’s office says the ban would also reach the companies’ subsidiaries and affiliates, any transceiver containing their firmware, software or components, and other firms designated by the Pentagon or the Commerce Department. Both companies also make modules in Thailand: Innolight established a high-volume manufacturing plant there in 2019, while Eoptolink’s first Thai facility began production in 2023.
According to the sponsors, the procurement ban would take effect after a five-year transition. Limited, renewable waivers would be allowed where no trusted alternative exists, with each reported to Congress, and the Commerce Department would assess US and allied production capacity. The proposal targets federal procurement for national security systems, rather than imposing a general ban on purchases by commercial data centres.
Chinese manufacturers supply nearly two-thirds of the world’s data centre optical transceivers by volume, according to Counterpoint Research. The firm puts Innolight first with about 27 per cent of market revenue in 2025, driven heavily by 800G and early 1.6T module deployments for North American cloud companies. Innolight’s annual report shows 90.6 per cent of its 2025 revenue came from outside mainland China.
The Pentagon added Innolight to its list of Chinese military companies on 8 June. Innolight has rejected the designation, saying it is neither a military nor a military-civil fusion enterprise.
Separately, Reuters reported on 4 August that the Federal Communications Commission was drafting rules to bar imports of new models of Chinese optical transceivers, a step that would reach commercial buyers too. The FCC has separately published broader equipment-authorisation proposals focused on its Covered List. Those proposals are distinct from a blanket restriction on Chinese optical transceivers. Reuters reported that the Information Technology Industry Council warned in an August letter that supply disruption could affect data-centre deployment and US AI leadership. Counterpoint separately warned that broader import restrictions could raise costs for US cloud operators.
Innolight and Eoptolink did not immediately respond to Reuters’ requests for comment on the bill, which now sits with the Senate Homeland Security and Governmental Affairs Committee. The bill would still need to pass both chambers of Congress before being sent to the president.
The bill is part of a widening US focus that now reaches beyond AI chips to the optical links between them.